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.

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Balance Sheet A firm's balance sheet is a snapshot of its financial picture on a given day. One side of the balance sheet totals up assets, moving from most liquid (cash) to least liquid (plant and equipment or goodwill). The other side of the balance sheet lists liabilities in order of immediacy. Remember that assets must equal liabilities plus shareholders equity. The balance sheet, along with the income statement, is an important tool for analyzing the financial health of a company. Using only a firm's balance sheet, you can compare current assets and current liabilities to assess liquidity; you can compare debt to shareholder's equity to see how leveraged the company is; and you can get a better idea of whether the assets might include some hidden value.   Balanced Fund A mutual fund that invests in some mix of stocks and bonds. A good balanced fund offers the advantage of one-stop shopping; it handles asset allocation and mixes equities with fixed income securities. The knock on these is that you don't get to determine your own asset allocation, and there is considerable evidence that asset allocation is the most important factor in portfolio returns. Instead of a balanced fund, for instance, you could choose a good equity fund and a good bond fund and then decide your own proportions.   Bankruptcy Under federal law, a debtor hands over his assets to the bankruptcy court and is relieved of the future obligation to repay his unsecured debts.   Bar Charts A chart that displays a security's open, high, low, and close prices using one vertical line for each time period - whether it is a day, week, month, etc. Bar charts are the most popular type of security chart. On the left side of the bar is a ""tick"" that indicates the opening price. The tick that appears on the right side of the bar is the closing price. The vertical length of the bar shows the price range.   Basis Point One one-hundredth of a percent. Thus, if a bond's yield drops from 6.56 percent to 6.51 percent, it is said to have fallen by 5 basis points.