Professional & Ethics
32 Professional & Ethics terms, defined in plain English — part of the 1345-term Finicade finance glossary. Each one has its own page, and links to the free game that teaches it.
- Accrual Accounting
- Recording revenue and costs when they're earned or incurred, not when cash actually moves.
- Agency Problem
- The conflict when the people running a firm (managers) don't share the interests of its owners (shareholders).
- Audit
- An audit is an independent examination of financial statements to give an opinion on whether they fairly present the position of a business.
- Balance Sheet
- A snapshot of what a company owns and owes at a moment in time — assets on one side, liabilities and equity on the other, always balancing.
- Cash Flow Statement
- The report tracking actual cash moving in and out — from operations, investing and financing.
- Code of Ethics
- The shared principles a profession commits to — acting with integrity, putting clients first, being honest with the market.
- Compliance
- Compliance is the function responsible for ensuring a firm follows the rules that apply to it — writing policies, monitoring, training, and reporting breaches.
- Conflict of Interest
- When your own interests clash with a duty you owe a client — a hidden commission, a personal stake.
- Corporate Finance
- How companies raise money and decide where to invest it — funding, capital structure, and which projects clear the bar.
- Depreciation
- Spreading the cost of a long-lived asset over the years it's used, instead of expensing it all at once.
- Disclosure
- Telling clients and markets what they need to know — fees, conflicts of interest, risks — openly and up front.
- Due Diligence
- The homework an investor or adviser must do before acting — checking facts, risks and suitability rather than taking claims on trust.
- DuPont Analysis
- Breaking return on equity into its drivers — profit margin, asset turnover and leverage — to see why a company's ROE is high or low.
- ESG
- ESG means judging investments on environmental, social and governance factors alongside financial ones.
- Fiduciary Duty
- The legal and ethical obligation to act in someone else's best interest ahead of your own — the standard a financial adviser or trustee is held to.
- Financial Ratios
- Standard ratios — liquidity, profitability, leverage, valuation — that turn raw statements into comparable signals about a company's health.
- Financial Statements
- The three core reports that tell a company's financial story — the balance sheet, income statement and cash-flow statement.
- Front Running
- Front running is trading ahead of a client order you know is coming, capturing the price move that order will cause.
- GIPS
- GIPS (Global Investment Performance Standards) is the voluntary rulebook for reporting investment returns honestly and comparably.
- Goodwill
- The premium a buyer pays for a company above the fair value of its identifiable assets — brand, reputation, customer loyalty.
- IFRS vs GAAP
- The two main accounting rulebooks — international (IFRS) and US (GAAP).
- Income Statement
- The report of a company's revenues, costs and resulting profit over a period.
- Independence
- Independence means being free of relationships that could compromise judgement — and being seen to be.
- Information Barrier
- An information barrier separates parts of a firm that must not share information — typically deal advisers from the traders in the same stock.
- Insider Trading
- Insider trading is dealing in a security while holding material non-public information about it, and in most jurisdictions it is a criminal offence.
- Internal Controls
- Internal controls are the procedures that make errors and fraud hard to commit and easy to detect: segregation of duties, approval limits, reconciliations.
- Investment Policy Statement (IPS)
- The written plan setting a client's goals, risk tolerance, time horizon and constraints — the contract that keeps investing disciplined instead of reactive.
- Management Fee
- The annual charge a fund takes for running your money, quoted as a percentage of assets.
- Material Nonpublic Information
- Price-moving information the public doesn't yet have.
- Soft Dollars
- Soft dollars are research and services a broker provides in exchange for trading commissions, paid out of client assets rather than the manager's own revenue.
- Suitability
- Suitability requires that a recommended investment fits the client's circumstances, objectives and risk tolerance.
- Whistleblower
- A whistleblower reports wrongdoing inside an organisation to regulators or the public.