Glossary

Welcome to Fineco’s Glossary! It will help you better understand the financial terminology and master your financial skills.

G

Gain

The opposite of loss, a gain is the positive change in the value of an asset or piece of property. Gains can be categorised as unrealised (a theoretical increase in value based on market value) or realised (the actual difference between the sale and purchase price when the asset is sold). For instance, if a trader buys a stock worth $200 and then its value rises to $250 but the trader has not sold it, the unrealised gains are $50. If the investor decides to sell, the realised gains would be $50 ($250-$200).

Generally only net realised gains, or the increase in the asset’s value minus any transaction or other fees, are subject to tax. Gains are triggered by special, non-recurring transactions, so sales, wages, and other normal business operations that bring in earnings are not considered gains.

Gold trading

Gold trading is the purchase and sale of physical gold or gold derivatives, such as futures, contracts for difference, or options where gold is the underlying asset. The activity aims to profit from fluctuations in gold’s price.

Gold has been prized for its chemical qualities and beauty for millennia and is now seen as a safe haven asset, which means it is considered to hold value regardless of inflationary pressures. For this reason, people tend to buy more gold when financial markets become more unstable or uncertain, which drives up the price of the metal.

Government bond

A government bond is an instrument used by a country's national government to issue sovereign debt. These bonds generally have a fixed maturity (meaning a pre-agreed period of time before the bond’s principal is paid back) and pay interest on a regular basis (called coupon payments). The coupon payment provides a steady stream of income, which is one of government bonds’ advantages.

The government bonds of certain countries, such as the U.S., are considered extremely low-risk investments. For this reason, they tend to offer lower rates of return than other investments and can fall short of the profits offered by stocks or other instruments.

Government grant

A government grant is money awarded by a government to fund a beneficial project. Unlike a loan, a grant is free money, meaning it does not need to be repaid and does not bear interest. However, the funds of the grant do have to be used for the intended purpose, and the grant’s implementers are ultimately accountable to taxpayers. Most grants are awarded through a highly competitive application process, and they often support the arts, science, or education. Grants have a limited timeframe (usually one to three years).

Grant

A grant is a non-reimbursable sum awarded by a government or other entity on the condition that it be used for a specific purpose or to achieve a specific goal, often related to education, research, or charity.

In business, the term grant often refers to awarding stock options to employees to reward or incentivise good performance. Stock option holders are given preferential rights to purchase stocks in a company, often at a discount, on a certain date.

Great Depression

The Great Depression was a period of worldwide economic contraction and hardship following the Black Tuesday market crash on October 29, 1929. The ensuing slump lasted for around 10 years, and the global gross domestic product (GDP) fell by approximately 15%. Unemployment reached nearly 25% in the United States, with similar levels elsewhere around the globe.

While most historians agree that the Great Depression was the most significant economic crisis in modern history, there is much debate about its causes and eventual solutions. While the stock market crash in the U.S. was the catalyst for the depression, scholars place blame for it on mismanagement by the Federal Reserve, on misguided intervention by U.S. President Herbert Hoover, and on U.S. protectionism. The New Deal policies of President Franklin Delano Roosevelt and the economic movement fueled by World War II are often credited with ending the Great Depression.

Green Bond

Green bonds are a type of debt instrument that raises capital for environmental projects like renewable energy. They are like other bonds in all respects except for their specific purpose of having a positive impact on the environment.

The estimated size of the green bond market as of 2020 was around $300 billion, and the market is expected to grow exponentially in upcoming years.

Green bonds are issued by businesses, governments, and multi-national organizations like the World Bank. As of late 2021, the U.S. was the top issuer of green bonds.

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is the aggregate value of all finished goods produced or services rendered within the borders of a nation in a set period of time. GDP is an important economic indicator for tracking the size and growth of a country’s economy, and businesses, economists, politicians, and investors use it to make a wide range of decisions.

When GDP is divided by the number of people in the country (known as GDP per capita), it can be used to compare economic development between countries. GDP per worker (GDP divided by workforce) is used to measure a country’s productivity rate.

Gross Profit

A company’s gross profit (or gross income) is its revenue minus the cost of goods sold (COGS), which are the variable costs directly related to selling its product or services. It is different from net profit (or net income), which is calculated by subtracting all expenses, including overhead, taxes, interest, and marketing costs.

Both items appear on a company’s balance sheet, and investors can use them as part of fundamental analysis to inform their decisions about the advisability of buying and selling stocks. Gross profit tells analyst how efficiently a business uses its raw materials and labour to produce its products or services, as well as how much margin it has left over to meet its other non-production obligations.

Gross Profit Margin

A company’s gross profit margin is calculated by subtracting the cost of goods sold (COGS), which are all costs directly related to producing its products, from total revenue and dividing the result by total revenue. Basically, it shows how much a business earns after taking away expenses like raw materials and labour.

This metric, which is expressed as a percentage, is important in fundamental analysis because it allows an investor to track trends in the efficiency of a company’s production. Also, if a business has a sizeable gross profit margin, it has more margin to meet non-production obligations and is, therefore, more likely to have a favourable operating margin or net profit margin.