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
What Is an Annuity? An annuity is a series of fixed, equal cash flows. Annuity streams have three characteristics: Types of Annuities There are two types of annuity streams: ordinary annuities and annuity dues. An ordinary annuity is a fixed payment stream where the payment occurs at the end of each period. An annuity due
The accounting cycle is the step-by-step process businesses use to record transactions and turn them into accurate financial statements. Below, we’ll discuss the key stages—journal entries, posting to the general ledger, preparing a trial balance, making adjusting entries to align with GAAP, and closing the books. This concept is a core part of fundamental investing.
What is the Trial Balance? A trial balance is an internal report a company runs at the end of an accounting period that shows the balances of all the accounts in the company’s accounting system. It is one of the key steps in a company’s accounting cycle. New to investing? Start with our guide to
An adjusting entry is a journal entry made at the end of an accounting period. Unlike most accounting entries, which correspond to immediate external transactions, adjusting entries are made to modify past transactions. The primary purpose of adjusting entries is to record unrecognized revenues and expenses and to adjust the carrying value of certain balance
A debit entry is an accounting entry that increases the balance of certain accounts and decreases the balance of others. Debit Entries in Double-Entry Bookkeeping In a double-entry bookkeeping system, all transactions are recorded into an accounting journal. All transactions are posted to individual accounts. The accounting entries are made in accordance with the double-entry
A credit entry is an accounting entry that increases the balance of certain accounts and decreases the balance of others. Credit Entries in Double-Entry Bookkeeping In a double-entry bookkeeping system, all transactions are recorded into an accounting journal. All transactions are posted to individual accounts. The accounting entries are made in accordance with the double-entry
The adjusted trial balance is a key step in the accounting cycle. It is a report run at the end of an accounting period after adjusting entries have been made in the company’s books. Where the Adjusted Trial Balance Fits in the Accounting Cycle In the process of preparing period-end financial statements, a company follows
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In finance, the discount rate is the rate used in present value calculations. The concept of present value is one of the most foundational concepts in finance, as it allows investors to quantify a future payment in today’s dollars (or euros, yen, etc.). Investors use present value calculations (called discounting) to estimate the value of
Fundamental analysis is the process investors use to evaluate an investment by studying its financial statements, business quality, cash flow, valuation, competitive position, and risk. In stock investing, fundamental analysis helps investors estimate what a business is worth and decide whether the current market price is attractive. It focuses on the economic reality of the
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Working capital is the difference between a company’s current assets and current liabilities. Working capital is calculated by subtracting current liabilities from current assets. Working capital is a liquidity measure in that it indicates the amount of resources available to satisfy short-term obligations. Financial managers and investors often distinguish between total working capital and operating
