escrow
/ɛˈskroʊ/Money or documents held by a third party until the conditions of a deal are met.
Example: The deposit is held in escrow until the house sale completes.
C120 words · Advanced
Finance & Accounting vocabulary — C1
Advanced finance vocabulary for lending and investment, including escrow, collateral, underwriting and the hedging and gearing that shape a company's risk.
20 questions
Words in this set
20collateral
/kəˈlætərəl/Property or another asset that a borrower offers to guarantee a loan.
Example:
The bank accepted the warehouse as collateral for the loan.
underwriting
/ˈʌndərˈraɪtɪŋ/The process of assessing and accepting financial risk, often for a loan or insurance policy.
Example:
The bank's underwriting team reviewed the loan application.
reconciliation
/ˌrɛkənˌsɪliˈeɪʃən/The process of checking that two sets of financial records match each other.
Example:
The reconciliation revealed a small error in last month's accounts.
factoring
/ˈfæktərɪŋ/The practice of selling unpaid invoices to a third party at a discount, in exchange for immediate cash.
Example:
The small business used factoring to cover costs while waiting for customers to pay.
indemnity
/ˌɪnˈdɛmnəti/A promise to compensate someone for a loss or damage they might suffer.
Example:
The contract included an indemnity clause in case of delays.
disbursement
/dɪsˈbɜrsmənt/A payment made from a fund, especially for a specific purpose.
Example:
The final disbursement of the loan was released last week.
covenant
/ˈkʌvənənt/A condition in a loan agreement that the borrower must follow.
Example:
Breaking the loan covenant allowed the bank to demand repayment.
capital gains
The profit made from selling an asset for more than it originally cost.
Example:
She paid tax on the capital gains from selling her shares.
goodwill
/ˈɡʊˈdwɪl/The extra value of a business beyond its physical assets, based on its reputation.
Example:
The buyer paid a premium for the company's strong goodwill.
deferred revenue
Money received for something not yet delivered.
Example:
Deferred revenue made the quarter look far better than it was.
contingent liability
A possible debt that depends on a future event.
Example:
The contingent liability was disclosed in a footnote.
cost of capital
What it costs a company to raise the money it uses.
Example:
Nothing clears the cost of capital at that interest rate.
gearing
/ˈɡɪrɪŋ/The ratio of borrowed money to a company's own funds.
Example:
Gearing of four to one made the bank nervous.
free cash flow
The cash left after paying for operations and equipment.
Example:
Free cash flow turned negative for the first time in a decade.
materiality
/məˌtɪriˈælɪti/Whether an amount is large enough to affect a decision.
Example:
Materiality was set at one per cent of turnover.
hedging
/ˈhɛdʒɪŋ/Reducing risk by taking an offsetting position.
Example:
Hedging the currency cost them the gain and saved the year.
intangible asset
Something valuable that has no physical form.
Example:
Most of the price was for one intangible asset.
clawback
The right to take back money already paid.
Example:
The clawback clause was invoked for the first time that year.
ring-fence
To set money aside so it cannot be spent on anything else.
Example:
They agreed to ring-fence the maintenance budget entirely.
