2022 AFBA Financial Planning Guide


Hedge Funds. Private equity investment groups which are generally established as limited partnerships. Insolvency. A condition existing when a person’s (or company’s) liabilities, other than those representing ownership, are more than its assets. Investment Portfolio. A list of income producers or capital assets, i.e. stocks, bonds, promissory notes, and other items owned by an individual, company, partnership, trust, or institution. Legal Corporate Person. A term often applied to a corporation which is permitted to own property, to sue, to be sued, as well as to exercise many of the rights normally given to a natural person. Lien. This is a claim on property, usually done in order to secure payment of a debt or fulfillment of some form of contract obligation. Listed Security. A stock, bond, or other security that is accepted, listed, recorded, and traded on one of the security exchanges. Marginal Buying. The practice of buying additional securities, paid for in part from funds borrowed from a bank or broker, by using the securities

Capital Stock. All outstanding preferred stock and common stock of a corporation, listed at the dollar amount assigned to a security by the issuer. Collateral. Property, or evidence thereof, given to a creditor as security for payment of a loan. Corporation. The most common form of business organization, in which the total worth of the organization is divided into shares of stock. Derivative Securities. Financial investments which represent another security and derive their value from the market performance of the security they represent (i.e. the value of a put or a call option is determined by the selling price of the stock they represent). Dividend. A distribution of the earnings of a corporation, usually in the form of cash, stock or property. Dow-Jones Averages. The arithmetic mean of closing prices on a selected group of industrial, public utility, and transportation stocks, including a composite average of all of the selected stocks on the New York Stock Exchange. Executor. A person, bank, trust, or agency identified as the person to carry out provisions of a will. Federal Reserve System. Virtually the entire U.S. banking system. It includes Federal Reserve Banks, Federal Reserve Branch Banks, all national banks, and state-chartered banks that have been admitted to membership in the Federal Reserve System.

Accrued Interest. Interest which has accumulated but has not been paid. On bond purchases, a buyer pays the seller accrued interest through the trading date. Agent. Generally, any person who acts legally for another person, with the latter’s consent. Arbitrage. Buying securities in one market and selling them at the same time in another market to take advantage of a price difference. Asset. Something of value which is owned or possessed. It may be tangible (i.e. a building) or it may be intangible (such as goodwill). Balance Sheet. A list of a person’s or company’s assets less liabilities as of a certain date. Bankrupt. A condition of a debtor judged insolvent by a court of competent jurisdiction. Blue Chip. A term indicating the security of a company with a sustained profitability record, superior management and future prospects. Bond. A certificate of indebtedness. As generally regarded in security markets, a bond is evidence of debt and a future liability of a person, partnership, corporation, or government entity. Book Value. For common stock, the proportionate amount of money that would accrue to each share of outstanding capital stock if all of a corporation’s assets were converted to cash at market value on a specific date, and all of their financial liabilities and creditors were paid in full.

already owned as collateral. Maturity Date. As it applies to

securities and commercial papers, this is the date when payment of the principal is due. Monetary Policy. Government actions relating to currency revaluation, credit expansion/contraction, discount/ rediscount policy, and the purchase and sale of government securities.


Made with FlippingBook. PDF to flipbook with ease