Glossary

TermDefinition
BankruptcyThis is a legal proceeding in which an individual or a business is declared unable to repay their debts. The petition is filed by a debtor and all his assets are measured and revalued to repay a portion of the outstanding debt. It allows the debtor to be free from debts giving them a fresh start however, bankruptcy can stay on credit reports for years making it difficult to borrow.
BlockchainThis is a system in which a record of transactions made in bitcoin or another cryptocurrency are maintained across several computers that are linked in a peer to peer network.
Break-even pointThis is the point at which the total cost is equal to the total revenue. This is the point at which the investor recoups their initial investment.
BudgetingThis is the process of creating a plan on how to utilize one’s assets to achieve set objectives. It helps to determine how much of a resource is needed and how to prioritize spending. It is also used to forecast future financial positions.
Capital BudgetA specific budget for expenses that increase the value of an entity or a person. It is a budget for the acquisition of fixed assets which may include land, buildings, etc.
Commercial PapersCommercial papers are money market instruments issued usually by blue chip companies with great credit ratings due to its unsecured nature being an IOU essentially.
Commercial Papers issued at discountThis is when the face value on a Commercial Paper is received by the holder upon maturity, but a lesser amount is paid by the holder on purchase of the instrument.
Cost of productionThis is the average cost per unit of goods and services. It includes all the costs such raw materials, labor cost, etc.
Credit RatingA credit rating is a quantified assessment of the credit worthiness of a borrower in general terms or in relation to a particular financial obligation.
Credit ReportThis is a detailed breakdown of an individual’s credit history by a credit bureau e.g. CRC in Nigeria. These credit bureaus prepare reports based on an individual’s financial information. Creditors and other organizations use this report to determine creditworthiness as well as the probability that an individual will repay their loans in a timely manner.
Credit ScoreThis is a number between 300 – 850 that shows an individual’s creditworthiness. The higher the score, the better. A credit score is based on credit history as well as other factors and can therefore, change over time.
CryptocurrencyThis is a digital currency in which transactions are verified and records are maintained by a decentralized system using blockchain technology rather than by a centralized authority e.g. a Central Bank
Cryptographyis a method of codification generated with the mathematical and engineering functions to protect information or communication. The prefix “crypt” is a Greek word meaning hidden.
DebtThis is an obligation, not necessarily money, owed by one part to another.
Debt SettlementThis is the process of debt repayment that involves offering your creditors a lump sum payment that is less than the total amount you owe in order to cancel the debt.
Debt ConsolidationThis is the process of taking out a consolidation loan to pay off all outstanding debts and thereafter make payments towards the new loan under the terms and conditions of the new lender. The advantage is that it helps repay in a convenient and straight forward manner.
DevaluationDevaluation of currency is the lowering of the value of a county’s currency in relation to other country’s currency. It can be a deliberate downward adjustment of the currency as a monetary policy tool.
Dividend per shareThis is the company’s declared dividend divided by the total number of shares
Due diligenceDue diligence is a comprehensive appraisal of a business undertaken to evaluate its commercial potential.
Earnings per shareThis is the company’s net profit divided by the total number of shares
Economic playersThese are the key participants in the stimulation of economic activities. They are consumers (individuals/households), producers (companies) and the governments.
Fiat currencyThis is a government issued currency that is not backed by a physical commodity but rather by the government that issued it.
Financial PlanningThis involves determining the activities and resources required to achieve certain financial objectives within a set timeframe. It helps take control of income, expenditure, and investments to manage money and achieve set financial goals.
Financial Reporting periodThis is the time period covered by the financial statements. It is always stated on the financial statements. Financial statements usually cover a period of twelve months. However, for a newly commenced or a liquidating entity, the financial statements may cover a period below or exceeding the typical twelve (12) months.
Future ValueThis is what the value of an asset will be at a particular future date based on an estimated growth rate.
Growth stockThis is a share in a company that is anticipated to grow significantly over the average growth of the market.
IlliquidCannot be easily sold or converted to cash
Institutional investorAn individual or company that invests money on behalf of other people e.g. mutual funds, pensions, insurance companies.
Intrinsic valueThis is the value something has in itself.
Life AssuranceLife assurance policies offer insurance cover for the whole of your life, rather than a chosen policy length. A life assurance pay-out is tax-free, and provided the premiums have been paid, a claim can be made upon the death of the insured person. (Legal & General Plc, 2021)
Market CapitalizationThis is the market value of a company’s outstanding shares. It is equal to the current share price multiplied by the number of outstanding shares.
Market IndexA market index is a hypothetical portfolio of investment holdings that represent a segment of the financial market.
Maturity DateThis is the date on which the final payment is due on a loan or other financial instruments.
Minimum investmentsThe smallest specified naira or dollar or unit required to invest in a particular.
MortgageMortgage is a loan provided by an institution that enables an individual to purchase a home or property.
Passive IncomeThis is the part of an individual income that does not significantly require time and effort to maintain. Unlike paid employment or business revenue, passive income requires little or no consistent input to earn e.g. rent received from property, interest on fixed deposits etc.
Pension Fund Administrator (PFA)A Pension Fund Administrator (PFA) is a company licensed by the National Pension Commission to manage and invest the pension funds in the employee’s Retirement Savings Account (RSA). (PENCOM, n.d.)
Present ValueThis is the current value of an asset at the now.
Permissionless transactionsThese transactions allow any computer on the Ethereum network to confirm a transaction.
Permissioned transactionsThese are transactions that are reviewed by only a select group of computers on the Ethereum network hence, their activities do not need to be exposed to all computers as long as it follows set protocols.
PortfolioPortfolio is a range of investments held by a person or an organization. It is a collection of financial investments.
Private Keyis the unique code generated to access the information protected by the public key i.e. to decrypt information.
Public Keyis used to encrypt information. The layer of security generated by cryptography.
Purchasing powerThis expresses the value of currency in terms of the number of goods or services that one unit of the currency can buy. Inflation would decrease the number of goods and services one unit of currency can purchase.
Retained EarningsThis is the accumulated residual value of the entity after its existing assets have been used to settle its existing liabilities. This is the amount of money left to be distributed amongst the shareholders, after the external creditors have been settled, in the event of a liquidation of the entity.
Return on InvestmentReturn on investment is a profitability ratio that show how well your investment is performing. To find out your return on investment you divide your net revenue by the cost of your investment.
Risk Appetiteis the level of risk an individual or organization is willing to take.
S&P 500This is a market index that tracks the average movement of 500 of the largest companies in the U.S Economy.
Scale of preferenceIt is a hierarchy of needs and wants in order of priority. It is a systematic way of prioritizing expenses chronologically per their importance.
Stable coinThis is a cryptocurrency whose price is backed by an underlying asset. It offers price stability while also maintaining the security and privacy of transactions.
StockbrokerStockbroker is a professional trader who buys and sells shares on behalf of clients.
Treasury BillsThese are debt instruments issued by the government to the public to finance government spending as an alternative to taxation. They are low interest-bearing debt. Treasury bills are risk free debts.
Value stockThis is a security trading at a lower price than what the performance of a company indicates. A common characteristic of a value stock is a low price earning ratio.
Volatility Rateis the degree of variation of the trading price of a currency over a period of time.
WhitepaperA whitepaper is an informative document used by a company or a not-for-profit organisation to promote a solution or service.