Great 'What Terms Don't You Know?' Hunt

STORM_2

squeaky wrote: »

Or do you man terms like OH, BM, DD...? ***

SOA got me for a while... it's Statement Of Affairs

*** Standard abbreviations used on OS

And this might help too...

Abbreviations on MSE

I thought " OH " meant " OLD HUSBAND " until now! :rolleyes:

brianpals

Please, please, please cut out some of the jargon. I haven't a clue what a sendpm button sends or what a Sticky is.

Can't you use normal English? If it's tricky for me, then I despair for any English speakers of other languages.

When is this glossary going to be live as I'm totally lost in my quest to ask a simple question!!

There's even another phrase below this box!! "Automatically parse links in text"!! What the ???? is that??

melancholly

PM = private message - just like an email between site users

a sticky is a thread that's really useful so it is 'stuck' to the top of the board so that it doesn't drop down when newer threads get made

as far as the links thing goes, not a clue but i've never touched it so ignore it!!

what's the question you want to ask?

ra2000

ocsiban wrote: »

Investment products sometimes mention "leverage" [ pronounced as if in America I think ]
Is it a variation on "borrowed money " or more complex?

Leverage is usually the USA term for what we in the UK call "gearing".
This is a financial term which in simple terms refers to the proportion of debt capital to equity.

OK ... I can already hearing gasps of "now what on earth does that mean" so I'll try to explain it simply by means of an example.

Imagine you buy a second house to rent out and you pay £100,000 for this house. You approach a lender who lends you £80,000 on it and requires you to put up £20,000
The property is leveraged, or geared 80% (£80,000/£100,000)

Why is it used - well it tells the investor the scale of risk of the investment.
In this case, if you invest with this person or give him credit for goods he wants to buy from you, you need to be aware that he doesn't own the whole house because 80% of the value is debt (leveraged). He is therefore, at substantial risk if interest rates rise, or will be making a lot of money when interest rates are very low (like today).

That is why leveraging/gearing is an important indicator of the risk in a business.

Hope that helps

ra2000

jamtart6 wrote: »

AER and APR are definites that I never understand ...and this hideous word "net" which I never understand either. Net profit vs. what? total profit? completely over my head! Please define!!

There are whole books written on the difference between APR and AER, but in layman's terms in essence APR (Annual Percentage Rate) is what is called the "simple" interest rate because it takes no account of compounding or fees.

AER (Annual Effective Rate) is what the interest rate actually works out to be (the mathematically true interest rate) when you take into account compounding (ie multiple payments in a year) and the timing of any fees. If fees are paid upfront, the AER would be higher than if they were paid at the end of the loan.

On your second query .....Net simply refers to final ( or after paying for overheads and expenses)
In the case of "Net Profit vs what?" the answer is compared to Gross Profit.

A simple example may help.
Imagine I bought a bag for £10 and sell it on Ebay for £30.
My only other costs were Ebay fees of £3 and postage of £5.

A simple profit statement would look like this :
Sales £30
less Cost £10

---

Gross Profit £20 (ie profit BEFORE overheads and expenses)

Less Expenses
-Ebay £3
- Postage £5
Total Expenses £8

---

Net Profit £12 (ie profit AFTER overheads and expenses)


Hope that helps

ra2000

katrina24 wrote: »

I would like to know how interest on loans and such like work. I have tried and tried over the years, but I can't make it out.

There's no simple answer, it all depends on what kind of loan it is, and how the loan is structured (ie is it a repayment, endowment, balloon loan etc).

For simplicity, let's take a simple repayment loan.
Imagine you take out a £1,000 repayment loan on Jan 1st 2009 over 10 years at 12% APR/AER (see my earlier post for the difference).

You will therefore have loan interest to pay of 12% of £1,000 = £120 interest pa
On top of that will be your capital repayment of £1,000/10 years = £100 pa

Thus, in your first year you will have to pay £120 interest + £100 capital = total £220.
Now, the banks usually set off your payments firstly against your interest, and only when that is totally paid off, will they set off against capital.

Thus, your £220 repayment may work out at £18.33 per month (£220/12), but Jan's payment of £18.33 will be against your £120 interest bill; so will Feb's £18.33, and March's £18.33, April's £18.33 ... May's £18.33 .... June's £18.33.
By the end of June you've repaid £109.98 (6 x £18.33) all against the £120 interest.
So, July's £18.33 will be split between £10.02 against the interest and only now are you starting to repay £8.31 against your capital of £100.

This is where the APR/AER difference comes in, because the banks usually recalculate your interest on a monthly, or daily, basis but that's another story ....
But this is how a straightforward loan repayment works

Hope that helps

marleyboy

I only know APR, the rest is all greek to me n I end up asking the MRS.

What would be nice is a glossery of terms like a dictionary explaining things like SOGA (sales of good act), APR (Annual Percent Rate), we could all possibly add to it those not already covered.

hayley11

I've never really understood quantative easing (sp?) So if that could be explained, that would be good