Financial terms you should know

Equity

. . . refers to the amount of capital contributed by the owners or the difference between a company’s total assets and its total liabilities.

Balance sheet

. . . is a financial statement that reports a company’s assets, liabilities and shareholders’ equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure.

Bottom line

. . . is a company’s income after all expenses have been deducted from revenues. These expenses include interest charges paid on loans, general and administrative costs, and income taxes.

Cash flow

. . . is the net amount of cash and cash- equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximise long-term free cash flow.

Non-Performing Loan ( NPL)

. . . is a sum of borrowed money upon which the debtor has not made the scheduled payments for a specified period

Hedge

... is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts and swaps.

Income statement

. . . (also known as profit and loss statement) is a report made by company management that shows the revenue, expenses, and net income or loss for a period. The income statement is one of the main four financial statements that are issued by companies — balance sheet, income statement, statement of owner’s equity, and statement of cash flows.