The financial world has developed a special investment-oriented language to help describe the stock market, investments, securities for the stock market, stock market analysis, and its conditions. At times you may be confronted with a term which is totally alien or has a completely different meaning from what you thought. Misunderstanding these terms can sometimes lead to the wrong conclusion, and that can cost you money!

What you don't know can hurt you.

An option with intrinsic value. A call is in the money when the market price of the underlying security is greater than the options strike price. A put is in the money when the market price of the underlying security is less than the options strike price.

The date the mutual fund was started or first offered to the public.

The year-to-date percent change in net income versus the same period a year ago.

The sum of the last four actual quarters of net income from total operations. This calculation is the same for income from continuing operations.

Income from operations that remain ongoing. This figure excludes income from operations that have been closed or sold.

Gains or losses from changes in accounting for depreciation or inventory methods.

This occurs if a company has had a net loss from operations in a previous year that can be carried forward to reduce net income for tax purposes.

Income from all operations, including those that have been discontinued or sold off.

In homebuying, income or debt guidelines estimate the size of the loan you can get. When you're ready to pass the muster of loan officers, you may later pre-apply for a loan, locking in the interest rate and other terms pending final loan approval.

Profits divided by number of workers. Labor is a huge expense for most businesses, and this figure can give some idea of how effectively a company can turn the wits and brawn of its workforce into earnings for shareholders.

A financial statement that shows revenue, expenses and profit during a given accounting period, usually either a quarter or a year. Along with the balance sheet, the income statement (also known as the profit and loss statement, or P&L) is Exhibit A in assessing the health and prospects of a company. Basically, what the income statement shows is revenue and expenses, including operating expenses, depreciation, income taxes and extraordinary items. Using the income statement, an investor can quickly figure cash flow, profit margins and other important indicators of how the business is doing. That said, it's important to remember that accounting is as much an art as a science, and the income statement is often the result of some important judgment calls by both management and the company's auditors. These judgments can substantially affect a firm's showing in a given period. Thus, it's important to read the footnotes, since these often disclose the kinds of judgments that were made, as well as other material information.

An income stock is one purchased primarily for income, which is paid out in the form of dividends. Income stocks tend to be among the least volatile of all stocks, and many investors view them as defensive in nature. These are typically very large, established firms, often in staid or highly regulated businesses. The advantage of income stocks, in addition to their stability, is that even if the stock isn't doing much, you're getting that nice regular dividend. Yet unlike a bond, the stock still gives you some potential for capital appreciation as well. The down side is that such stocks can be sensitive to rising interest rates, which make the dividend look less attractive versus riskless Treasury securities and certificates of deposit. Such stocks can also be sensitive to inflation, which erodes the buying power of the dividend. Also, industries that once looked very stable have become less so in a deregulated and increasingly global economy.

Income taxes paid, net of any investment tax credits.

Change in inventories over time. Rising inventories could be a red flag indicating slowing sales and coming markdowns. On the other hand, many businesses will have rising inventories going into the hectic Eid selling season. In general, inventories are merchandise bought for resale and supplies and raw materials purchased for use in revenue-producing operations.

The increase or decrease between periods of the other current assets. Other current assets includes current assets that are not assigned to accounts receivable and inventories. This category typically includes prepayments, deferred charges, and amounts (other than trade accounts) due from parents and subsidiaries.

Change in receivables over time. Receivables are amounts owed to the company. Rising receivables could indicate growing sales, but might also be a sign that debtors are paying more slowly.

A composite of securities that serves as a barometer for the overall market or some segment of it. The best known of these are the KSE-100 INDEX and the ALL SHARE INDEX, both of which reflect the performance of large Pakistani companies. Many indexes are much more specific. There is an American Stock Exchange Biotechnology Index, for instance, as well as indexes for emerging markets, long-term treasury bonds, and individual markets overseas (the Nikkei, for instance, in Tokyo). Index investors simply try to match a given index, keeping expenses low and acknowledging that it's tough to beat the market. Using the appropriate index, investors can gauge how well they (or their mutual funds) are doing.

A mutual fund that seeks to passively match the performance of some market index. Index investing is based on the theory that all information about stocks is known and discounted in market prices and that, over the long haul, it is virtually impossible for an active manager, hampered by the expenses of running a fund, to beat a broad market indicator. In fact, indexing has become extremely popular in recent years as investors have noticed how frequently the S&P 500 has trounced actively managed funds. One reason is that index funds have very low expenses, since there are no high-priced analysts or stock-pickers needed. Another reason is that index funds do very little trading, which saves commissions. There are now index funds for small-cap stocks, international stocks, corporate bonds and other categories of investing, all offering simply to match the market. The key to choosing an index fund is to pick the one with the lowest fees.

An option on a stock index, usually the Standard & Poor's 500. Basically, these are a way to bet on the direction of the market. They can also be used to hedge against risk. Options on market-sector indexes are also available.

A municipal bond secured by the creditworthiness of a private business rather than a government entity. These bonds are issued by local governments to attract new businesses or help local businesses expand. Such bonds offer the usual tax-exempt interest, but are generally considered riskier than bonds secured by the full taxing power of a stable, solvent local government.

A category that includes economic and industrial development, pollution control, resource recovery, conventions, expositions, stadiums and hotels.

This gives an indication of the field in which the company operates. For example,PTC is in the Telecom industry.

The risk that our money will not be worth as much in the future. That's because the cost of the things we need to buy, such as like housing, clothing and medical care all increase. Guaranteed investments like bank accounts do not keep pace with inflation.

The first stock sold by a company in going public. IPOs are a standard feature of runaway bull markets, since there is proven demand for stock and it makes sense to sell shares when they are likely to bring the highest prices. IPOs are probably the focus of more attention than they deserve, in part because the hottest IPOs can make their purchasers a quick profit by soaring soon after trading begins. In most cases, though, these early gains soon evaporate, and besides, such desirable IPOs are made available mainly to the most cherished customers of the underwriting firms bringing out the offering. IPOs are a risky business.

An institutional investor manages large amounts of money for a big organization. Mutual fund, pension fund managers and insurance companies are institutional investors.

Percent of a company's shares owned by banks, mutual funds, pension funds, insurance companies and other institutions, all of them characterized by a propensity to buy and sell in bulk. Big institutional trades are having an increasing impact on the securities markets as the institutional share of savings increases.Their size and clout gives them more influence than most individual investors could hope to have, and it is usually exercised for the benefit of all stockholders in a given concern. Institutional ownership is a sign of legitimacy for a public company, and liquidity for its shares. It implies that a firm has gained access to vast pools of capital controlled by institutional investors -- capital that might not be otherwise available. On the other hand, some analysts see a large percentage of institutional ownership as a negative, presumably because they figure it's a sign they're too late to get a jump on the crowd.

Items such as goodwill, or patents, that are neither physical nor financial in nature. These have value, but that value often is difficult to determine. A company with a large proportion of its assets consisting of intangibles should be approached with care.

The cost of interest on outstanding debt. Here, it includes all fixed interest expenses net of capitalized interest. Also includes dividends on preferred stock of unconsolidated subsidiaries, if any.

All investors are affected by interest rate risk or the chance that interest rates will change the value of their investment. But interest rates have the greatest impact on bonds. When rates rise, the value of bonds fall. And the longer the term of the bond, the more it falls. So an increase in interest rates will have a much greater impact on a 30-year bond than on a five-year bond.

A stock whose price is very much affected by rising or falling interest rates. Companies in a number of industries have fortunes tied to rates. Auto makers, home builders, mortgage lenders, financial institutions and others find that when rates soar, their business dries up. But some stocks can show rate sensitivity even in an industry not known for such problems. These are stocks that pay hefty dividends. Such stocks often are purchased specifically for their dividend. When rates fall, this dividend looks even better. But rates rise, this dividend is less appealing compared to Treasury securities and other riskless investments.

Intermediate term bonds have a maturity roughly between seven and 15 years, although some people consider even five-year bonds to be intermediates. Intermediate term Treasury bonds are favorites of cautious investors because, historically, they have yielded almost as much as 30-year Treasuries, yet the shorter-term bonds fluctuate much less with changing interest rates. That is, when rates rise, the value of longer-term bonds falls more than that of shorter-term bonds. Intermediate term municipal bonds and intermediate bond mutual funds are also available.

Mutual funds that invest in stocks and/or bonds of companies outside the country. International funds pose some unusual risks. In addition to choosing the most promising foreign companies, fund managers must also hedge against currency fluctuations and sometimes must even consider political unrest.

A Morningstar category for international equity funds that invest at least 20% but less than 70% of their portfolio in stocks, with at least 40% of all stock and bond investments in foreign countries. These funds diversify investments across several countries and regions, presenting less risk than a regional fund. That's because the financial markets of different countries don't always move the same way.

The difference between an in-the-money option strike price and the current market price of the underlying security.

Merchandise bought for resale or supplies and raw materials purchased for use in revenue-producing operations. Changes in inventories could be a clue to a company's changing circumstances or fortunes. For example, rising inventories might indicate that sales are slowing. Remember, holding inventory costs money, both in terms of interest on capital tied up in widgets until they are sold, and in terms of expenses associated with warehousing all those widgets until they can be unloaded.

Latest 12 months' cost of sales divided by the average inventory from the most recent quarter and the year earlier quarter. The resulting inventory turnover rate is an indicator of how well the company's products are succeeding in the marketplace. In general, the higher this number, the better.

A company's investing activities. Refers to cash derived from (or used in) securities investments and asset purchases and sales.

This gives an indication of what the fund invests in, whether it be European stocks, intermediate- term bonds, small-cap growth stocks or any number of other choices.

A typical investment club is a group of individuals -- often neighbors, co-workers or friends -- who agree to contribute a fixed sum each month to the club's investment pool. The money is used to buy stocks, bonds or to make other types of investments. If you're nervous about picking your own stocks and don't like the idea of working with a stockbroker, an investment club might be for you.

A group of individuals who pool their money for the purpose of investing. Profits from the investment, as well as tax deductions and other items, are usually then split according to each investor's interest in the pool. Virtually all partnerships have a general partner, who is usually responsible for the day-to-day duties involved in running the partnership's investment. The general partner usually has total liability, while the investors--known as limited partners--are liable only for the amount they put in. Although partnerships can be formed to invest in just about anything, they usually invest in real estate, oil and gas exploration and development, and equipment that is leased to others. Some partnerships are also designed to provide start-up capital for companies with promising products.

Proceeds from issuance of both common stock and preferred stock.

Proceeds from company borrowing.