Finance: learn the essentials
Topics, terms and formulas in finance, explained in plain English.
Cash & Liquidity
Profit is an opinion, cash is a fact: a profitable company can still go bankrupt if cash runs out. Liquidity and working capital show whether you can pay bills on time.
Investing & Returns
Investing trades money today for expected returns tomorrow. ROI and payback judge a project, compounding grows it, and the rule of 72 estimates doubling time.
Valuation & Deals
Valuation estimates what a business is worth. Mergers and acquisitions are checked by due diligence, and present value converts future cash into today's money.
Credit & Risk
Credit lets you use money now and repay later with interest. Collateral secures a loan, a credit score signals reliability, and diversification limits risk.
Owners & Shares
Owners hold shares and earn through dividends. Limited liability caps their loss at what they invested, and stock options reward staff with ownership.
Market Value
Market capitalization is share price times number of shares: the market's price tag for a company. A unicorn is a private startup valued above a billion dollars.
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