Finance and accounting English can seem like a maze of complex terms and jargon, but understanding the basics is important for developing your business English vocabulary and improving as a business professional in the finance field. Here are some essential terms to get you started:
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- Assets – Anything of value owned by a person or business. Example: The company’s assets include its real estate holdings, machinery, and the patents on its unique products.
- Liabilities – Debts or obligations owed to others. Example: Due to several outstanding loans, the firm’s liabilities have significantly increased this year.
- Revenue – Income generated from sales or services. Example: In the last quarter, our revenue from the new product line surpassed all expectations.
- Expenses – Costs incurred in running a business. Example: The company’s expenses for this month included a significant amount for marketing and advertising.
- Profit – Revenue minus expenses. Example: After deducting all operating costs, the store reported a profit of $10,000 for the month.
- Balance Sheet – A financial statement showing assets, liabilities, and equity. Example: The balance sheet for the year-end showed a healthy equity position and a decrease in long-term debts.
- Income Statement – Summarizes revenue, expenses, and profit over a period. Example: The income statement for the year displayed an impressive growth in revenue, although the expenses also rose.
- Cash Flow – The movement of money in and out of a business. Example: Monitoring our cash flow statement has been crucial in ensuring the business remains solvent during these challenging times.
- Depreciation – Decrease in the value of assets over time. Example: The company factors in depreciation when calculating the value of its physical assets over time.
- Audit – Examination of financial records for accuracy. Example: Every year, an external firm conducts an audit of our financial statements to ensure transparency and compliance.
- Interest – The cost of borrowing money or the return on investment for lending money, typically expressed as a percentage. Example: We paid 5% interest annually on the business loan we secured last year.
- Diversification – The strategy of spreading investments across different asset classes to reduce risk. Example: To safeguard against market volatility, Jessica believes in the importance of diversification in her investment portfolio.
- Fiscal Year – A 12-month accounting period used by businesses or governments for financial reporting and budgeting. Example: Our company’s fiscal year ends in September, so we’re currently preparing for year-end financial reporting.
- Stock – A share of ownership in a company, representing a claim on a portion of the company’s assets and earnings. Example: XYZ’s stock has been performing well, attracting many investors.
- Amortization – The process of spreading the cost of an intangible asset over its useful life, often applied to loans or mortgage payments. Example: The amortization schedule for the company’s patents spreads the cost over 15 years.
- Bond – A debt security that represents a loan made by an investor to a government or corporation. Example: The government issued a new bond to raise funds for infrastructure projects.
- Credit rating – Also known as a credit score or credit score, credit rating is a numerical representation of someone’s ability to repay any new loans. Example: After consistently paying off his credit card bills on time, John noticed an improvement in his credit rating.
- Recession – The period of significant decline in a country’s economy that typically lasts for several months or even years. Example: The global economy faced a major recession in 2008, impacting millions of jobs and businesses.
- Mortgage – A type of loan specifically used to purchase real estate, typically homes. Example: Jane secured a 30-year mortgage at a fixed rate for her new home.
- Shares – A share is a unit of ownership in a company. When you own shares in a company, you are essentially a shareholder. Example: Mark purchased 100 shares of XYZ, believing in the company’s long-term growth potential.
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Understanding and developing finance and accounting expressions in English is a valuable skill that opens doors to global opportunities, improves financial literacy, and enhances career prospects in the finance and business world. It’s an investment in both personal and professional growth.
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