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Some general finance term definitions:
Equity : ‘Equity’ is simply a technical term for shares, or stocks. It represents, in case of a private company, capital that is introduced into the business by its owners, who are often the same people as its directors. In a public company it represents capital introduced into the company by investors, who while they are technically owners of the company, normally take no part in its management.
Debt : While a share may be thought of as value owned by the company, debt is the value owed by the company. In accounting terms, it is the liability of the company.
Bonds : While loans are a contractual arrangement between the borrower and lender, bonds are instruments, just like equity shares. However, unlike shares, they are debt, not equity. Bonds have a due date on which the money is to be paid back, and a rate of interest in the meantime.
Dividends : Dividends are a part of the profits made by the company that are declared by the directors of the company and distributed to the shareholders. Dividends are paid after tax, which means, the directors cannot treat dividends as a company expense.
Voting : Voting refers to the consent received from the shareholders of the company on various issues of interest to the company. Such as, appointment of the company’s auditors, re-election of the company’s directors, authorization of the director’s remuneration and several other issues.
Loans : Loans are capital paid by a bank or a financial institution to a company with the expectation that the capital is paid back by the company in its entirety at a fixed date in the future, in addition to regular periodic payments of interests against this capital.
Liquidation: The last right of the ownership enjoyed by the shareholder of a company is to participate in its liquidation, or in other words, the right to their share in the ownership of the company’s assets, should it be wound up.
Conversion : This refers to the rights enjoyed by certain types of financial instruments to swap the instruments for shares in the company, or to subscribe to new shares in the company at the agreed upon price.
Limited Liability : Limited Liability means that a shareholder in a company is only liable for any debts of the company no more than the value of the share capital owned by him.
Limited Partnership : Limited partnership is a partnership between the various partners of a company or a firm, but in which some (but not all) of the members enjoy limited liability.
Profits : Profits are what is left over, after all the company’s expenses are deducted from its turnover or sales.