Financial glossary

Short definitions of the most searched financial terms, each linked to the calculator where you can apply it with your own numbers.

  • APR (Annual Percentage Rate)

    APR is the real annual cost of a loan or mortgage, expressed as a single percentage that includes both interest and the associated fees.

  • Nominal interest rate

    The nominal interest rate is the percentage the bank charges on the outstanding balance, and it's the figure used directly to calculate the monthly payment of a mortgage or loan.

  • Euribor

    Euribor is the interest rate at which European banks lend each other money, and it's the most common reference rate used to calculate variable-rate mortgage payments in Spain.

  • EBITDA

    EBITDA is a company's earnings before interest, taxes, depreciation and amortization: a measure of its pure operating profitability, without the effect of how it's financed or accounting decisions.

  • P/E ratio (price-to-earnings ratio)

    The P/E ratio is a stock's price divided by its earnings per share, and it shows how many times the annual earnings the market is paying for that company.

  • ROE (Return on Equity)

    ROE measures what percentage of profit a company generates for every euro of capital contributed by its shareholders, and it's one of the most-used indicators to assess a company's efficiency.

  • CAGR (Compound Annual Growth Rate)

    CAGR summarizes the return of a multi-year investment as a single constant annual rate, as if it had grown at the same pace every year.

  • Liquidity

    Liquidity measures how quickly and easily an asset can be converted into available cash without losing significant value in the process.

  • Inflation

    Inflation is the sustained, generalized rise in prices, which reduces the purchasing power of money that isn't earning any return, over time.

  • CPI (Consumer Price Index)

    The CPI is the official indicator that measures how the prices of a representative basket of goods and services change over time, and it's the most common way to calculate a country's inflation.

  • Dividend yield

    Dividend yield is a stock's annual dividend per share divided by its price, and it measures the return you get purely from dividends, not counting price appreciation.

  • Financial leverage

    Leverage means using borrowed money to fund a purchase or investment, which multiplies the effect - positive or negative - of the capital you actually put in.

  • ROI Calculator

    Calculate return on investment (ROI) to measure your investment gains.

  • Volatility: Understanding market fluctuations

    Volatility measures the intensity of price fluctuations of a financial asset over time. Higher volatility means higher risk but also greater return potential.

  • Diversification: Your best defense against risk

    Diversification means distributing your investments across different assets, sectors, and geographies to reduce your portfolio's overall risk.

  • Beta: The systematic risk indicator

    Beta measures how much a stock moves relative to the overall market. A beta of 1 means the stock follows the market; greater than 1, it's more volatile; less than 1, it's more stable.

  • Index Funds: Simple and cheap investing

    An index fund is a fund that replicates a stock index composition (like the S&P 500), offering market returns with very low fees.

  • APY vs APR: The power of compound interest

    APR is the interest percentage without compounding; APY includes periodic compounding. APY is what you actually earn in your savings account.

  • Drawdown: Quantifying the risk of declines

    Drawdown is the maximum decline from the highest peak to the lowest trough of an investment.

  • Sharpe Ratio: Comparing investments fairly

    The Sharpe ratio measures how much return you get for each unit of risk assumed.

  • Duration: The measure of time in bonds

    Duration measures the average time to recover your bond investment, weighted by cash flows.

  • Rebalancing: Restore your strategy periodically

    Rebalancing is adjusting your portfolio periodically to maintain target proportions.

  • Margin: Your profit per unit sold

    Margin is the difference between a product's selling price and cost, expressed as a percentage.