Definitions Starting with "N"
Nakahara Prize
The Nakahara Prize is an award from the Japanese government to Japanese economists under age 45 who have made significant contributions to the world of economics. The board of directors of the Japanese Economic Association determines who wins the Nakahara Prize, which was first awarded in 1995. Read more
Naked Call
A naked call is an options strategy in which an investor sells a call option unassociated with units of the underlying security. In a naked call strategy, the sale of a call option is predicated on the writing party's belief that the market price of the underlying security will not exceed the specified strike price prior to the expiration date. Read more
Naked Option
Naked option refers to an option contract which does not comprise ownership of the underlying security by the purchasing or selling party. It is the opposite of a covered option. Read more
Naked Position
Naked position refers to any securities holding which has not been hedged for risk by any accompanying options or futures contracts. A naked position in a given security is exposed entirely to fluctuations in its market price. Read more
Naked Put
A naked put is a put option which is unaccompanied by the actual units of the underlying security specified in the contract. The seller, or writer, of a naked put option incorporates a specific quantity of a given security as an underlying in which he does not hold an actual short position. Read more
Naked Shorting
Naked shorting refers to the practice of shorting units of a given security in advance of ensuring whether or not they can be borrowed. Traders and investors engage in short selling in order to make a profit by leveraging units of a security borrowed from another investor's portfolio. Read more
Naked Warrant
A naked warrant is a warrant that is not attached to a bond or preferred stock. Warrants are securities that give the holder the right, but not the obligation, to buy a certain number of securities (usually the issuer's common stock) at a certain price before a certain time. Read more
Named Beneficiary
A named beneficiary is a person identified as the recipient of benefits from a pension plan, insurance policy, trust or other instrument. For example, let's say John Doe has a life insurance policy with a $1 million death benefit. Read more
Named Fiduciary
A named fiduciary is a person or entity responsible for managing a qualified retirement plan in accordance with the Employee Retirement Income Security Act (ERISA). For example, let's say Company XYZ gets a 401(k) plan. Read more
Named Perils Insurance Policy
A named perils insurance policy is a policy that covers losses from events specifically named in the policy. For example, let's say John Doe owns a houseboat. Read more
Nanny Tax
A nanny tax is a colloquial term for the Social Security, Medicare and federal unemployment taxes due on the pay to caregivers. For example, let's say John and Jane Doe hire Sally Smith to take care of their two preschool-age children while they are at work. Read more
Nano Caps
A nano cap is a company with the smallest market capitalizations in the market place, typically below $50 million. Market capitalization is a measure of the market value of the outstanding stock of the company in the market place. Read more
Narrow Basis
In the futures market, a narrow basis occurs when the spot price of a commodity is close to the futures price of the same commodity. For example, let's say the price of a bushel of wheat is $1 right now (this is called the spot price). Read more
Narrow Moat
Narrow moat refers to the size of a company's competitive advantage. The term is an adaptation of the term "economic moat. Read more
Narrow Money
Narrow money is a colloquial term for the total of a country's physical currency plus demand deposits and other liquid assets held by the central bank. The economic term for narrow money is M1. Read more
NASD Rule 2790
NASD Rule 2790 is a rule prohibiting FINRA members from buying IPO shares for personal gain. The rule is now just called Rule 2790, because NASD became FINRA in 2007. Read more
Nasdaq
Nasdaq, which stands for the National Association of Securities Dealers Automated Quotation system, is a computerized system for stock trading. The Nasdaq does not have a physical trading floor; it is entirely computerized. Read more
Nasdaq 100 Index
The Nasdaq 100 index is one of the most frequently cited "technology" indexes. The Nasdaq 100 Index is composed of the 100 largest stocks (based on market capitalization) traded on the Nasdaq. Read more
Nasdaq Composite Index
The Nasdaq Composite is a broad market index that encompasses about 4,000 issues traded on the NASDAQ National Market. The index first started in February of 1971 with a base value of 100. Read more
Nash Equilibrium
In economics, a Nash equilibrium occurs when two companies in a duopoly react to each other's production changes until their prices reach an equilibrium. The term is named after John Nash, who is an American mathematician who won the Nobel Prize in Economics in 1994. Read more
National Accounting
National accounting, also called macro accounting, is a method of calculating the economic activity of a country or region. In the United States, federal government agencies typically use national accounting to calculate employment rates, inflation rates and many other statistics that indicate how the country's economy is faring. Read more
National Association of Insurance and Financial Advisors (NAIFA)
The National Association of Insurance and Financial Advisors (NAIFA) is a trade organization for insurance professionals and financial advisors. Founded in 1890, the organization originally was called The National Association of Life Underwriters (NALU). Read more
National Association of Mortgage Brokers (NAMB)
The National Association of Mortgage Brokers (NAMB) is an industry trade group representing mortgage brokers. Founded in 1973, the NAMB's primary objective is to promote ethics and professionalism among mortgage brokers. Read more
National Association of REALTORS (NAR)
The National Association of REALTORS (NAR) is a trade association for real estate professionals. The NAR has 1 million members in the United States. Read more
National Association of Securities Dealers (NASD)
The National Association of Securities Dealers (NASD) was a regulatory organization that oversaw the securities industry. The Financial Industry Regulatory Authority (FINRA) superseded NASD in 2007. Read more
National Automated Clearinghouse Association (NACHA)
The National Automated Clearinghouse Association (NACHA) operates the Automated Clearinghouse (ACH) network, which allows companies and consumers to send payments from one account to another. NACHA was established in 1974 through the merger of the California ACH Association, the Georgia ACH Association, the New England ACH Association, and the Upper Midwest ACH Association in order to establish uniform rules for exchanging ACH payments. Read more
National Bank
A national bank is a bank that is a member of the Federal Reserve system and the Federal Deposit Insurance Corp. In global terms, a national bank is a country's central bank. Read more
National Bank Surveillance System
The National Bank Surveillance System is a computer system that collects financial information about banks. The U. Read more
National Best Bid and Offer (NBBO)
The National Best Bid and Offer (NBBO) is the highest bid and lowest offer price quoted on Nasdaq. For example, let's say the following people have buy orders (bids) for Company XYZ (these are the prices people are willing to pay for the stock): 100 shares for $20 per share 50 shares for $20. Read more
National Bureau of Economic Research (NBER)
The National Bureau of Economic Research (NBER) is a private, nonprofit, nonpartisan research organization that studies the economy. Founded in 1920, the NBER undertakes and distributes unbiased economic research to public policymakers, business professionals and the academic community. Read more
National Credit Union Administration (NCUA)
The National Credit Union Administration (NCUA) is an agency of the United States government that charters and oversees federal credit unions. It was created by Congress in 1970. Read more
National Currency
A national currency is simply the currency issued by a country's central bank. Currency is a medium of exchange for goods or services within an economy. Read more
National Income Accounting
National income accounting is a government accounting system to measure economic activity. For example, national income accounting measures the revenues earned in the nation's companies, wages paid, or tax revenues. Read more
National Market System (NMS)
The national market system (NMS) is a system that regulates the disclosure and execution of trades across all exchanges. Congress established the National Market System in 1975. Read more
National Retail Federation (NRF)
The National Retail Federation (NRF) is a trade group that represents retailers. The NRF represents retailers in the United States and 45 countries. Read more
National Savings Rate
The national savings rate is the percentage of gross domestic product that households, governments and businesses save rather than spend. There are only two things to do with money: spend it or save it. Read more
Nationalization
Nationalization occurs when a country's government seizes the assets of corporations or resources without paying for those assets. Let's say Country XYZ elects John Doe. Read more
Natural Capital
Natural capital is a term that describes an economy's natural resources such as water, timber or oil. Let's say Company XYZ is a paper manufacturer. Read more
Natural Unemployment
Natural unemployment is the level of unemployment always present in an economy as industries expand and contract, as technological advances occur, as new generations enter the labor force and as workers voluntarily search for better opportunities. The unemployment rate measures the percentage of employable people in a country's workforce who are over the age of 16 and who have either lost their jobs or have unsuccessfully sought jobs in the last month and are still actively seeking work. Read more
Near Money
Near money is a term for highly-liquid assets that are quickly and easily converted into cash. They may also be referred to as cash equivalents. Read more
Negative Amortization
Negative amortization occurs when the principal balance on a loan (usually a mortgage) increases because the borrower's payments don't cover the total amount of interest that has accrued. For example, let's assume that John wants to borrow $100,000 from Bank XYZ to buy a house. Read more
Negative Amortization Limit
A negative amortization limit is a clause in a loan that restricts the amount of negative amortization that can occur during the contract. Negative amortization occurs when the principal balance on a loan (usually a mortgage) increases because the borrower's payments don't cover the total amount of interest that has accrued. Read more
Negative Amortizing Loan
Negative amortizing loans are loans in which the loan's principal balance increases even though the borrower is making payments on the loan. For example, let's assume that John wants to borrow $100,000 from Bank XYZ to buy a house. Read more
Negative Arbitrage
Negative arbitrage occurs when the interest rate a borrower pays on its debt is higher than the interest rate the borrower earns on the money that will be used to repay the debt. For example, let's assume that XYZ City wants to build several new bridges. Read more
Negative Assurance
A negative assurance is an auditor's written statement that an audit did not uncover any signs of fraud or violations of accounting rules. For example, let's assume that Company XYZ hires an auditor to audit its financial statements and internal controls for the year 2010. Read more
Negative Authorization
Negative authorization is the term for a credit card system that approves or disapproves a credit card transaction based on whether the card appears on lists of stolen, canceled, closed, or lost account numbers. For example, let's assume John purchases $200 worth of widgets at Sears. Read more
Negative Butterfly
Negative butterfly refers to a change in the yield curve whereby medium-term yields change by a greater magnitude than short-term and long-term yields. It is important to note that the negative butterfly is the opposite of the positive butterfly, where medium-term rates change less than the short-term and long-term rates. Read more
Negative Carry
Negative carry means that the price of borrowing money is higher than the returns earned on borrowed money. It is the opposite of positive carry. Read more
Negative Carry Pair
Used in foreign exchange (forex), a negative carry pair refers to a situation in which the investor buys the currency of a country with low interest rates and shorts the currency of a country with high interest rates. It is the opposite of a positive carry pair trading strategy. Read more
Negative Confirmation
A negative confirmation occurs when entities that have a relationship with an auditor's client indicate they have financial discrepancies or disagreements regarding their accounts with the client. For example, let's assume Company XYZ is working on its year-end audit. Read more
Negative Convexity
Negative convexity refers to the shape of a bond's yield curve and the extent to which a bond's price is sensitive to changing interest rates. The degree to which a bond's price changes when interest rates change is called duration, which often is represented visually by a yield curve. Read more
Negative Correlation
Negative correlation describes a relationship in which changes in one variable are associated with opposite changes in another variable. For example, many economists have discovered that people tend to buy more candy and liquor during recessions. Read more
Negative Covenant
A negative covenant is a promise a company makes to not exceed certain financial ratios or not conduct certain activities. Negative covenants are almost always found in loan or bond documents. Read more
Negative Directional Indicator
A negative directional indicator (known as negative DI) is a technical measure of a downtrend's momentum. Mathematically speaking, a negative directional indicator exists when the difference in a security's low price for two periods is bigger than the difference in the security's high price over the same two periods. Read more
Negative Equity
Negative equity occurs when liabilities exceed the value of assets. For example, let's assume that Company XYZ has $20 million of total assets and $40 million of total liabilities. Read more
Negative Float
Negative float is the amount of time between when a person writes a check and when that check clears the account. In banking, the formula for negative float is: Negative Float = Account's Ledger Balance - Account's Available Balance For example, let's assume John has $1,000 available in his checking account today. Read more
Negative Gap
A negative gap occurs when a bank's interest-bearing liabilities exceed its interest-earning assets. Let's assume Bank XYZ has $40 million of interest-rate sensitive assets (mostly loans) and $70 million of interest-rate sensitive liabilities (CDs, savings accounts, etc. Read more
Negative Gearing
Negative gearing is an investment strategy whereby an investor can deduct any shortfall in income from an investment that does not cover the interest expense and maintenance costs associated with owning a particular asset. Not every country allows taxpayers to use negative gearing strategies. Read more
Negative Goodwill
Negative goodwill, also called a bargain-purchase amount, occurs when a company buys an asset for less than its fair market value. Negative goodwill is the opposite of goodwill. Read more
Negative Growth
In economics, negative growth usually refers to shrinking gross domestic product (GDP). For example, if the United States' GDP falls from $14. Read more
Negative Income Tax
Negative income tax refers to transfer payments given to families whose reported household income fall below a predetermined amount and qualifies them for a supplemental payment from the government. For families whose household income qualifies as insufficient to fulfill their needs, the government provides a subsidy to help ensure their welfare. Read more
Negative Obligation
In the trading world, negative obligation refers to a stock specialist's responsibility to avoid buying or selling shares for their own accounts in order to match orders. The New York Stock Exchange imposes this rule on its specialists. Read more
Negative Pledge Clause
A negative pledge clause is lending agreement language designed to prevent borrowers from pledging the same collateral to multiple lenders or otherwise taking actions that might jeopardize the security of existing lenders. For example, let's assume that Company XYZ borrows $10 million from Bank A. Read more
Negative Points
For mortgages, negative points are a strategy for qualified borrowers to decrease the amount of cash they need upfront to finance their home. A mortgage company will pay fees and closing costs on the borrower’s behalf (in the form of points) in exchange for a higher interest rate on the mortgage. Read more
Negative Return
A negative return is a loss on an investment. For example, if an investor buys $1,000 of Company XYZ stock and then sells it for $500, the investor has a negative return of 50%. Read more
Negative Verification
Negative verification is a bank method for verifying bank records. For example, let's assume Bank XYZ is performing an internal audit of the computer system that generates customers' monthly bank statements. Read more
Negative Volume Index (NVI)
A negative volume index (NVI) identifies days in which trading volume of a particular security is substantially lower than other days. Mathematically, the NVI compares the day's volatility to its moving average: If V < V-1, then NVI = NVI-1 + ((Px - Px-1) / Px-1) If V > V-1, then NVI = NVI-1 where V = today's trading volume, V-1 = yesterday's trading volume, NVI-1 = yesterday's NVI, Px = today's closing price, and Px-1 = yesterday's closing price. Read more
Negative Watch
Negative watch is a status that credit-ratings agencies assign to companies that might receive a lower credit rating in the future. Moody's, Standard & Poor's, and Fitch's are the three primary credit ratings agencies in the United States. Read more
Negatively Amortizing Loan
Negatively amortizing loans are loans in which the loan's principal balance (usually a mortgage) increases even though the borrower is making payments on the loan. For example, let's assume that John Doe wants to borrow $100,000 from Bank XYZ to buy a house. Read more
Negotiable
Negotiable refers to an item that can be sold or transferred to another party as a form of unconditional payment. Negotiable also means that the terms of an agreement can be adjusted. Read more
Negotiable Certificate of Deposit (NCD)
A negotiable certificate of deposit (NCD) is a certificate of deposit that differs from a conventional CD in that its terms are negotiated with the issuer. Another difference is that it can be sold in the secondary markets before maturity. Read more
Negotiable Instrument
A negotiable instrument is a signed document that gives the bearer of the document permission to obtain a certain amount of money. Checks are the most common negotiable instrument. Read more
Negotiable Order of Withdrawal (NOW) Account
A negotiable order of withdrawal account (NOW) is an interest-earning bank account in which the account holder can write checks against the balance. Most mutual savings banks, commercial banks, savings and loan associations, and credit unions offer NOW accounts. Read more
Negotiation
Negotiation is a process in which two or more parties resolve a dispute or come to a mutual agreement. Negotiations occur all the time in the business world, and they are often strategic in nature. Read more
Nellie Mae
Nellie Mae is a subsidiary of Sallie Mae (SLM), the largest originator, funder and servicer of student loans in the United States. Specifically, it is responsible for originating Federal Stafford Loans, PLUS loans, consolidation loans and private loans for students and parents. Read more
Nest Egg
A nest egg is a slang term describing money saved for the future. For example, let's say that John Doe works at Company XYZ. Read more
Net Advantage to Leasing (NAL)
Net Advantage to Leasing (NAL) refers to the money a company or individual saves from leasing an asset rather than buying it. Under a lease agreement, the user (the lessee) agrees to make periodic payments to the owner (the lessor) in exchange for the use of the asset. Read more
Net Asset Value (NAV)
Most commonly used in reference to mutual or closed-end funds, net asset value (NAV) measures the value of a fund's assets, minus its liabilities. NAV is typically calculated on a per-share basis. Read more
Net Asset Value Per Share (NAVPS)
In finance, the net asset value per share (NAVPS) is the value of one share of a mutual fund. A fund's NAVPS fluctuates with the value of its underlying investments. Read more
Net Assets
Net assets are what a company owns outright, minus what it owes. Put another way, net assets equal the company assets (economic resources) minus liabilities (what is owed to someone else). Read more
Net Book Value
Net book value is the net value of an asset carried on its balance sheet. Net book value results from the accounting technique of depreciating or amortizing the value of an asset: a company gradually “uses up” or expenses the cost of a fixed asset over the asset’s useful life. Read more
Net Borrowed Reserves
Net borrowed reserves are a measure of the difference between what a bank has borrowed from the Federal Reserve and the cash reserves it holds above the required minimum. The opposite of net borrowed reserves is free reserves. Read more
Net Borrower
A net borrower (also called a "net debtor") is a company, person, country, or other entity that borrows more than it saves or lends. Borrowing can take the form of traditional bank lending, but it also might come in the form of Treasury debt, publicly traded bonds, or even seller financing (accounts payable). Read more
Net Cash Flow
Net cash flow is the difference between a company’s cash inflows and outflows within a given time period. A company has a positive cash flow when it has excess cash after paying for all operating costs and debt payments. Read more
Net Change
Net change refers to the difference in closing price of a stock, bond, mutual fund, ETF or other traded financial instrument from one period to the next. In fundamental analysis, net change is used to analyze stock prices and can be either positive or negative. Read more
Net Current Asset Value Per Share (NCAVPS)
The net current asset value per share (NCAVPS) equals a company's current assets divided by its number of shares outstanding. The formula for NCAVPS is: NCAVPS = (Current Assets - Current Liabilities) / Shares Outstanding A current asset is cash or an asset that can be converted to cash within one year. Read more
Net Debt
Net debt is a company's total debt less cash on hand. The formula for net debt is: Net Debt = Short-Term Debt + Long-Term Debt - Cash and Cash Equivalents For example, let's assume that Company XYZ has $10,000,000 in short-term debt, $4,000,000 in long-term debt, and $1,000,000 in cash and cash equivalents. Read more
Net Debt Per Capita
Net debt per capita is a government's total debt (less cash on hand) per person. The formula for net debt per capita is: Net Debt per Capita = (Short-Term Debt + Long-Term Debt - Cash and Cash Equivalents) / Population For example, let's assume that Country XYZ has $100 billion in short-term debt, $400 billion in long-term debt, $10 billion in cash and cash equivalents, and 250 million people. Read more
Net Debt to Assessed Valuation
Net debt to assessed valuation is a term used in the municipal bond world to compare the value of debt to the value of the issuer's assets purchased or assessed. The formula for net debt to assessed valuation is: Net Debt to Assessed Valuation = (Short-Term Debt + Long-Term Debt - Cash and Cash Equivalents)/Total Property or Asset Taxable Value For example, let's assume that County XYZ has $100 million in short-term debt, $400 million in long-term debt and $10 million in cash and cash equivalents. Read more
Net Debt to Estimated Valuation
Net debt to estimated valuation is a term used in the municipal bond world to compare the value of debt to the market value of the issuer's assets. It is not the same as net debt to assessed valuation. Read more
Net Domestic Product (NDP)
Net domestic product (NDP) represents the net book value of all goods and services produced within a nation's geographic borders over a specified period of time. Gross domestic product (GDP) is the broadest quantitative measure of a nation's total economic activity. Read more
Net Earnings
Net earnings represent the amount of sales revenue left over after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a company's total revenue. Net earnings are also referred to as the bottom line, net profit, or net income. Read more
Net Exporter
A net exporter is a country that sells more to other countries than it buys from other countries. Countries are often net exporters in some industries (natural gas, for example) but net importers in others. Read more
Net Exports
Net exports are the difference between a country's total value of exports and total value of imports. Depending on whether a country imports more goods or exports more goods, net exports can be a positive or negative value. Read more
Net Free Reserves
Net free reserves is a measure of how much cash a bank holds above the Federal Reserve's required minimum. The opposite of net free reserves is net borrowed reserves. Read more
Net Importer
A net importer is a country that buys more from other countries than it sells to other countries. Often, countries are net importers in some industries (natural gas, for example) but net exporters in others. Read more
Net Income
For businesses, net income indicates how well a company is managing its profit (both earnings and expenses). For individuals, this number is defined more loosely: it can refer to your gross income net of expenses, or your take-home pay. Read more
Net Income After Taxes (NIAT)
Net income after taxes (NIAT) is the number of sales dollars remaining after all operating expenses, interest, depreciation, taxes and preferred stock dividends have been deducted from a firm's total revenue. Net income after taxes is also referred to as the bottom line, profit or net earnings. Read more
Net Interest Cost (NIC)
Net interest cost (NIC) is a way to compute the average annual interest expense for a bond issue. The formula for net interest cost is:Net Interest Cost = (Total Interest Payments + Discount - Premium) / Number of Bond-Year DollarsThe "number of bond-year dollars" equals the sum of the product of each year's maturity value and the number of years to its maturity. Read more
Net Interest Income (NII)
Net interest income is the difference between interest received from assets and interest paid on liabilities. The formula for net interest income is: Net Interest Income = Interest Received - Interest Paid Let's assume XYZ Bank earns $1,000,000 for the month on its mortgage loans, commercial loans, and personal loans. Read more
Net Interest Margin (NIM)
Net interest margin is the ratio of net interest income to invested assets. Net interest margin is also known as "net yield on interest-earning assets. Read more
Net Interest Margin Securities (NIMS)
Net interest margin securities (NIMS) provide investors with cash flows from securitized mortgages. The first NIMS came into the marketplace in the mid-1990s. Read more
Net Interest Rate Differential
Net interest rate differential is the difference in interest rates associated with two different currencies or two different economic regions. For example, let's assume an investor in Japan puts her Japanese savings in a Japanese bank and earns interest at Japanese interest rates (say 8%). Read more
Net Interest Rate Spread
In banking, the net interest rate spread is the difference between interest earned on loans, securities, and other interest-earning assets and the interest paid on deposits and other interest-bearing liabilities. For example, let's assume XYZ Bank earned a weighted-average interest rate of 5% on its assets and paid a weighted-average interest rate of 3% on its liabilities. Read more
Net Investment
Net investment is the measure of a company's investment in capital assets, such as the property, plants, software and equipment that it uses for operations. The formula for net investment is: Net Investment = Capital Expenditures – Depreciation (non-cash) In order to calculate the net investment of a company, you must first know the amount of capital expenditures and non-cash depreciation they have. Read more
Net Investment Income
Net investment income is what an investment company receives in capital gains, dividends and interest payments, less administrative fees. The formula for net investment income is:Net Investment Income = Capital Gains + Dividends + Interest Income - Administrative FeesFor example, let's assume Fund ABC is reporting its performance results for the year. Read more
Net Lending
Net lending is an economic measure of whether governments are either providing financial resources to other sectors of the economy or using resources from other sectors of the economy (the latter is called net borrowing). The formula for net lending is: Net Lending = Revenue - Expenditures Or, more precisely: Net Lending = (Net Savings + Net Capital Transfers) - (Value of Acquisitions - Disposed Nonfinancial Assets - Fixed Capital Used) In the simplest terms, if a government receives $1 trillion in revenue and has $250 billion in expenditures, it is a net lender of $750 billion. Read more
Net Liquid Assets
Net liquid assets are cash and securities that can be converted to cash quickly, minus current liabilities. The formula for net liquid assets is: Net Liquid Assets = Cash + Marketable Securities - Current Liabilities note that current liabilities are liabilities due within the next 365 days. Read more
Net Long
An investor is net long when he or she has more long positions than short positions for a particular asset, market sector or portfolio. The concept also applies to commodities trading. Read more
Net Loss
A company reports a net loss when its expenses exceed revenues during a specific period of time. A net loss is the opposite of net income or net profit, which is when a organization's revenue is greater than its expenses. Read more
Net Margin
Net margin is the percentage of revenue remaining after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a company's total revenue. The formula to calculate net margin is: (Total Revenue – Total Expenses)/Total Revenue = Net Profit/Total Revenue = Net Margin By dividing net profit by total revenue, we can see what percentage of revenue made it all the way to the bottom line, which is good for investors. Read more
Net National Product (NNP)
Net national product (NNP) is the market value of a nation's goods and services minus depreciation (often referred to as capital consumption). The formula for NNP is: NNP = Market Value of Finished Goods + Market Value of Finished Services - Depreciation Alternatively, NNP can be calculated as: NNP = Gross National Product - Depreciation Let's assume Country XYZ's companies, citizens and entities produce $1 trillion worth of goods and $3 trillion worth of services this year. Read more
Net of Tax
Net of tax simply means that the number in question is the amount left over after taxes. For example, let's say you win $1,000,000 on a game show. Read more
Net Operating Cycle
The net operating cycle, also called the "cash conversion cycle," is the number of days it takes a company to generate revenues with assets. Analysts can calculate the length of the cycle with the following formula: Net Operating Cycle = Days Inventory Outstanding + Days Sales Outstanding + Days Payables Outstanding Note that DPO is a negative number. Read more
Net Operating Loss (NOL)
A net operating loss (NOL) is a negative profit for tax purposes. It usually occurs when a company's tax deductions exceed its taxable income, making the company unprofitable. Read more
Net Operating Profit After Tax (NOPAT)
One key indicator of a business success is net operating profit after tax (NOPAT). Considered an “apples-to-apples” measure, NOPAT helps investors determine how well one company is performing versus another in the same industry, regardless of how much debt they use to buy and control assets. Read more
Net Operating Profit Less Adjusted Taxes (NOPLAT)
Net operating profit less adjusted taxes (NOPLAT) is a measure of profit that includes the costs and tax benefits of debt financing. put another way, NOPLAT is earnings before interest and taxes (EBIT) adjusted for the impact of taxes. Read more
Net Option Premium
A net option premium is the difference between the price paid to purchase an option and the price received from the sale of a different option. The formula for net option premium is: Net Option Premium = (Price of Options Sold - Commission on sale) - (Price of Options Purchased - Commission on Purchase) Let's assume investor X buys 100 options of XYZ Company for $10 and then sells 100 options in XYZ Company for $12. Read more
Net Payoff
Net payoff is the profit or loss on the sale of a good or service after all the costs of producing and selling that good or service have been subtracted. Let's assume investor X wants to sell his house for $700,000. Read more
Net Present Value (NPV)
Net present value (NPV) reflects a company’s estimate of the possible profit (or loss) from an investment in a project. Companies must weigh the benefits of adding projects versus the benefits of holding onto capital. Read more
Net Present Value of Growth Opportunities (NPVGO)
Net Present Value of Growth Opportunities (NPVGO) is the simply the present value of additional cash flows associated with an acquisition, net of the purchase price of the acquisition. Essentially, the concept adds the present value of assets in place to the present value of the company's growth prospects. Read more
Net Present Value Rule
The net present value rule is the idea that investors and managers should only engage in deals, projects or transactions that have positive net present value (NPV). Using the NPV formula, the net present value rule decides if an acquisition or project is worth it based on the following criteria: If NPV < 0, the project/acquisition will lose the company money and therefore may not be considered. Read more
Net Proceeds
Net proceeds refers to the amount of money remaining after an asset has been sold and related expenses have been paid. For example, a homeowner sells his house for $100,000. Read more
Net Profit
Also referred to as the bottom line, net income, and net earnings, net profit is easily summarized as the amount of money a company has after all expenses are paid. You can think of net profit like your paycheck: It’s the money left after all taxes and benefits are subtracted. Read more
Net Profit Margin
Net profit margin is a metric that indicates how well a company can transform its revenues into profits. Net profit margin is the percent of revenue remaining after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from a company's gross or total revenue. Read more
Net Profits Interest
Net profits interest is the proportion of net profits paid out to a particular investor, according to his or her percentage stake in the company. Net profits interest is most often used in reference to oil and gas contracts in which the property owners lease the property to a developer or producer in return for a percentage of the proceeds. Read more
Net Realizable Value (NRV)
The net realizable value (NRV) of an asset is the money a seller expects to receive for the sale of an asset after deducting the costs of selling or disposing of the asset. Let's assume Company XYZ needs to get rid of a widget maker. Read more
Net Receivables
Net receivables refers to the net amount of money remaining after deducting the provision for bad debt. It is primarily used in businesses that sell on credit. Read more
Net Revenue
Net revenue is defined as a company’s sales (revenue) minus discounts and returns. Net revenue is sometimes called the ‘real top line’ because it reflects total sales with only direct sales-related expenses deducted. Read more
Net Revenue Pledge
A net revenue pledge requires issuers of municipal bonds to use their net revenues (revenue minus expenses) to pay the principal and interest of the municipal bonds before any other use. Let's assume City XYZ issues $10 million of municipal bonds to build a toll road. Read more
Net Sales
Net sales usually refers to a company's revenue net of discounts and returns. Sometimes, though, the user is referring to net profit, which is sales net of all expenses. Read more
Net Settlement
In banking, net settlement is simply the sum of the day's credits and debits. Let's assume XYZ Bank has the following activity today: Outflows: Cash withdrawals $400,000 Debit card transactions $500,000 Credit card transactions $300,000 Total $1,200,000 Inflows: Check deposits $275,000 CD purchases $100,000 Cash deposits $125,000 Total $500,000 Net settlement = $500,000 - $1,200,000 = -$700,000 Banks send their net settlement data to each other and to Federal Reserve bank banks in order to collect or pay amounts due from or to one another. Read more
Net Short
In finance, net short refers to holding more short positions than long positions in a given security, sector or portfolio. Net short is the opposite of net long. Read more
Net Taxes
In economics, net taxes are taxes on production less subsidies received. Alternatively, net taxes are taxes paid to the government less transfer payments. Read more
Net Unrealized Appreciation (NUA)
Net unrealized appreciation (NUA) refers to the difference between the cost of a security or investment and the current market value of that security or investment. Let's assume Jane purchased 100 shares of Company XYZ for $3 per share 20 years ago. Read more
Net Volume
In trading, net volume refers to the difference between a security's uptick volume and its downtick volume. Let's assume that investors bought 4,000,000 shares of Company XYZ today (the uptick volume) and sold 3,000,000 shares today (the downtick volume). Read more
Net Worth
Net worth refers to the total value of an individual or company expressed as total assets less total liabilities. The net worth of an individual is simply calculated as total assets (e. Read more
Neutrality of Money
The neutrality of money is a theory stating that changes in the money supply only affect prices and wages rather than overall economic productivity. For example, when the Federal Open Market Committee (an agency within the Federal Reserve) purchases U. Read more
New Economy
The new economy refers to the convergence of manufacturing, services and technologies to produce high value-added, technology-enabled, and adaptable industries. Industry trends have always adapted to changes in technologies, incorporating and often initiating changes to improve productivity, quality, and profitability. Read more
New Highs/New Lows
As the name implies, new highs/new lows represents the number of all stocks making new 52-week highs or lows. The result is graphed, and the aggregate number of new highs and new lows is used as a market timing tool. Read more
New Home Sales
New Home Sales is an economic indicator released monthly by the United States Census Bureau. The data reflect the number of newly constructed homes purchased in the previous month. Read more
New Issue
A new issue is a never-before-offered security. Let's assume that Company ABC makes a public offering of shares in order to finance its business expansion. Read more
New Paradigm
A new paradigm is a new logical framework for understanding a situation. In the financial markets, a new paradigm refers to the shift in the underlying economic rules and factors that affect the markets. Read more
New York Board of Trade (NYBOT)
The New York Board of Trade (NYBOT), founded in 1870, is a physical commodity futures exchange located in New York City. The NYBOT trades options and futures on cotton, sugar, coffee, orange juice, and cocoa, as well as interest rates, market indexes, and currencies. Read more
New York Clearing House Association
The New York Clearing House Association, founded in 1853, is the country's first and largest bank clearing house. The Clearing House was created to streamline the bank settlement process, which had grown convoluted during America's "Expansionist" period of unregulated capitalism. Read more
New York Mercantile Exchange (NYMEX)
The New York Mercantile Exchange (NYMEX), founded in 1872, is the world's largest physical commodity futures exchange, headquartered in lower Manhattan. NYMEX handles trades worth billions of dollars in commodities that are bought and sold on the trading floor, as well as on overnight electronic trading computer systems for future delivery. Read more
New York Stock Exchange (NYSE)
The New York Stock Exchange (NYSE) is the oldest stock exchange in the United States, and it's located on Wall Street in lower Manhattan. It is the world's largest stock exchange by market capitalization of listed companies ($13. Read more
No Load Fund
A no load fund, also called a "no transaction fee mutual fund," is a mutual fund that does not charge a sales commission to investors. shares of no load funds are purchased directly from the fund companies rather than through brokers. Read more
No Penalty CD
A no penalty CD is a type of certificate of deposit. A certificate of deposit, or CD, is a financial product offered by banks and credit unions for personal savings and investing. Read more
Nominal Value
Also referred to as face value or par value, nominal value is the value shown on the face of a security certificate or instrument, including currency. The concept most commonly applies to stocks and bonds but is especially important to bond and preferred stock investors. Read more
Nominee
A nominee is a person or entity that takes possession of securities or other assets for the purpose of making transactions on behalf of the owner of the securities or other assets. For example, let's say that John Doe owns several positions in about 200 companies in his brokerage account. Read more
Non Judicial Foreclosure
A judicial foreclosure occurs when a court allows a lender to seize and sell a borrower's collateral when the borrower has failed to repay the lender. The term is most often associated with real estate. Read more
Non-Accredited Investor
A non-accredited investor is an individual or organization that does not meet the description of a "sophisticated" investor as defined by the Securities and Exchange Commission. According to the Securities Act of 1933, a person or entity must meet any of the following criteria to be deemed an accredited investor: An accredited investor can be a bank, insurance company, registered investment company, business development company or small-business investment company. Read more
Non-Cash Charge
A non-cash charge is a write down or expense against earnings that does not involve cash. A company will take a non-cash charge against non-cash items on the balance sheet, such as depreciation, amortization, and depletion. Read more
Non-Cash Item
A non-cash item is an entry on an income statement or cash flow statement correlating to expenses that are essentially just accounting entries rather than actual movements of cash. Depreciation and amortization are the two most common examples of noncash items. Read more
Non-Exempt
The descriptors "exempt" and "non-exempt" are used to describe different categories of employees as defined by the Fair Labor Standards Act (FSLA) according to US Federal employment law. Typically, a non-exempt employee is an hourly wage earner who is entitled to overtime pay at a rate of 1. Read more
Non-Financial Asset
A non-financial asset has a value based on its tangible characteristics and properties. A company's balance sheet includes several types of assets and liabilities. Read more
Non-GAAP Earnings
Non-GAAP earnings (GAAP stands for Generally Accepted Accounting Principles) are measures of profit that don't follow a standard calculation for companies and are not necessarily required in their disclosure. To properly understand non-GAAP earnings, you first need to know what GAAP earnings are and why they are important. Read more
Non-Interest Income
In banking, non-interest income is revenue derived mostly from fees and other activities outside the core activity of lending. For example, let's say Bank XYZ charges customers $25 for bounced checks, $4 to use an out-of-network ATM, and $3 for a paper statement. Read more
Non-Negotiable
Non-negotiable refers to something that cannot be bought, sold, exchanged or transferred. Non-negotiable also can refer to a term or condition that is not open to negotiation. Read more
Non-Operating Asset
A non-operating asset is an asset that generates income, but is unrelated to the core operations of the company. Also called a redundant asset, a non-operating asset usually generates some form of revenue or return for the owning company, but play no role in the company's operations. Read more
Non-Qualified Plan
A non-qualified plan is a retirement plan to which the IRS does not grant specific tax benefits. A non-qualified retirement plan is essentially whatever a qualified plan is not. Read more
Non-Sufficient Funds (NSF)
In most states, writing a bad check is at least a misdemeanor, with the consequences growing depending on the state, the amount involved, and whether the transaction crosses state lines. Most NSFs are simply oversights by consumers, so even if the police are not involved, the fees for bouncing checks can run in the hundreds or even thousands of dollars if the check writer is particularly disorganized. Read more
Noncallable
Noncallable refers to a security that cannot be redeemed by the issuer prior to maturity. Sometimes, it is referred to as non-redeemable. Read more
Nonfarm Payrolls
Nonfarm payrolls is an economic indicator released by the Department of Labor on the first Monday of each month at 8:30am EST. The data reflect the change in nonfarm payrolls from the previous month. Read more
Nonperforming Assets
Nonperforming assets are a bank's nonperforming loans plus the real estate owned by the bank due to foreclosures. On a bank's balance sheet, loans made to customers are listed as assets. Read more
Nonperforming Loan
A nonperforming loan is a loan that is close to defaulting or is in default. Let's assume Bank XYZ lent $1,000,000 to Company ABC, which much repay the loan in monthly installments of $25,000. Read more
Nonqualified Option (NQO)
A nonqualified option (NQO) is the right but not the obligation to purchase shares of a company, usually the option holder's employer, for a fixed price by a certain date. Option grants are incentive compensation that encourages employees to focus on doing work that increases the stock price and thus shareholder value, which is the primary objective of all businesses. Read more
Normal Yield Curve
Also called a positive yield curve, a normal yield curve is one in which short-term yields are lower than long-term yields. A yield curve is a graph that plots the yields of similar-quality bonds against their maturities, ranging from shortest to longest. Read more
North American Free Trade Agreement (NAFTA)
The North American Free Trade Agreement (NAFTA) is an agreement among the United States, Canada and Mexico designed to remove tariff barriers between the three countries. NAFTA was implemented on January 1, 1994, and supersedes the U. Read more
Notarize
To notarize means to have a notary affix his or her seal and signature to a document signifying that he or she witnessed the signing of the document. For example, when John and Jane Doe buy a house, they must sign the closing paperwork that makes them responsible for a large mortgage, title insurance and other responsibilities. Read more
Notary
Notaries are important people because they give documents legal weight. Notaries are commonly involved in the creation of wills, trusts, deeds and powers of attorney. Read more
Note
In the finance world, a note is debt. Notes are typically medium-term debt, but not always. Read more
Notice of Seizure
A notice of seizure is a bad thing. During this time, the IRS takes physical custody of the taxpayer's assets, which could range from cash accounts to homes, cars and other assets. Read more
Notice to Creditors
The notice to creditors is a way to inform creditors of their opportunity to make claims against a bankrupt company, an estate or other entity. Let's say Company XYZ files for bankruptcy. Read more
Notional Principal Amount
Notional principal amounts never change in an interest rate swap, and they are the core of the calculations involved in these transactions. An interest rate swap is a contractual agreement between two parties to exchange interest payments. Read more
Notional Value
Notional values are most discussed in derivatives and currency transactions because those transactions often involve hedging, which means that a small amount of money can influence a very large investment. The term helps distinguish between the amount of money actually invested from the amount of money involved in the whole transaction. Read more
Null Hypothesis
The null hypothesis (H0) suggests that there is no statistical significance in a given set of observations. This implies that any kind of deviation or importance you see in a data set is only the result of chance. Read more
Numismatics
People who enjoy numismatics often have rare coins that can be quite valuable. But not all numismatics fans have to have money to keep collections. Read more
NYSE Holidays
The New York Stock Exchange (NYSE) is open Monday through Friday from 9:30 a. m. Read more
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