Financial Lexicon: M-S

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Management Expense Ratio:

  • cost of an investment company to run a mutual fund.

  • includes investment manager compensation, marketing costs, administrative costs, accounting and auditing fees, as well as commissions paid to sales team (known as trailers).

  • deducted from value of mutual fund's assets, which results in a lower return for the investor.

Market Capitalization:

  • value of a company as defined through the market price of its issued and outstanding common shares.

  • calculated as market price times number of outstanding shares.

  • categorized as:

    • Mega-cap = over $200B (billion)​

    • Large-cap = $10B to $200B

    • Mid-cap = $2B to $10B

    • Small-cap = $300M (million) to $2B

    • Micro-cap = $50M to $300M

    • Nano-cap = less than $50M


  • date a loan or bond contract ends and is payable by the borrower to the lender.

  • principal amount owing, along with any unpaid interest, must be paid by this date; alternatively, contract can be renegotiated to extend the term to a future date.

  • lack of payment of money owing may result in default.



Net Asset Value (mutual funds or ETFs):

  • per share or per unit price as of a specific point in time.

  • calculated taking market value of all securities and other assets owned by the fund, subtracting out any liabilities, and dividing by total number of units (or shares) outstanding

  • usually calculated each day after markets close.


Net Worth:

  • in terms of individuals, refers to net economic position.

  • represents the amount of cash leftover in an event where all assets are sold to cover all liabilities.

  • calculated as assets minus liabilities.

No-Load Fund:

  • mutual fund that does not charge a commission to purchase or sell.

  • normally sold directly from the fund sponsor and/or distributor, not through a broker/retail channel.

  • see also Back-Load Fund and Front-Load Fund.



Over-the-Counter (OTC) Traded:

  • privately negotiated bilateral agreements transacted away from any organized exchange, usually done on a broker-dealer network instead.

  • less regulation brings more privacy and customization but also less transparency and liquidity when compared to the exchange-traded method of listing and trading financial assets.

  • used by companies unable to meet exchange listing requirements to raise capital or by companies who require customization of terms of the financial contract.

Owner Equity

  • in corporate terms, represents owners' interest to assets after all claims have been met.

  • may include the initial capital invested by the owners to fund the corporation, the re-invested profits of the company and/or capital withdrawn by the owners.

  • calculated as assets minus liabilities and appears on the right side of a  balance sheet.



Preferred Stock:

  • class of share of ownership of a public corporation.

  • does not ordinarily carry voting rights for the holder.

  • pays dividends at a specified rate, which may not be withheld in favor of paying common stock dividends (i.e. all promised preferred stock dividends must be paid before common stock dividends can be paid).

Present Value:

  • value today of a future payment.

  • guides investor in calculating how much needs to be invested today to reach a certain future goal.

  • reliant on accuracy of assumed rate of return (or discount rate).

Principal Amount:

  • face value of a bond or loan, which must be repaid at maturity.

  • initial amount lent out to borrower.

  • does not include interest owing.


  • business:

    • financial benefit resulting from business activity revenue being greater than the costs, expenses and taxes of operating the business concern.​

    • generally reinvested back into business operations and/or paid out to owners through dividends.

  • investment:

    • difference between selling price of a security and purchase price, bestowing a financial gain to investor.​

Put Option:

  • contract that gives the holder the right, but not obligation, to sell a specific quantity of an asset at a specified price by a specific date.

  • must either be traded or exercised by the expiry date; otherwise, it expires worthless.

  • typically viewed as "insurance policy" against the decrease in price of an asset that may need to be sold in the future.




  • income generated from the sale of services through normal business operations.

  • known as "top line" because it appears first on income statement and may be referred to as "sales".

  • is not the same as cash flow as revenue does not imply that cash has exchanged hands yet.




Secured Credit:

  • loan that is backed by assignment of rights to property in event of default (collateral).

  • lender can take legal action to take possession of property when terms of loan contract are broken by borrower, to sell collateral to make themselves whole.

  • examples include houses for mortgages or securities for margin accounts.

Security (investing):

  • instrument conveying:

    • ownership in a corporation (stock); or​

    • lending relationship  with government or corporation (bond); or

    • rights to ownership (options).

Short Selling:

  • selling a security not owned by the seller.

  • used as strategy when outlook for price of a given security is negative. 

  • process involves borrowing the security from another investor to sell, with the intention of buying back the security at a lower price and closing out borrowed position at a later time.

  • also known as selling short, shorting.

Simple Interest:

  • earning or paying "interest on principal" only.

  • calculation based on initial principal only and does not take into consideration any interest generated/paid earlier.

  • growth of investment or liability slower than with compound interest.


  • ownership of a corporation represented by shares, which entitle the holder to certain privileges, although specific privileges depend on the type/class of share owned (ex. Common vs. Preferred).

  • as an owner, grants a claim on the profit and assets of the corporation.

  • has lower ranking with respect to bonds in corporate capital structure.

Stock Exchange:

  • organized marketplace where of the exchange/trade of financial securities takes place between members of the exchange.

  • members act both as agents (on behalf of someone else) and as principals (on behalf of themselves or their company).

  • list of the major exchanges in the world

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