An asset is something valuable that can be owned or controlled to generate future benefits. It can be tangible, like property or equipment, or intangible, like patents or copyrights.

Alternative investments are non-traditional asset classes such as alternative fixed income, private equity, cryptocurrency, collectibles, pieces of art, hedge funds, etc.

Average return is a measure of the expected or average rate of return on an investment over a certain period and provides an indication of the typical performance of an investment. It is the simple mathematical average of a series of returns generated over a specified period.

An asset class is a category of investments with similar characteristics and behaviour in the market, such as stocks, bonds, real estate, or commodities.

A bond is a contract between the borrower (Issuer of the Bond) and the lender(investor), whereby the borrower agrees to issue a debt instrument to the lender and repay the principal, while also making timely payments of interest at a pre-determined rate. In simple words, a bond is a loan made by a lender to the borrower.

Any person, business or entity who obtains funds from others (lender or a financial institution) with an agreement to repay by agreeing to the terms of repayment is a borrower.

A business model is the plan your business has for making money.  It largely provides a framework that supports the viability of the business and explains who the business serves, what it offers, how it offers it, and how it achieves its goals.

The interest rate charged by the country’s central bank while lending money to commercial banks.

A balance sheet is a financial statement that provides a snapshot of a company's financial position including company's assets, liabilities, and shareholders' equity at a specific point in time.

A basis point (BPS) is a unit of measurement used in finance and investment to represent a small percentage change in interest rate. One basis point is equal to one-hundredth of a percentage point or 0.01%.

Companies with proven business models and cash flows raise debt in the form of bonds to support business growth. These bonds are called Corporate Bonds or Debts. Investors who purchase corporate bonds receive regular interest payments over the life of the bond, and the principal is repaid at the bond's maturity date.

A creditor typically means a person or a financial institution who is owed money by extending credit to another party.

A Custodian is an entity or financial institution that holds securities for safekeeping and clearing, on behalf of its clients. The security can be either in physical form or dematerialized form.

Something pledged as security for repayment of a loan, to be forfeited in the event of a default. Collateral is the security for a loan or credit pledged by the borrower with the lender where the lender has the right to seize the collateral in case of failure to repay the loan.

The coupon for a bond is nothing but the interest that the bond issuer pays  to the bond investor on the face value of the bond.

Capital means liquid cash or assets which can be liquidated to get cash. The value of a company's capital would include everything it owns and all of its money.

A credit rating essentially is an indicator of the loan repayment capability of an individual or an organisation that has borrowed money. These scores/ratings are typically done by established credit bureaus for individuals (Examples: Equifax, Experian, Transunion) and credit rating agencies for businesses (Examples: CRISIL, CARE, ICRA)

Cash reserve is the amount of cash held or highly liquid asset owned by an individual or an organisation for the purpose of meeting contingencies.

This is defined as the amount of cash that a company is depleting every month as part of running a business. With monthly cash burn rate, companies determine how many months of runway they have based on the total amount of cash reserves on hand..

It is the amount of cash available at any point in time in the books of a person, business, or an entity.

Counterparties are those parties that are a part of a monetary transaction. These transactions may cover deals and agreements made between individuals, governments, businesses, or any other entities.

Just like banks hold your money, depositories are entities that hold your financial securities like stocks, bonds, and mutual funds. Central Depository Services Limited is one of the two major depositories of India (NSDL & CDSL) responsible for holding stocks, bonds, mutual funds and other financial instruments in dematerialised form.

It is the procedure of evaluating a borrower’s creditworthiness and assessing the potential risk of default before lending money or offering loan.

It is the measure of potential risk associated with lending money to a borrower. Simply put, credit risk refers to the risk that a lender may not receive the owed principal and interest from the borrower.

Capital Adequacy Ratio (CAR) is the ratio of a NBFC’s or bank’s capital in relation to its risk weighted assets. CAR is critical to ensure that lending institutions such as banks or NBFCs have a large enough financial cushion to absorb a reasonable number of losses before they become insolvent.

It is a measure used to calculate the annualized growth rate of an investment or business over a specific period of time. CAGR considers the compounding effect of growth over multiple periods, which makes it a useful metric for comparing the performance of different investments or businesses.

The money owed by a person or a business to another person or business

The person or the business who has borrowed money from a lender. They are often called borrowers.

Debenture is a debt instrument issued by companies or government to raise money from the public without dilution of ownership. There are both secured and unsecured debentures.

Diversification is a wealth creation strategy that suggests adding a wide variety of investments in a portfolio to reduce portfolio risk.

Demat is an abbreviated term for “dematerialisation”. A demat account is required for holding shares, bonds, mutual funds, and other financial instruments in electronic form. Demat is the process of converting physical share certificates into electronic form making it easier for investors to buy, sell and transfer securities.

In the Indian stock market, a depository refers to an organization that holds securities (such as stocks, bonds, and mutual funds) in electronic/dematerialised form on behalf of investors. The two main depositories in India are the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL).

A depository participant (commonly known as DP) could be a bank, stockbroker, or a sub-broker acting as an agent of the depository and may work with either or both the depositories (CDSL and NSDL)

A downturn in economics typically refers to a period of economic decline or contraction resulting in slower/stagnant business growth. A downturn could lead to decline in revenue, reduction in profits, shortfall or negative cash flows, fall in credit ratings, decrease in company’s stock price, shrinkage of market share or in severe cases, bankruptcy or insolvency.

A thorough review or research about current and historical information of a company before engaging in a financial transaction. It is typically performed to assess the potential risks and benefits of an investment, acquisition, lending, or a partnership opportunity.

Default is the failure to fulfil the obligations or the terms of agreement/contracts by either of the parties to the transaction. Ex. EMI defaults.

The date by which something has to be done or paid.

It is a financial arrangement where the funds of two parties to the transaction is managed by a third-party who acts as a neutral intermediary to ensure that the transaction is completed fairly and efficiently.

Earnings Before Interest, Tax, Depreciation, and Amortisation. EBITDA attempts to represent cash profit generated by the company’s operations.

These are independent credit rating organisations who assess the creditworthiness of individuals, companies, countries, and other entities by analysing the financial and non-financial information (past financial behaviour). These ratings are used by investors and creditors to decide about lending, investing, or partnering with the rated entity.

Equity as an investment represents the ownership stake that shareholders hold in a corporation. Shareholders / Investors can own equity in the form of stocks or shares, which entitle them to a portion of the company's profits, voting rights, and potential dividends. Companies calculate as Equity = Total assets - Total liabilities

Effective yield refers to the total return an investor receives from an investment over a specific period, considering factors such as interest, dividends, and capital gains net of associated costs or fees.

The expense ratio is a measure of the cost of owning a mutual fund, exchange-traded fund (ETF), or other investment fund. It represents the percentage of a fund's assets that are used to cover the operating expenses of the fund over a specific period, typically on an annual basis.

A fund refers to a pool or collection of money, assets, or resources that are set aside or contributed by individuals, organizations, or governments for a specific purpose.

Fund flow statement is a financial statement that provides information about the sources and uses of funds within an organization over a specific period. It focuses on the changes in the financial position between two balance sheet dates, typically the beginning and end of a reporting period.

The costs incurred by a business which does not change with changes in production capacity or sales. For Ex. Office Rent.

Fixed income Instruments refers to the type of investment securities that pays the investors fixed interest along with the principal over the period of the tenure or at maturity.

Face Value of an investment is the nominal value of a stock/bond as given by the issuer. One can find the original value or face value of a share or a bond on the share certificate or bond term sheet respectively.

Financial exposure refers to the potential risk or loss that an individual or organization may face due to fluctuations in financial markets, economic conditions, or specific financial instruments.

Fundamental analysis is a method used to evaluate the intrinsic value (real or fair market value) of a security, such as a stock, bond, or commodity. By analysing various factors, both quantitative and qualitative, fundamental analysis helps to make informed decisions about buying, selling, or holding an instrument.

It is the return on an investment before deducting tax, fees, commissions, or expenses.

Total revenue of a business net of cost of goods is Gross income and it does not include taxes, expenses, and other deductions.

A government bond, also known as a sovereign bond or treasury bond, is a type of debt security issued by a national government to raise capital. It is essentially an IOU (”I Owe You”) issued by the government, where investors lend money to the government in return for periodic interest payments and the repayment of the principal amount at maturity.

Financial institutions earn interest income by lending money to borrowers, such as individuals, businesses, or governments, and charging them interest on the loans. The interest charged is the gross interest. At the same time, these institutions need to fund their lending activities by attracting deposits from customers and paying them interest on those deposits. The gross interest margin would be the variance between the interest income earned by the institution and the interest expenses paid out on deposits and other borrowings.

It is the financial term used to refer to the original cost of an asset when it is purchased. Historical cost is the original purchase cost of the asset including the expenses incurred while acquiring or constructing an asset such as installation cost, cost incurred to get the asset into working condition.

Hedge funds are privately managed investment funds that pool capital from accredited investors or institutional investors to pursue a variety of investment strategies. Hedge funds aim to generate high returns by employing a range of investment techniques, including both traditional and alternative strategies They are typically structured as limited partnerships or limited liability companies.

An "heir" refers to a person who is legally entitled to inherit the assets, property, or rights of a deceased individual. When someone passes away without a valid will (intestate), their assets are typically distributed among their heirs according to the laws of inheritance, which can vary depending on the jurisdiction.

The term "holdings" is often used in the context of portfolio management, investment analysis, or financial reporting, where it refers to the aggregate value or composition of assets held by an individual, company, or investment fund.

It is a financial term used to describe a situation where an asset, such as securities or property, is pledged as collateral for a loan or other form of debt. In hypothecation, the borrower retains ownership and possession of the asset while granting a security interest or lien to the lender.

IRR is the annual rate of return that you get on your investment when there are multiple inflows or outflows over the tenure of the investment.

The possibility of default or loss that cannot be separated from the event or happening.

Interest is the cost of borrowing money, or the compensation paid to the lender for utilising his funds.

It is the true value of an asset based on its fundamental characteristics like earnings, cash flows, potential for growth etc. Intrinsic value is independent of its market price or prevailing market conditions.

At Jiraaf, Internal committee is a panel of financial and legal experts who thoroughly conduct due diligence to assess potential risks and financial health of a borrower.

Know your customer or KYC check is the mandatory process of identifying and verifying the customer’s identity when opening an account or any financial relationship, and also periodically.

Leverage is the amount of funds borrowed by a company for its business or operational activities.

The potential for an organisation to encounter difficulties in sufficiency of cash or liquid assets for managing daily operations or debt repayments. From an investor standpoint, it is ability to liquidate an investment into cash before maturity.

Listed bonds are debt securities issued by companies, financial institutions or government, and are traded on the stock markets like National Stock Exchange(NSE) or Bombay Stock Exchange(BSE). Listed Bonds are also traded on the secondary market and are regulated by SEBI.

LOC is an amount of credit extended to a borrower. An LOC is an arrangement between a financial institution—(mostly a bank)—and a customer that establishes the maximum loan amount that they can borrow.

Liquidity ratio is used to determine the current debt repaying ability of a borrower without raising external capital.

Laddering is an investment technique that requires investors to purchase multiple financial products with different maturity dates. Laddering avoids the risk of reinvesting a large portion of assets in an unfavourable financial environment. Each "rung" of the ladder is a bond of a specific maturity date and the "height" of the ladder is the difference between the shortest maturity bond and the longest maturity bond. The more rungs in the ladder (10 or more is recommended), the better the diversification, the more stable the yield, and the higher the average yield.

Large-cap stocks are shares issued by a company with large market capitalisation.

A lessor is the owner of an asset that is leased, or rented, to another party, known as the lessee. In case of an asset leasing opportunity there can be multiple lessors (Investors) for an asset and usually only one lessee (Borrower).

A lessee is a person who leases an asset and pay periodic payments to the lessor in return of using the asset.

Liabilities are debts or obligations a person or company owes to another person or company.

Lien is a right to keep possession of property belonging to another person until a debt owed by that person is discharged.

Lump sum payment refers to a one-time large monetary payment against a loan, or an investment instead of a series of payments made over time.

Lock in period or lock up period refers to that period for which investments cannot be sold or redeemed.

Market-linked debentures or MLDs are debt securities whose returns are based on the indices they are linked with. These indices can be Nifty 50, Sensex, Government securities, gold index funds, etc. Their value is tied to the performance of the indices.

Market risk is the risk that an investor faces due to the decrease in the market value of a financial product arising out of the factors that affect the whole market. Often called systematic risk, the market risk arises because of uncertainties in the economy, political environment, natural or human-made calamities, or recession.

The date on which a financial instrument or investment becomes due for repayment or redemption is called the date of maturity.

Mitigants in finance refer to the measures taken to reduce the potential risks or losses associated with the particular investment opportunity. These mitigants are designed and executed in a way that the financial institutions or the end customer face minimum negative effects of unexpected market volatility, counterparty default, etc.

A mutual fund distributes investments across several instruments and is managed by a professional Fund Manager. The fund pools the money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities.

Market cap—or capitalization—refers to the total value of all a company's shares of stock. Knowing a company's market cap can help you compare the relative size of one company versus another.

NCDs are debt securities issued by companies for fixed rate of interest (coupon rate) and specific maturity date. These securities do not have an option to be converted to equity shares.

Total profit earned by a company after subtracting expenses like interest, tax, operating expenses, and depreciation. Net income is the revenue leftover for reinvestment or for distribution to shareholders.

National Depository Services Limited is one of the two major depositories of India (NSDL & CDSL) responsible for holding stocks, bonds, mutual funds and other financial instruments in dematerialised form on behalf of the customer.

A nominee(s) in investment is a person(s) in whom the investment holder has faith and receives the benefit in case of death of the investment holder.

Operating profit is the net income earned by a corporation from its core business operations, where interest expenses and tax deductions are removed from the measurement. Operating profit is also called EBIT (Earnings before Interest and Taxes). The formula is: Operating Profit (EBIT) = Revenue – Cost of Goods Sold – Operating Expenses EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) slightly varies from EBIT in that it also excludes depreciation and amortization, which especially would distort operating profits for companies with significant fixed assets.

The costs incurred by a business to operate their day-to-day activities to keep the business running. These include expenses like rent, wages, raw materials, marketing expenses related to producing and selling goods.

It is a finance facility provided by a bank to its account holder to withdraw more money than what is available in their account by charging some interest.

Opportunity cost is the value of what you lose when choosing between two or more options. In simple words, opportunity cost refers to the benefits that could have been obtained by choosing one option over the other.

The unpaid amount of money owed to others is called outstanding debt or in simpler words outstanding debt is calculated by adding up an organization’s short-term and long-term debt. It includes the total principal and the interest yet to be paid by a company.

It is a type of lease agreement where the lessee obtains the right to use the leased asset for a specific period in exchange for periodic lease payments. At the end of the lease period, the leased asset is returned to the lessor and the lessee does not retain the any rights over the asset.

The amount owed by a company to its suppliers or vendors for goods or services purchased on credit. Payables are recorded on the liabilities on the balance sheet until they remain outstanding.

A collection of different investments by an individual or entity can be collectively called as Portfolio. A portfolio consists of investments from various asset classes, and financial instruments like stocks, bonds, cryptocurrencies, alternative fixed-income investments, mutual funds etc.

Expected repayments or disbursements related to an investment opportunity.

In a borrowing arrangement, a principal refers to the amount of money borrowed, excluding any interest or other charges. It also refers to the original amount of the loan sans the interest paid/payable.

The face value of the financial instrument as stated in its issuing document is called par value. Example – If a bond is issued at a face value (original value) of Rs 100, the par value of such a bond is Rs 100.

The value addition of a financial instrument above its original issuing value is called premium. Such an increase in the value of the instrument can vary because of market factors, demand, supply and more.

The asset secured as a collateral for a debt or borrowing. A pledged asset can be held by a lender until the borrower returns the borrowed funds.

Investment made in private companies or unlisted companies for ownership stake in the form of equity is called Private Equity. Private equity firms raise funds from institutional investors, high net worth individuals, and other accredited investors, and use these funds to acquire ownership stakes in private companies.

In finance, qualitative analysis refers to the process of assessing non quantifiable data such as management expertise, industry relations, market sentiments, referral interviews, etc. While analysing the financial health of a company, financial experts use both qualitative and quantitative data to make an informed decision.

Contracts implied by law without being mutually signed between each other are called quasi contracts. This is also referred to as a constructive contract as it is constructed by a judge when there is no existing contract between two parties.

The ratio derived by dividing the company’s quick assets (most liquid assets) with current liabilities. This ratio depicts how well the company will be able to pay its short-term debts with its most liquid assets.

A 3-month period of a financial calendar is called a quarter. In a financial calendar of 12 months, there are 4 quarters (Q1, Q2, Q3 and Q4).

A method of raising capital where the business promises a percentage of future revenue to the investors.

Receivables refer to the amount yet to be received from customers to whom goods or services have been delivered or provided. Receivables are also called account receivables or trade receivables and appear as assets in the balance sheet.

Return on investment (ROI) is the calculation of the monetary returns for an investment made with a defined cost. It is a popular metric used to evaluate how well the investment has performed. ROI does not consider the holding period or passage of time, and so it can miss opportunity costs of investing elsewhere.

Risk refers to the degree of uncertainty with respect to your investments that have the potential to negatively impact your financial welfare including 100% loss of your invested capital. Risks on investment can arise due to wrong business decisions, economic instability, the borrower/vendor’s default, business competition, regulatory changes, market volatility.

Returning the borrowed amount/ money or loan is called repayment. Typically, the details of repayment of principal and interest are outlined in a loan agreement.

A repayment schedule is a plan that outlines the timeline and frequency of repayments as contractually agreed by the parties.

Redemption in finance refers to early repayment (before the scheduled repayment date) of debt or bond, cashing in of a mutual fund, or conversion of securities before its scheduled repayment dates. In simple words, repayment of the financial instrument before the date of its maturity is called redemption.

Recourse is a legal protection offered to lenders to recover collateral or other assets from the borrower if they fail to meet the agreed-upon terms of borrowings.

Risk to reward ratio is a measure used to assess the potential return of an investment when compared to its potential risk. It is calculated risk-to-reward ratio = potential profit/ potential risk. Higher the ratio, potential profits are better than the potential risks.

Non-performance or disputing the terms of a contract or refusing to honor an agreement is called repudiation. Often the party doing the repudiation cannot perform its financial obligations outlined in the contract due to business challenges.

The financial instruments which are assessed and graded by independent credit rating agencies based on their ability to meet their financial obligations are called rated products. Some major credit rating agencies in India are CRISIL, ICRA, and CARE. Credit ratings are assigned to debt instruments, such as bonds or loans, to indicate the creditworthiness and risk of default associated with the issuer. Credit ratings typically ranges from AAA (highest credit quality and lowest risk of default) to D (lowest credit quality and highest risk of default).

Rollover is a financial term used to describe reinvesting/renewing a financial instrument with the proceeds obtained from a maturing investment. Rollover is nothing but investing the maturity proceeds in the same type of investments usually with an aim to maintain the same asset allocation.

A secured deal involves a borrower providing collateral to a lender as protection for borrowed funds. If the borrower fails to meet the terms of the debt, the lender can sell the collateral to recover the money lent.

It refers to the level of protection that a lender has against the risk of default by the borrower. Security for a loan can be in the form of assets pledged by the borrower as collateral. Security cover is calculated as: Security cover = Value of assets as collateral / amount of loan. Higher the ratio, better is the protection for the lender.

Bonds backed by collateral such as specific assets owned by the issuer are called secured bonds. Subordinate bondholders are lower in the priority compared to senior bond holders. This means that subordinate bondholders may have to wait in line behind other creditors to recover their investment from the collateral if a company defaults and files for bankruptcy.

Senior secured bonds on the other hand are more protected than subordinate bonds. Senior secured bonds are backed by collateral and the bondholders have a higher priority over other creditors in case of default. Due to their low risk profile, they generally offer lower yields than unsecured bonds.

Tenure or tenor refers to the length of time for which an investment or a loan is held as per the agreement.

Traditional assets are assets that have existed for many years and are conventional investment options, such as fixed deposits, stocks, bonds, gold, and real estate.

T-Bills or Treasury bills are government-issued debt securities for short-term financing ranging from a few days to a few months, but less than a year. T-Bills issued by the Government of India are currently of three different tenors, namely 91 days, 182 days, and 364 days. Treasury Bills are issued at a discount to their face value and repaid at par value.

T+1 is the acronym for transaction plus 1 day. T+1 is a term used to indicate the settlement date of securities like stocks or bonds.

Trustee is an intermediary who holds and manages assets of a financial arrangement in alignment with the contract that governs the agreement. In case of bonds, the trustee assigned to represent investors has a fiduciary duty to the bond issuer to enforce all the terms of a bond indenture. He makes sure that all bond interest payments and principal repayments are made as scheduled and protects the interests of the bondholders if the issuer defaults.

Volatility often refers to the amount of uncertainty or risk related to the size of changes in a security's value or how large the asset’s prices swing around the mean price. Factors contributing to market volatility include economic events, geopolitical tensions, market sentiment, and investor behaviour.

A bond's yield is the return an investor expects to receive each year over its term to maturity.

YTM is essentially bond’s internal rate of return or total anticipated return if held to maturity.

YTD refers to period beginning from the first day of the current fiscal or calendar year up to the current date.

YOY stands for a financial analysis technique that compares a company’s financial performance for one period to the same period in the previous year.