Fundamental Financial Terms You Should Know!

Fundamental Financial Terms

Understanding financial terms is essential as these terms provide the language necessary for proper decision-making in the financial world in maybe managing personal investments or analyzing corporate balance sheets, familiarity with concepts like assets, liabilities, and cash flow is paramount. A grasp of financial terminology empowers individuals to make informed choices, mitigate risks, and pursue opportunities for growth. 

Among them are:

  • Market capitalization is the valuation of the market as whole. It can be used for comparing the worths of different businesses as it depends on the value of their current share schemed at the market.
  • Mega Cap: Companies with market capitalizations typically exceeding INR 2,00,000 crores.
  • Large Cap: Companies with market capitalizations generally ranging between INR 20,000 crores to INR 2,00,000 crores.
  • Mid Cap: Companies with market capitalizations typically between INR 5,000 crores to INR 20,000 crores.
  • Small Cap: Companies with market capitalizations generally below INR 5,000 crores.
  • Growth: Investing strategy focusing on companies expected to grow earnings at an above-average rate, often characterized by higher price-to-earnings ratios.
  • Value: Investing strategy targeting undervalued stocks relative to their intrinsic value, often characterized by lower price-to-earnings ratios.
  • REIT (Real Estate Investment Trust):A business that manages, funds, or holds income-producing real estate, giving investors exposure to the asset class without taking ownership of it directly.
  • Volatility: The degree of variation in the price of a financial asset over time, indicating the level of risk associated with that asset.