This will be a multi-part series to gain enlightenment with terms used in finance. For us to uncover the deception of the financial elite and see opportunities to gain we need an understanding of the terminologies of finance. I will use bold italics to simplify the terminologies when needed. Here are three financial terms you need to know:
Debt – Debt is an amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest. The total amount of money you owe to a person or financial institution.
Liability – A liability is a company’s financial debt or obligations that arise during the course of its business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services. Recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues and accrued expenses. Anything that removes money from your pocket or increases expenses/cost to you. There are however exceptions to this as you won’t view your child or pet as an expense, right?
Asset – An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. An asset can be thought of as something that in the future can generate cash flow, reduce expenses, improve sales, regardless of whether it’s a company’s manufacturing equipment or a patent on a particular technology. Anything that places money in your pocket or reduces cost/expenses.
All definitions can be found on www.investopedia.com