Now, where did we leave off?! Oh yes, more vocabulary and important need to know information!! In order to strengthen our minds, we must keep learning and expanding our vocabulary.
In today's day and age, the ups and downs of the financial world is comparable with that of a roller coaster. In this case, the ups on the ride are inflation, and the downs are deflation. As dictionary.com states, "Inflation is a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency." Whereas, deflation can be defined as the exact opposite, a decrease in price levels.
Another term that waivers on the teeter totter of pros and cons is leverage. In financial terms, leverage is where a positive or negative outcome is enlarged through using available fund. Leverage "generally refers to using borrowed funds, or debt, so as to attempt to increase the returns to equity."
Liability is the next term I'd like to address. Liability is when one party owes something to another party. For instance, if you borrow money from a credit card company, you are held liable to repay the amount you borrowed and if not, there are penalties placed against you.
Next, let us define assets. An asset is when a person or a business, who had control over a previous transaction, is likely to provide future wealth.
The final term I'd wish to define comes from Wikipedia. "Insolvency is a financial condition experienced by a person or business entity when their assets no longer exceed their liabilities, commonly referred to as 'balance-sheet' insolvency, or when the person or entity can no longer meet its debt obligations when they come due, commonly referred to as 'cash-flow' insolvency."
So, now that we've defined multiple terms that are significant in the financial world of debt, I hope your mission out of any financial hardship will be a little easier to navigate.
