Financial Terms “I”


Financial Terms Dictionary

I


IASB

International Accounting Standards Board (IASB) sets the IFRS global accounting standards.


IFRS

International Financial Reporting Standards; the financial reporting standards globally outside of the United States. IFRS is issued by the IASB.


Income Statement

The income statement is one of the three financial statements. The income statement shows the results for a period. The format is revenues minus expenses. If revenues are higher, the company has net income. If the expenses are higher, the result is a net loss. It is also called a profit and loss statement.


Index fund

An index fund is a mutual fund or an exchange-traded fund (ETF) that tracks an index. The index could be a U.S. stock index like the S&P 500 or the Russell 2000.

The index could be a bond index like the Bloomberg U.S. Aggregate Bond Index. The index could be an international index like the MSCI EAFE index.

An index fund would buy and hold the stocks or bonds within the index. This low-cost approach captures the index market returns.


Interest Rate

The interest rate, expressed as a percentage, is the rate charged on a loan. It is also the rate of return on investment. Interest can be simple interest or compound interest. Interest rates are used in time value of money (TVM) calculations. Interest rates are also called yields, rates of return, or returns. Financial calculators use the P/Y function to calculate interest rates. Excel uses the RATE function.


Inventory Turnover

Inventory turnover is a financial ratio that calculates how often inventory is turned. It is cost of sales divided by inventory. A low inventory turnover may indicate inventory problems such as too much inventory or obsolete inventory. Generally higher inventory turnover is better.

An alternate formula of inventory turnover uses sales instead of cost of sales as the numerator.

inventory turnover formula

Jeff Mankin

Jeff Mankin teaches financial literacy. His website is FinallyLearn.com.

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