If you have been considering getting into stocks, investing, or simply want to find out more about your finances, then you need to make sure you understand the terms used in financial services. They may sound common and simple, but when it comes to finances, few things are as simple as they first appear. In order to understand exactly what information is being presented to you, the lingo of financial services should be clear, and the best way to make that happen, is to define some of the most common terms. Here are a few of the most commonly used terms in financial services.
Top Three Terms in Financial Services
One of the most commonly used terms when it comes to financial services is net income, also called NI. This term refers to whatever income the company has after all of their expenses are figured in. Basically, you want to take everything the company earned over the course of a year, then subtract the expenses the company had, and you are left with the net income. The higher this is, the happier most companies are. In order to increase a company’s net income, they often have to cut down on their expenses, or increase their total earnings (or both). Cutting their expenses is often the easier task to undertake.
Another common term in financial services is GAAP. This stands for generally accepted accounting principles, and basically gives an overview of what principles the company uses for reporting each portion of their financial information. While there are general rules within financial services about what information must be shared, each company can slightly change around the specifics on some of what is shared, so long as the information is true and accurate. The company cannot go so far as to decide to not give out specific information that is required, but it can give out additional information that is not required by law, if it so chooses.
If you are trying to educate yourself on just how profitable a company is in the truest sense of the word, then you should look into the company’s EBITDA. The EBI stands for earnings before interest, the T stands for tax, and the DA stands for depreciation and amortization. Each of these numbers will give you a very raw look at how this company makes a profit. This is important in financial services because it allows investors to make educated guesses on which companies are going to be able to profit, and which could wind up with a loss, plus those that are struggling or those that have the power to recover and move ahead in their specific field. These figures give investors, and financial analysts, a lot of insight as to what the company is doing over a longer period of time, since you can compare last years to this year and see what direction the company is headed.
Knowing what you hear when you turn on financial channels is important if you plan on using financial services to invest in some way. The more informed and educated you are, the better off your earnings have the potential to be. Going into any branch of financial services blindly could cost you a lot of time and money, so it is best to make sure you have a solid understanding of each of these terms. There are other terms that are important as well, so make sure any time you do not understand something that is being said, you do a bit of research. This could help you save, or even make, money, in the long run.