Financial Terms – I

Financial Terms – I

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I-Bonds – US Treasury savings bonds with two interest rates. 1. A fixed interest rate. 2. An inflation-busting interest rate. The fixed rate never changes, while the variable one adjusts every six months to the CPI (consumer price index).

ICAO Technical Instructions – a list of requirements regarding the transportation of dangerous goods by air. ICAO stands for the International Civil Aviation Organization.

Iceberg Principle – a theory stating that the majority of what is happening in most circumstances and events is concealed from view. The majority of the ice is below the water’s surface, similar to an iceberg, therefore we cannot see it. Additionally, we refer to it as the Iceberg Model, the Theory of Omissions, and the Iceberg Theory.

Icon – 1. A graphical user interface symbol that we employ. On our desktop, we could see them. They might name a software application, file, document, or folder. 2. A revered individual who stands in for a certain time period, fashion, social movement, or school of thought. 3. An image painted on a wooden panel of the Virgin Mary, Jesus Christ, or a saint.

Identity Theft or Identity Fraud – The former, often known as identity theft, is the taking of another person’s identification information. The latter, or identity fraud, is the practise of exploiting that data to open bank accounts, clone phones, make phoney passports, etc. Fraud and identity theft are huge industries today all over the world.

Idiosyncratic Risk – or unsystematic risk, is a type of risk that is distinctive to a given company or industry. Systematic risk is the antithesis of it. An example of an idiosyncratic risk is when employees of a business go on strike; this only affects the value of those shares, not the market as a whole. The systematic risk is that an increase in interest rates will have an impact on all businesses.

Idle Funds – money that is not earning interest and has not been invested in anything. In other words, money that is just lying around, i.e., it is not working for you. Eventually, due to inflation, that money will lose value. We also refer to it as idle money.

Idle Time – a period of time when neither machines nor employees are producing. The business will lose money if employees are paid during downtime. It is also known as allotted time, downtime, and waiting time. Idle time may result from a variety of factors, such as mishaps, poor management, and defective equipment.

Illegal drugs – Either illegal narcotics that we cannot manufacture, distribute, sell, purchase, or consume; or misused prescribed medications. For instance, a patient may receive a prescription from a doctor and then give or sell the drug to someone else, who may then use it or resell it. They are also known as illegal drugs.

Illiquid – having insufficient funds to meet one’s debt commitments and other expenses. A security that is difficult to sell quickly, or simply convert into cash, is referred to as being illiquid. The phrase is used to describe any assets that take a while to sell. Slow volume, or very few traders, characterises an illiquid market.

Imperfect Competition – a market with entrance restrictions that prevent it from reaching a condition of ideal competition In an imperfect market, participants frequently have the ability to misuse their influence, drive up prices, and steer the market in their favour. It is impossible for an economy to operate with perfect competition; there will always be industries with monopolies, oligopolies, or monopolistic businesses.

Implicit Cost – an unreported potential cost that the accountant failed to categorically categorise as an expense. any expense related to an asset that is not related to renting or selling it. To put it another way, what the business must give up by deciding not to sell or rent that asset. Imputed cost, notional cost, and implied cost are other names for it.

Implicit Interest Rate – an arrangement for a loan or lease when interest is added but the interest rate is not specified. Although it is not explicitly stated, the interest rate is “implied” or “implicit,” and it is calculated mathematically.

Import Credit – a loan facility that a bank in the importer’s home country offers the importer. Import credit is useful for importers if their suppliers do not offer credit terms. It contrasts with export credit.

Import Duty – tax on imported goods or services. Imports are goods and services that come from another country. Customs duty and import tariff mean the same as import duty.

Import Quota – a cap imposed by a government on the volume of a certain good or service that is allowed to enter a nation from abroad. Or, a restriction on imports that specifically targets a certain commodity or service. This could be done to defend homegrown suppliers, as retaliation for an action taken by the other nation, or as a component of an international coordinated campaign.

Import Ratio – the proportion of imports to the average monthly sum of all foreign exchange reserves held by the central bank. The majority of nations have to have sufficient reserves to cover imports for three months. Particularly emerging nations should have a favourable ratio because they employ hard currencies to fund their imports and debt repayments. The phrase could also be used to describe the relationship between all imports and GDP (GDP).

Import Relief – measures the government takes to help domestic companies compete with foreign imports. Measures include restricting imports, providing subsidies and low-interest loans. Sometimes, the domestic producer gets special tax concessions.

Imports – products and services purchased from another country by individuals, businesses, or the government of one country. When an American purchases a car in New York that was manufactured in Japan, it is an imported good. The Japanese automaker exports while the American consumer imports. International trade includes both imports and exports.

Import Substitution Industrialization (ISI) – a theory of economic policy that favours using locally produced goods instead of imports. During the 20th century, the economic or trade theory gained popularity in various emerging countries. Today, only few nations pursue ISI.

Impound – The verb means: 1. To seize something by taking legal custody of it. 2. to confine animals in a space. impound means to keep water in a reservoir, as in “The dam impounds the water in the reservoir.” The phrase may be used as a noun to describe an account that a mortgage firm maintains and into which borrowers make certain instalments.

Impression Management – the process by which we attempt to affect how others, locations, objects, or events are seen by others. In both work and daily life, we do it. Executives in marketing and advertising, for instance, work to sway consumers’ opinions of their goods in order to encourage purchases. Impression management includes the process of shaping perceptions.

Impulse Buying – when a decision was made in the moment to buy something. The choice was made on the spot. We also refer to it as an impulse buy. Impulsive purchases are driven by sentiments and emotions rather than reason and careful planning. These types of purchases account for a sizable amount of the revenue for many businesses.

Impulse Goods – products that we buy without planning to do so, i.e., on the spur of the moment. Chocolate, candy, and chewing gum, for example, are impulse goods. We usually see them strategically placed at the checkout aisle of supermarkets.

Impunity – free from punishment or the consequences of bad or illegal actions. If a person committed an illegal act with impunity, it means that they got away with it. When we use the term, it means we think they should be punished.

Inbound Marketing – a marketing technique in which a business or organisation relies on content that resonates with potential clients or supporters (if it’s a movement or political party) rather than placing banner advertising and embedded videos. Compared to outbound marketing, it is the opposite. Inbound marketing employs content that people are interested in, like as blogs, videos, podcasts, social media marketing, and newsletters, to draw customers in.

Incentive – something that encourages people to do things. They are also used with animals. The word does not have the same meaning as motivation, which includes enthusiasm and will.

Income – also known as earnings, it is money that comes in for work done, goods sold or services rendered. In accounting, it refers to an excess of revenue over expenses for a month, quarter or year (accounting period).

Income Distribution – looks at how much different people, i.e., socioeconomic groups, in a country earn. Income distribution tells us how much or little income equality there is in an industry, company, or country.

Income Elasticity of Demand – determine the impact that an individual’s income has on the demand for a good or service. The same concept is conveyed by the acronym YED as well. YED examines how proportionate changes in income levels affect demand for a given good or service.

Income Inequality – a way to gauge how incomes are distributed throughout a nation. It draws attention to the disparity between those with the greatest salaries and those with the lowest incomes. Inequality of income has increased in the US and many other affluent economies.

Income Share – a share in a mutual fund that gives the investor good dividends, but does not appreciate in value. The opposite of an accumulation share, which appreciates but gives little income.

Income Tax – a charge that the government imposes on some businesses’ and individuals’ incomes. Both earned and unearned income are taxed. It contributes significantly to the government’s revenue. Today, most nations have a progressive tax system, meaning that people with higher earnings pay proportionally more in taxes than people with lower incomes.

Increased Hazard – a circumstance that increases the danger risk to an insured item. Either a current threat has increased in likelihood or a brand-new threat has surfaced. Increased risks typically translate into higher insurance costs. The insurance provider may occasionally even decline to offer coverage.

Increasing-Cost Industry – an industry where the cost of production increases as more businesses enter the market. There is a finite amount of the materials needed for manufacture. The phrase contrasts with decreasing- and constant-cost industries.

Increasing Costs – Any increased output will result in higher costs, even higher costs per unit, when factors of production are at their maximum. For instance, employees will be required to work overtime. They will be entitled to overtime pay from the business. The full name of the concept is “the law of increasing expenses.”

Increasing Opportunity Cost – Opportunity costs rise while a business maintains its production level with its constrained resources. The opportunity cost will increase with each additional unit of production. In fact, it will increase each time by a bigger margin. According to the “law of growing opportunity cost,” this is the case.

Incremental Innovation – a series of small updates or improvements that a business makes to its current products. It consistently makes these little advancements. Incremental innovation is essential in some sectors, such as consumer technology. A consumer tech company could not exist without it.

Incubator Firm – an organization, often a company, that helps early-stage businesses and startups. It assists them during their developmental stage until they can operate completely independently. We also refer to it as a business incubator.

Indemnity – Payment made by one party to another to make up for losses, harm, or damages. When you purchase home insurance, you will be held harmless if the house is harmed by an earthquake, storm, fire, or any other risk specified in the contract.

Indexation – applying a cost-of-living index to an economic variable, such as wages, pensions, taxes, or expenditures, so that the variable rises or falls in line with the rate of inflation. Indexation of salaries refers to the process of ensuring that workers’ salary keeps pace with inflation.

Index Number: a measure of quantity or price in relation to a base value, which is often equal to 100 in economic data. An index would be 300 in relation to 2000, for instance, if something cost three times as much in 2010 as it did in 2000. Index numbers are frequently used to compare business activity, cost of living, and employment rates. They make it possible for statisticians and economists to translate complex business information into simple words.

Index Option – a derivative financial product that depicts an index of a group of stocks. The index option may be connected to indices like the Russell 3000 Index or the S&P 500 Index. Tied narrow-based indexes represent a particular sector, as the technology or energy sectors.

Indian Rupee – the national currency of India. One rupee equals 100 paise.

Indirect Competition – competition between two businesses that produce distinct items for the same market and set of consumers. An ice cream parlour and a frozen yoghurt shop, for instance, cater to customers who are thirsty and craving something cool and delicious. When two businesses produce nearly identical products under different brand names, this is known as direct competition. Coca-Cola and Pepsi-Cola are two examples of companies that compete directly.

Indirect Labor – the employees who support a company’s manufacturing process but do not create the goods that the company sells. They do not actively participate in the transformation of raw resources into final goods. For instance, janitors, security officers, and accountants are indirect workers, whereas assembly line workers are direct workers.

Indirect Materials – materials whose production history we are unable to determine. They are not included in the final output. For instance, cleaning supplies are indirect resources in a furniture manufacturing company. They stand in contrast to traceable direct materials.

Indirect Relationship – a relationship between two parties where their interactions only have an impact on the third party. Direct interaction between the two parties or variables is not possible. For instance, Variable A indirectly influences Variable C by way of Variable B. Think about three dominoes. Only by bringing down Domino B can Domino A cause Domino C to collapse. It is unable to directly knock Domino C down.

Indirect Taxation – Taxes that do not derive from individual income, corporate earnings, or assets are known as indirect taxes. Direct taxes is the alternative. Sales tax or VAT, excise duty, environmental taxes like the carbon tax, and spending taxes are a few examples of indirect taxation. Because people are less aware of any changes, lawmakers frequently concentrate on indirect tax when trying to increase government income.

Individual Branding – a marketing tactic some businesses do whereby each of their items has a distinctive brand name. The approach is in opposition to umbrella branding. Companies that practise umbrella branding employ the same brand name throughout their whole portfolio of goods.

Industry 4.0 – also referred to as the 4IR, or Fourth Industrial Revolution. The Internet of Things is growing, artificial intelligence is developing, factories are getting increasingly automated, and much more. Machines are also becoming “smart” and talking with one another.

Inequality – The disparity between the wealth, education, health, lifespans, and other characteristics of affluent and poor, men and women, and other groups of people is sometimes referred to as economic inequality. Inequality is significant when a small portion of the populace possesses 50% of its wealth. According to studies, nations with high levels of inequality see slower economic growth than those with more equal social structures.

Inflation – inflation occurs when general market prices rise (products become more expensive). It is the opposite of deflation. Inflation figures are closely monitored by economists, central banks, investors and companies.

Influencer – somebody who has the authority, reputation, or expertise to influence a large number of people in a specific niche. Influencers in social media, for example, have many followers and can help promote your product or service.

Influencer Marketing – Influencer marketing is a type of marketing where brands hire social media influencers to promote products and services to their fanbase or following.

Informal Sector – part of the economy that operates ‘below radar’. People who work within the informal sector, also known as the shadow economy, gray economy or underground economy, never declare their income to tax authorities, and consequently pay no tax on those earnings. What makes the activity ‘informal’ is not the work itself, but the evasion of taxes. Some parts of the informal sector are criminal, such as drug dealing, while others legal.

Information Technology (IT) – the term refers to the development, maintenance, and use of computer systems, networks, and software. It includes the use of computers for the processing and distribution of information. Virtually anything related to computing technology is part of IT.

Infrastructure – all the structures and systems in a country which we take for granted but without which our economy could not function, including road & rail networks, bridges, tunnels, subways, power generation and distribution, healthcare, education, emergency services, air control towers, cell towers, telephone lines, etc. The term may refer to a whole country, a company or any entity.

Inheritance – something that a person passes onto somebody else after they die.

Inheritance tax – that which an individual pays when they inherit money or property from someone who has died. Tax systems generally differentiate it from estate tax, which applies to the deceased person’s estate. The rules are different in different countries.

Initial Public Offering (IPO) – an IPO occurs when shares of stock of a company become available for the public to buy for the first time. In an IPO, a private company becomes a public one.

In Lieu Of – a term that refers to replacing something with something else; commonly used in business, finance and everyday English, especially in the United States. For example, a restaurant that has run out of onions, carrots and celery may serve asparagus soup in lieu of minestrone soup. The term originates from Latin (‘locus’ meaning ‘place’), via French.

Innovation – involves inventing, creating and producing new goods and services, new business models, or new process methods. It is more than invention. Commercial success depends on a good innovation system with the company. Some famous innovators, such as Alexander Graham Bell, dramatically changed people’s lifestyles across the world.

Insider Trading – buying and selling shares in the company you work for. This activity may be legal or illegal. If you use material non-public information – relevant information the public does not know about – to trade or help others trade, it is an illegal activity.

Inspection – the act of examining something carefully, usually visually, to make sure it is up to standard and conforms to stipulated requirements or rules and regulations. The word may refer to an official visit to an organization or building to check that everything is legal and correct. In the US and Australia, it is an examination of the structure of a house or building by a specially-trained professional (UK/Ireland: a survey). An inspection is carried out by an inspector. The verb is ‘to inspect’.

Institutional Investor – an organization (firm) that buys and sells shares and other financial assets in huge quantities. Examples include pension funds, mutual funds, endowments, and insurance companies.

Insurance – a financial product that insurance companies sell to safeguard the policyholder against the risk of loss, damage or theft (such as an accident, burglary or flooding). Some types of insurance are compulsory – you cannot drive a car in most countries without the minimum 3rd-party insurance. Many lenders will not grant mortgages if the borrower does not agree to take out a mortgage insurance policy. Insurance has existed for many thousands of years.

Insurance deductible – the amount of money a policy holder has to pay in an insurance claim before the insurance provider covers any expenses.

Intangible Assets – valuable things a company has, but we cannot touch them because they have no physical form. Examples include brands, trademarks and patents.

Intellectual Property – patents, trademarks, slogans are examples of intellectual property. Intellectual property refers to the creation of the mind, such as literary and artistic works, inventions, designs, symbols, images, and names used in commerce.

Interactive Advertising – a media-based marketing technique which encourages consumer participation.

Interest – money a borrower pays on top of the principal (original amount), which compensates lenders for the risk they take as well as having to manage without that money for a specific period. Interest is a rental cost for the borrower and income for the lender. In some cultures and religions today and in the past, charging interest on loans is/was forbidden.

Interest Rate – typically expressed at an annual rate, it is the amount of interest that has to be paid during a year. Loans and savings accounts have interest rates – banks charge interest on loans and overdrafts and pay out interest on people’s savings accounts. Banks’ interest rates are closely linked to the rates imposed by the central bank – if the central bank’s rate (bank rate) increases, so do those of the rest of the banks in the country.

Intermediate Goods – items that we use to create another product. They are also the ingredients or components of a final product. For example, a baker buys salt and adds the salt to flour when making bread. The baker then sells the bread. The salt is an intermediate good.

International Bank Account Number (IBAN) – a series of alphanumeric characters used as a means of identifying a specific bank account internationally. The use of IBANS helps speed up automatic processing of international payments and receipts.

International Banking Facility (IBF) – an account that an American bank creates to provide banking services to non-US residents and institutions. Essentially, the facility allows banks to operate loan and deposit business with foreigners.

International Business – business that takes place across borders, i.e., in more than one country. If make something in the UK and sell it to a customer in Japan, I am involved in international business.

International Depository Receipts (IDRs) – also known as Global depository receipts (GDRs), these are receipts that purchase shares of foreign companies that the bank holds in trust. In the US, they are called American Depository Receipts (ADRs).

International Monetary Fund (IMF) – an organization that focuses on fostering global monetary cooperation, securing financial stability, facilitating international trade, promoting sustainable economic growth and high employment, and putting an end to poverty. The IMF is different from the World Bank.

International Monetary Market (IMM) – one of the four divisions of the Chicago Mercantile Exchange, the largest futures exchange in America. The IMM trades foreign exchange, interest rate and equity index futures, and all IOM and GEM products.

International Trade – the buying and selling of goods and services across borders; from one country to another. International trade’s two main data items are imports and exports. If countries did not trade so extensively, our current industrial world would be quite different.

Internal Rate of Return (IRR) – also known as the economic rate of return (ERR), it is the rate of return used in capital budgeting to predict the rate of growth of an investment and how much it will generate in return. The IRR is calculated to determine whether a project is worth doing.

Internet – also called the Net, is a global network of networks that interlinks billions of computers – a bit like the physical postal system, but at ultra-fast speeds. In the Internet, small packets of digital data are sent from one computer to another using a language called Transmission Control Protocol/Internet Protocol (TCP/IP). The Net was not invented by one person or organization. It gradually evolved in the 1960s, when the military were worried that the telephone system could be knocked out of operation with just one missile attack.

Internet Marketing – marketing that only occurs online. It is the marketing efforts that companies do solely over the Internet. Online advertising and search engine optimization are examples of Internet marketing.

Internet of Things – or IOT is a system of interrelated devices, machines, objects, people, and animals that communicate with each other. Your car will communicate directly with your house, which will communicate with hundreds of different devices at home and outside.

In The Red – a bank account that is in the red has negative numbers, i.e., the account holder owes the bank. It is the opposite of ‘in the black.’ If we say that a company is operating in the red, we mean that it is making a loss.

Intrinsic Value – what a company, stock, option, currency or property is really worth, rather than its book value or market price. It takes into account several variables including the firm’s business historical performance, regional and global market conditions, the quality of its directors, its financial condition, business trends, trademarks, copyrights and brand name.

Investing – refers to committing money, energy or time for a future benefit. We invest money in order to make our money grow, boost production, or make our businesses more successful.

Investment – the application of resources, e.g. money, to make more money or provide a future benefit. It may also mean purchasing goods that are not consumed today, but are utilized for future production and income generation. In finance, it may mean an asset that will appreciate (rise in value) and either be sold at a higher price or provides an income.

Investment Analyst – somebody who specializes in studying investments and providing advice and recommendations to portfolio managers, stockbrokers, and market traders. Also called an equity analyst or financial analyst.

Investment Bank – a financial institution that specializes in services for companies and major investors such as pension funds. Investment banks, unlike commercial banks, do not take deposits. Also known as a merchant bank in the UK/Ireland.

Investment Club – a group of up to 100 people who pool their money to make investments. The investment club meets regularly and decides (usually by voting) which investments to buy and sell.

Investment Horizon – how long a person expects to have his or her money tied up before they liquidate it. A young woman investing in a pension, for example, has an investment horizon several decades away. Also called investment time horizon.

Investment Philosophy – a person’s particular style and approach to investing. How they view the market, how long they plan to invest, the type of companies they wish to focus on, plus other factors all contribute to building an investment philosophy. Also called investment style.

Investor – a person, company, organization or other entity that invests capital (money) into a business or project with the expectation of making a profit or gaining an advantage.

Investor Relations – a department in larger companies that deals with the investor community, i.e. shareholders, investors and other people and entities who may be interested in a company’s stock or financial stability. Also called financial public relations and financial communications, investor relations is a sub-function of public relations.

Invisible Hand – a metaphor used by Scottish political economist and philosopher Adam Smith (1723-1790) that people’s self-interest is what makes economies great. The term refers to the ability of the free market to allocate factors of production, goods and services to their most valuable use. If each individual in an economy acts from self-interest, driven by profit, then the system will work more efficiently and productively, compared to an economy with some type of central planner.

Invoice – a document that a seller issues to a buyer containing pertinent information related to a sale transaction. It is used in business as a record of sale.

Inward Investment – investment in capital goods that comes into a country from abroad, specifically from foreign companies, individuals or other entities. It is the opposite of outward investment. The US is the largest recipient globally of inward investment. The US by far is the largest investor in the UK and vice-versa. Inward investment creates well-paying jobs.

IP Geolocation – sourcing the physical address of a user who visits your web site by doing IP lookups.

IQ – which stands for Intelligence Quotient, is a score that indicates how intelligent a person is compared to their peers. When talking about children, peers refers to age group. A genius has an IQ of at least 140.

ISP – Internet Service Provider; an industry term for a business that provides users with Internet access. ISPs also provide other services such as emailing, data communication access, web hosting, and domain registrations.

IT Consultant – a person that helps organizations make best use of information technology (IT).