Financial dictionary & historical
We are often asked about the origin and definition of common financial words, here are our latest interpretations:
Asset: Any possession that has value – physical (property, stock etc.) or non-physical (rights, debts owed etc.). Children not included under this heading.
Accounts: Produced by companies to keep a record of how things are going, used by the Revenue to tax you and by bankers to reduce your overdraft limits.
Balance Sheet: Thing that details the assets and liabilities – what a firm owns and owes. Remember that this is only a ‘photo of a moving train’. Both sides of a balance sheet equal each other in an ideal world.
Budget: This is where the Chancellor tries to stop us (continuing to) emulate Mr Micawber. Views as to his ability in this regard differ. See next.
Chancellor of the Exchequer: Politician in charge of finance. The word ‘Exchequer’ comes from medieval times where a chequered cloth was used to cover a large table on which counters were placed. The counters represented different items and values.
Equities: Fancy name for shares. Equity means ownership in this context and Share Certificates evidence ownership rights in a company. Values can rise as well as fall.
Gilt Edged: Years ago when people lent money to HMG they were given a book of vouchers, somewhat like a cheque book. They would take the book to the local Post Office every six months who would tear off the foil, stamp the counterfoil and pay the interest due on the loan. The book itself was silver edged – or gilded. Hence ‘gilt edged’ came to mean reliable financially (see Budget comment above) and the debt instrument became known as ‘Gilts’.
Inflation: A general tendency for prices to rise. Deflation is the opposite. A bit of inflation is good for us. Deflation stops people spending money (because goods will be cheaper next month) and we all go bump because next month is a bit like tomorrow and never comes.
Money: A medium of exchange or a measure of value; what you had before the kids and your mortgage, a way of keeping score.
Money Laundering: Turning criminal money into legitimate money. Interesting to note that if you leave a ten pound note in your pocket and it gets laundered it often does not disintegrate like ordinary paper. This is because our currency is made from rags, rather than directly from trees.
Savings: Deferred spending, accumulating security, a form of insurance against bad fiscal happenings.
Stock: Ownership of the certificates in any company (shares are ownership of the certificates of a particular company). Stocks and shares are mostly the same thing.
Taxpayer: Someone who works for the Government but without the good pension scheme.
Zzz: Enough boring stuff.