Finance Abbr

Here’s a breakdown of common finance abbreviations, formatted for HTML presentation:

APR

Annual Percentage Rate: The total cost of borrowing money, including interest and fees, expressed as a yearly rate. Crucial for comparing loan offers.

APY

Annual Percentage Yield: The actual rate of return earned on an investment or savings account in one year, taking into account the effect of compounding interest. Generally higher than the stated interest rate if interest is compounded.

ROI

Return on Investment: A performance measure used to evaluate the efficiency of an investment. Calculated by dividing the net profit by the cost of the investment. A high ROI indicates a profitable investment.

NAV

Net Asset Value: The value of a fund’s assets less its liabilities, often used for mutual funds. Represented as a per-share value, calculated daily.

P/E Ratio

Price-to-Earnings Ratio: The ratio for valuing a company that measures its current share price relative to its per-share earnings. Used by investors to determine if a stock is overvalued or undervalued.

EPS

Earnings Per Share: A company’s profit allocated to each outstanding share of common stock. A key indicator of a company’s profitability.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization: A measure of a company’s overall financial performance and is used as an alternative to net income in some circumstances. Useful for comparing companies with different capital structures or tax rates.

CAGR

Compound Annual Growth Rate: The year-over-year growth rate of an investment over a specified period of time, assuming profits were reinvested during the term of the investment.

GDP

Gross Domestic Product: The total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. A broad measure of a country’s economic activity.

CPI

Consumer Price Index: A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. Used to track inflation.

IPO

Initial Public Offering: The first time that a private company offers shares to the public. Allows the company to raise capital and investors to own a piece of the business.

SEC

Securities and Exchange Commission: A U.S. government agency that oversees securities markets and protects investors.

IRA

Individual Retirement Account: A tax-advantaged investing tool used to save for retirement. Different types exist, such as traditional and Roth IRAs, each with its own tax implications.

401(k)

A retirement savings plan sponsored by an employer. Allows employees to save and invest a portion of their paycheck before taxes are taken out; some employers offer matching contributions.