Investing Glossary
Investing terms can often feel confusing, especially for beginners. This glossary is designed to give you clear, simple definitions of the most important concepts in fundamental investing so you can understand how markets work and make better financial decisions.
Fundamental investing focuses on analyzing businesses based on their financial performance, competitive advantage, and long-term value. To do that effectively, you need to understand the language investors use—from basic terms like assets and cash flow to more advanced concepts like return on invested capital (ROIC) and discounted cash flow (DCF).
In this investing glossary, each term is explained in plain language with a focus on real-world understanding—not technical jargon. Whenever possible, definitions are connected to broader investing concepts so you can see how each idea fits into the bigger picture.
You’ll learn key terms related to:
Financial statements and accounting concepts
Business analysis and valuation methods
Stock market fundamentals and investment strategies
Risk, return, and long-term decision-making
If you’re just getting started, this glossary is the perfect place to build your foundation. If you’re already learning, it will help reinforce and clarify the concepts that matter most.
Start with our complete guide: What Is Fundamental Investing
Then explore deeper topics in Investing Basics and Business Analysis
Accelerated depreciation refers to methods of calculating an asset’s depreciation which recognize greater depreciation in the earlier years of an asset’s useful life. Accelerated depreciation differs from straight-line depreciation, which recognizes an equal amount of depreciation expense each period. In contrast with straight-line depreciation, accelerated depreciation recognizes higher depreciation expense in the asset’s earlier years […]
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A contra account is an account which reduces the balance of an account to which it is paired. Contra accounts can exist for all of the five account types: asset, liability, equity, income, and expense accounts. However, some contra accounts are more common than others. A contra account has the opposite normal balance as the
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A corporation is a business entity which has a separate legal identity from its owners. As a separate legal entity, a corporation has many of the rights and responsibilities of an individual. Corporations have two important features which help attract capital. First, corporations offer their owners financial liability limited to the owners’ original investment. Second,
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Depreciation represents the periodic expensing of the cost of a tangible asset. When a company purchases a fixed asset, the company capitalizes the cost of the asset on the balance sheet rather than directly expensing the cost on the income statement. However, fixed assets lose value as they age. Depreciation is thus a method for
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The chart of accounts is a listing of all of the accounts a company uses in its accounting system. There are five types of accounts: assets accounts, liability accounts, equity accounts, income accounts, and expense accounts. Every account within the chart of accounts is one of these account types. The chart of accounts is used
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Capital expenditures (“capex”) are investments made to acquire or enhance the value of long-term productive assets. Capital expenditures are not expensed on the income statement. Rather, capital expenditures are “capitalized” into the asset section of the balance sheet. Capital expenditures also appear within the cash flow statement under the cash flow from investing section. Capital
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Accounts receivable represent sales made to customers who have not yet paid for them. Accounts receivable are thus monies owed to the firm from customers. Accounts receivable is presented on the balance sheet under current assets. Under U.S. GAAP, accounts receivable must be presented at their net realizable value. This requires the company to create
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The statement of changes in equity is a financial statement which details the changes in the equity section of the balance sheet over a given period. For corporations, this statement is also called the statement of shareholder’s equity. The statement of changes in equity is required annually under U.S. GAAP. Thus, all companies which issue
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Financial accounting refers to the type of accounting concerned with reporting financial information to the firm’s shareholders and creditors. This information is provided through the financial statements and supplementary information prepared in accordance with relevant accounting standards. For companies which are domiciled or have issued securities in the U.S., the accounting standards are U.S. Generally
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The income statement, also known as the profit and loss statement, is a financial statement which conveys basic information regarding business operations over a given period. A company’s business operations consist primarily of revenues and expenses. A company’s revenues constitute sales of goods or services, while expenses are costs associated with the generation of revenues.
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