LEVEL 1 GLOSSARY
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Bonds
When you buy bonds, you're basically lending money to municipalities, states, and other government entities, which they use for construction projects and other fun stuff. They then pay you back with interest. These aren’t the biggest money makers, but bonds are fairly stable for those of you who think “risk” is a dirty word.
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NASDAQ
It's known as The National Association of Securities Dealers Automated Quotation System, but suffice to say this stock exchange is one of the biggies.
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Return
Gain (or loss) from an investment. Unless you're fiscally masochistic, you're going to cross your fingers for a gain.
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Revenue
The money generated from sales. If you own a lemonade stand and charge 25 cents per cup, add up all the sales for the day and—voila!—that's the revenue (just to keep you on your toes, sometimes people just refer to this as sales).
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Stock
This is your piece of the corporate pie, and it entitles the holder to a share of assets and earnings.
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Bull Market
Like a bull charging forward, a “bull market” is typically a market on the upswing. Olé!
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Debt
It's a bad word in personal finance, but it's pretty common in the corporate world. This is the money that a company owes to a lender.
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Dow Jones Industrial Average
The grandaddy of them all when it comes to indices only because it’s the oldest and most popular—not the largest or most representative. The Dow only represents the prices of 30 largest and most widely held companies in the U.S.
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IPO
Short for Initial Public Offering, this is a private company's way of saying, "Do you want a piece of this?" This is when a company offers shares to the public to get more dough to grow the business. Also known as "going public."
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NYSE
The New York Stock Exchange, a.k.a. Wall Street, is where stocks are bought and sold.
See full glossary
In Level 1 we'll introduce you to some of the basic concepts of investing. Each concept features a brief description and a case study, so you can see how each concept works in what financial analysts call "the real world." When you've mastered a concept, click the link at the bottom of the page to add it to your Report Card and move to the next one. Master all the concepts in each level, and then take the quiz to see just how smart you are.
- What is money?
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The uses of money
- Function of a bank
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What is a company?
- Is that company any good?
- How companies make money
- Brands
- Stocks vs. bonds
- What is a stock?
- Compounding interest
- What is the market?
- LEVEL 1 QUIZ
Going Ga-Ga for Google
If you want to be technical, Webster's defines a company as "an association of persons for carrying on a commercial or industrial enterprise." But who wants to be technical?
To get an idea of what a company is, let's look at Google (GOOG), one of the best and brightest companies in the world — and how it got to be that way.
It all started in 1996, when Stanford University student Larry Page was working on a research project with Sergey Brin. They were looking at search engines, and they figured they could put together a formula that made a better search engine than the ones that were already out there.
Instead of just seeing how many times a word was repeated, their system would look at variables like links pointing to a site and rank them according to how "important" they were.
To test out their idea, they started small — their search engine only counted pages on Stanford University's website. But they had ambitions to go big, so in 1997 they bought the google.com domain.
A year later they formally incorporated a new company in a friend's garage in Menlo Park, California.
They weren't the only ones who thought this was a good idea: They had over a million bucks in backing from outside investors like Andy Bechtolsheim, a key player in Sun Microsystems (JAVA).
With that, Google was off and running. And what a run it was — Google's search engine garnered a huge following thanks to its impressive results and its simple home page.
The word "google" even became an official verb. How cool is that?
Then, in 2004, Google had their big day: They went public. Going public not only brought in some major cash ($1.67 billion), but it also made a lot of their employees instant millionaires.
These days, Google is worth around $122 billion. Not too shabby for a couple of guys who got their start in a garage with nothing but an idea.
That's the beauty of going public: If your idea is good enough, you'll be able to get your hands on some serious money to see it through.
Some companies thrive, and others don't. But Google is a great example of a company that created a superior product and found huge success.
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