There are so many words in the personal finance lexicon that it can sometimes feel impossible to keep up. That said, welcome to The Wealth Edit’s “Weekly Words,” where we introduce you to increasingly complex personal finance vocabulary words so your vernacular grows along with your personal finance knowledge. If you have any questions about any of these terms, reach out!
Acquisition
- An acquisition is when one company purchases most or all of another company’s shares to gain control of that company.
- Acquisitions are very common in business.
- Though we more often hear about large acquisitions, most mergers and acquisitions (M&A) occur between small- to medium-size companies.
Liquidity
- Liquidity is the efficiency or ease with which an asset (see Weekly Words No. 1) or security (see below) can be converted into cash without affecting its market price.
- The most liquid asset of all is cash.
Security
- A security is a fungible, negotiable financial instrument that holds some type of monetary value.
- It can be in the form of a stock, bond, or option, for example.
- Securities are used to raise capital in public and private markets.
- The three main types of securities are Equity (which provides ownership rights to holders); debt; and hybrid, which is a combination of equity and debt.
Thanks as always to our friends at Investopedia for helping us clarify these sometimes confusing terms. Stay tuned for more Weekly Words next week!
