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
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 investing is an investment philosophy centered on analyzing the core financial and operational health of an asset before making a decision to buy. This disciplined approach relies on three foundational pillars: 1. Investing in Cash-Flow Producing Assets Fundamental investors seek to purchase assets that generate income, such as: These assets are chosen for their
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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
Unearned revenue is a current liability account that represents money collected from customers before goods have been delivered or services have been performed. When a company receives payment from customers for goods or services not yet delivered, the company will initially record the payment on the balance sheet as a current liability. The payment is
Treasury stock represents stock shares that a company had issued and then later repurchased. Treasury stock reduces the number of shares a company has outstanding. Companies often repurchase outstanding shares for three primary reasons. First, a company’s management may believe that the shares are undervalued and thus represent a good investment. Second, a company that
A subsidiary company is a company that is majority owned by another entity. The entity which owns the subsidiary company is called the parent company. A subsidiary may be wholly owned or partially owned. A wholly owned subsidiary is a subsidiary company where all of the outstanding shares are owned by the parent company. A
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