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Financial Terminology


  1. Returns
    • Absolute return is the return that an asset achieves over a certain period of time. This measure looks at the appreciation or depreciation, expressed as a percentage, that an asset, such as a stock or a mutual fund, achieves over a given period of time.
    • The Compound Annual Growth Rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance assuming the profits were reinvested at the end of each year of the investment's lifespan.
    • Internal Rate of Return (IRR) is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero. IRR is used to evaluate the attractiveness of a project or Investments. If the IRR of a new project exceeds a company's required rate of return, that project is desirable. If IRR falls below the required rate of return, the project should be rejected.
  1. SWP
    • Systematic Withdrawal Plan (SWP) is the facility by which an investor can withdraw a predetermined amount from his existing investments in mutual funds at a pre-decided interval (weekly, monthly, quarterly, semi-annually or annually). This helps in generating a regular cash flow for the investors. SWP in the mutual fund is one of the most effective and tax-efficient ways to earn potential returns.
  1. Nifty
    • The NIFTY 50 index is the National Stock Exchange of India's benchmark broad-based stock market index for the Indian equity market. It represents the weighted average of 50 Indian company stocks in 12 sectors
  2. Sensex
    • The BSE SENSEX (also known as the S&P Bombay Stock Exchange Sensitive Index or simply the SENSEX) is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks are representative of various industrial sectors of the Indian economy.
    • Sensex & Nifty are the two most important stock indices used in India.
  1. Insurance Underwriter
    • Insurance underwriters evaluate the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them.
    • Each insurance company has its own set of underwriting guidelines to help the underwriter determine whether or not the company should accept the risk.
  2. Claim settlement ratio
    • Claim Settlement Ratio is the indicator of how much death claims Life Insurance Company settled in any financial year. It is calculated as the total number of claims received against the total number of claims settled. Let us say, Life Insurance Company received 100 claims and among that it settled 98, then claim settlement ratio is said to be 98%. Remaining 2% claims the Life Insurance Company rejected.
  1. No Claim Bonus
    • No-claim bonus refers to the bonus amount that gets accumulated to the sum insured amount for every claim-free year. In other words, it is the reward offered by the insurer for not making any claim during a particular policy period.
  1. Rera
    • The Real Estate (Regulation and Development) Act, 2016 (RERA) is an Act passed by the Indian Parliament. The RERA seeks to protect the interests of home buyers and also boost investments in the real estate sector. The Rajya Sabha passed the RERA bill on 10th March 2016, followed by the Lok Sabha on 15th March 2016, and it came into force from 1st May 2016.
  2. Carpet Area
    • According to the RERA, carpet area is defined as 'the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.