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
Cash equivalents are financial securities which can be sold quickly and without impairment in value. Common cash equivalent securities include U.S. Treasury bills and commercial paper. For accounting purposes, cash (bank balances and petty cash) and cash equivalents are lumped together into a single account on the balance sheet. This account is usually called cash […]
Cash flow from operations, also called operating cash flow, refers to the difference between cash received from operating sources and cash disbursed for inventory and operating expenses. Cash flow from operations is one of three sections on a firm’s cash flow statement. The other two sections are cash flow from financing activities and cash flow
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Accounts payable represent obligations of the firm to pay for goods purchased and services consumed but not yet paid for. Accounts payable is listed as a current liability on the firm’s balance sheet. Suppliers often provide goods and services to their business customers on terms which call for future payment. For example, an inventory wholesaler
Amortization is the periodic expensing of an intangible asset over the asset’s estimated useful life. Common intangible assets include copyrights, trademarks, and patents. Like depreciation, amortization is accumulated into an account which offsets the carrying value of the intangible asset. However, unlike tangible assets, intangible assets generally do not have residual value. Thus, amortized intangible
Accumulated depreciation refers to the aggregate amount of depreciation expense occurred since the fixed assets were placed on the company’s books. Accumulated depreciation is a contra asset account because it reduces the carrying value of the underlying asset. For an example of accumulated depreciation, consider the following scenario. A company purchases a vehicle for $50,000.
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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
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,
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
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
