Category: Financial Terms

Appropriation Account An appropriation account records how profits or budgeted funds are set aside for specific purposes. In business accounting, it shows how a firm’s profits are allocated (for example, to dividends, reserves, salaries, or reinvestment). In government budgeting, it shows how estimated revenues are allocated to agencies and programs. How appropriation accounts work —…

Appropriation Definition Appropriation is the act of setting aside funds for a specific purpose. It applies in both government budgeting (earmarking public money for programs or projects) and corporate finance (allocating cash or retained earnings to uses such as capital spending, dividends, or debt repayment). Key takeaways Appropriation designates money for a defined use, improving…

Appreciation Appreciation is an increase in an asset’s value over time. Its opposite, depreciation, is a decline in value as an asset wears out, becomes obsolete, or loses demand. Understanding appreciation helps investors assess potential returns and make informed decisions about buying, holding, or selling assets. Key points Appreciation: rising asset value (e.g., real estate,…

Appraisal Management Company (AMC) An Appraisal Management Company (AMC) is an independent firm that manages residential real estate appraisals on behalf of mortgage lenders. AMCs administer the appraisal process by selecting a qualified appraiser, arranging the assignment, and delivering the completed appraisal report to the lender. Individual, state-licensed or state‑qualified appraisers perform the actual property…

Appraisal Costs: Definition, How They Work, and Examples What are appraisal costs? Appraisal costs are expenses a company incurs to detect defects and ensure products or services meet customer expectations and regulatory requirements. They are a category of quality-control costs focused on inspection, testing, and verification before products reach customers. Why appraisal costs matter Prevents…

Appraisal: Definition, How It Works, and Types What is an appraisal? An appraisal is a professional, independent estimate of an asset’s fair market value. Appraisals apply to real estate, businesses, antiques, collectibles, and high‑value personal property. They are commonly required for mortgages, insurance coverage, taxes (including charitable donation valuations), estate settlements, and sales negotiations. Appraisers…

Applied Economics: Definition, How It Works, and How It’s Used Applied economics uses insights from economic theory and empirical research to inform real-world decisions and predict likely outcomes. Its goal is to improve choices in business, public policy, and everyday life by rigorously weighing costs, benefits, incentives, and human behavior. Key takeaways Applied economics translates…

Application-Specific Integrated Circuit (ASIC) An application-specific integrated circuit (ASIC) is a custom-designed chip built to perform one particular task extremely efficiently. In cryptocurrency, ASIC miners are specialized devices optimized to run hashing algorithms used in proof-of-work (PoW) blockchains like Bitcoin. Introduced in 2012, ASICs dramatically increased mining speed and energy efficiency compared with CPUs and…

Application Programming Interface (API): Definition and Examples Key takeaways An API (application programming interface) is a set of programming instructions that enables one software system to request data, parse responses, and send commands to another system. APIs power interoperability across platforms—fueling the “API economy” by letting companies expose services without requiring full integration. In financial…

Applicable Federal Rate (AFR): What it is and how to use it The Applicable Federal Rate (AFR) is a set of minimum interest rates published monthly by the IRS that apply to private loans. AFRs prevent below-market family or related‑party loans from being treated as gifts for tax purposes and determine the minimum imputed interest…

What Are Appellate Courts? Appellate courts (courts of appeals) review decisions from trial-level or other lower courts. They focus on whether the law was applied correctly and whether the lower court’s findings are supported by sufficient evidence. Appellate courts do not hold trials or use juries; panels of judges (often called justices) decide the outcome….

Antitrust: Laws, Enforcement, and Why It Matters Antitrust refers to laws and regulations designed to preserve competition by preventing the concentration of economic power through monopolies, collusion, or other anticompetitive practices. These rules aim to protect consumers and markets by promoting lower prices, higher-quality goods and services, and ongoing innovation. Key takeaways Antitrust laws limit…

Anticipatory Breach: Definition and Key Points Key takeaways * An anticipatory breach (anticipatory repudiation) occurs when one party clearly indicates they will not perform their contractual obligations before performance is due. * The non-breaching party may treat the contract as breached immediately, stop their own performance, and seek remedies, but must make reasonable efforts to…

Understanding Anti‑Money Laundering (AML): Key Processes and Global Impact Anti‑money laundering (AML) comprises the laws, regulations, procedures, and controls designed to detect, prevent, and deter the conversion of illicit funds into apparently legitimate assets. AML programs protect the integrity of financial systems from crimes such as drug trafficking, tax evasion, public corruption, fraud, and the…

Anti-Dumping Duty: Definition, Process, Impact, and Example What is an anti-dumping duty? An anti-dumping duty is a tariff that a government imposes on imported goods that are sold at prices below their normal value—often below production cost or the price charged in the exporter’s home market. The purpose is to protect domestic industries from unfair…

Anti-Dilution Provisions: Definition, Types, and Impact What is an anti-dilution provision? An anti-dilution provision is a clause in a company charter or investor agreement that protects holders of convertible securities (such as preferred stock or convertible debt) from reductions in their ownership percentage when the company issues new shares at a lower price than earlier…

Annuity Table: What It Is and How to Use It An annuity table (also called the present value interest factor of an annuity, PVIFA) provides pre-calculated factors that simplify finding the present value of a series of future payments. It’s commonly used by financial professionals to compare lump-sum offers with structured payments (pensions, settlements, lottery…

Annuity Due What is an annuity due? An annuity due is a series of equal payments made at the beginning of each period. Common examples include rent and many insurance premiums, which are typically payable at the start of each coverage period. How it works Because payments occur at the start of each period, each…

Annuities: A concise guide What is an annuity? An annuity is a contract sold by an insurance company that converts a lump sum or periodic premiums into a stream of payments. Those payments can begin immediately or at a future date and may continue for a fixed period or for the lifetime of the annuitant….

Annuitization: Turning an Annuity Into Steady Income What is annuitization? Annuitization is the process of converting an annuity contract into a series of regular income payments. These payments can be set for a fixed period or continue for the annuitant’s lifetime. The arrangement shifts longevity risk from the annuitant to the insurer in exchange for…

Annuitant: Definition, Types, Payments, and Tax Basics What is an annuitant? An annuitant is the person whose life expectancy is used to calculate payments under an annuity contract. Annuities provide a stream of payments either immediately or starting at a future date, and the annuitant’s age and life expectancy are primary factors in determining payment…

Annualized Total Return What it is Annualized total return (also called compound annual growth rate or CAGR) is the geometric average annual rate of return earned by an investment over a specified period. It shows the constant annual rate at which an investment would have grown if returns were compounded each year. It does not…

Annualized Rate of Return What it is The annualized (or annual) rate of return measures the average growth of an investment per year over a specified period. It expresses performance as a compounded, time-weighted percentage and is useful for comparing investments held over different lengths of time. Unlike a simple arithmetic average, the annualized return…

Annualized Income Installment Method The annualized income installment method lets taxpayers—typically those with fluctuating or seasonal income—figure quarterly estimated tax payments based on income actually earned through each payment period. It helps reduce underpayment penalties that can occur when income is uneven over the year. When to use it You receive income not subject to…

Annualized Income Annualized income estimates how much an individual, business, or investment will earn over a full year based on income observed during a shorter period. It’s a practical tool for budgeting, forecasting seasonal revenue, and calculating estimated tax payments when income varies across the year. Why annualize income Helps plan monthly budgets when income…

Annualization: Definition, Methods, and Practical Examples Key takeaways * Annualization converts a short-term rate, return, or value into a full-year equivalent to enable apples‑to‑apples comparisons. * Simple annualization multiplies the period rate by the number of periods per year; compounding annualization accounts for reinvestment and produces a different (usually higher) effective annual rate. * Use…

Annual Turnover Definition Annual turnover measures how frequently assets, securities, or inventory change ownership over a one‑year period. It indicates activity levels in investment funds (how often holdings are bought and sold) and business efficiency (how quickly inventory is sold). Turnover alone does not determine quality or performance. Portfolio (Investment Fund) Turnover Portfolio turnover shows…

Annual Return What is an annual return? An annual return (or annualized return) measures the average percentage growth of an investment per year over a specified period. It reflects total returns—capital appreciation plus distributions such as dividends—and is typically expressed as a compounded (geometric) rate rather than a simple arithmetic average. Key takeaways Annualized return…

Annual Report An annual report is a yearly publication public companies distribute to shareholders that summarizes their financial performance, operations, and strategic direction for the preceding fiscal year. It combines audited financial statements with narrative discussion and visuals to help investors and other stakeholders evaluate the company’s health and outlook. Key takeaways Annual reports disclose…

Annual Percentage Yield (APY) What is APY? Annual Percentage Yield (APY) is the annual rate of return on an investment or deposit account that includes the effect of compound interest. It expresses how much an investment will grow in one year when interest is compounded at regular intervals. Key takeaways APY shows the actual annual…

Annual Percentage Rate (APR) Key takeaways * APR measures the annual cost of borrowing (or the annual return on some investments) expressed as a percentage and typically includes certain fees in addition to the nominal interest rate. * APR uses simple interest and does not account for intra-year compounding; APY reflects compounding and will usually…

Annual General Meeting (AGM) What is an AGM? An annual general meeting (AGM) is a yearly gathering of a company’s shareholders, hosted by the board of directors and senior management. Its primary purpose is to report on the company’s performance, allow shareholders to vote on key matters, and provide a forum for shareholders to ask…

Annual Equivalent Rate (AER) What is AER? The Annual Equivalent Rate (AER), also called the effective annual rate (EAR) or annual percentage yield (APY), shows the actual annual return on an interest-bearing product after taking compounding into account. It converts a quoted (nominal) rate and its compounding frequency into a single annualized rate that reflects…

Understanding Animal Spirits in Finance “Animal spirits” describes the psychological and emotional forces—confidence, fear, optimism, pessimism—that influence economic and financial decision-making. Coined by John Maynard Keynes, the term captures how moods and sentiment can drive investment, hiring, spending, and ultimately market outcomes, sometimes independently of fundamentals. The concept sits at the intersection of classical economics…

Angel Investor: Definition and How It Works An angel investor is an individual who provides early-stage funding to a startup, typically in exchange for equity. Unlike lenders, angel investors expect returns only if the business succeeds. They can be hands-off financiers or active mentors who help guide a company through product development and market entry….