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The Secret Language of Finance
Everything you need to know about abbreviations, initialisms, and acronyms in order to join the club
I often tell students in my introductory finance courses that to understand finance you first need to learn the language of finance. Not knowing a foreign language can be a barrier in dealing with foreign businesses; and similarly, not knowing the language of finance can be a communications barrier. Even if your goal isn’t to be a finance professional, you probably spend at least part of your time communicating with finance and accounting professionals within your organization. Knowing the language of finance can give you confidence so that you can at least follow conversations, and even contribute. I’ll review the most common abbreviations, acronyms, and initialisms so you know how to pronounce them, and have an idea as to what they mean. (At the end of this article I’ll provide an alphabetized list of the abbreviations and what they stand for.) And if you are experienced in the language of finance or have already taken a finance or investments course, I’ve got some “shocking news” (ok, that’s admittedly a bit of a stretch) about the pronunciation — or mispronunciation — of one of the best-known financial models, CAPM.
Abbreviations, Acronyms, and Initialisms
First, let’s distinguish among abbreviations, initialisms, and acronyms. An abbreviation is the shorting of a word or phrase to a word or letters — for example, shortening “abbreviation” to “abrev.” Initialisms and acronyms are two different types of abbreviations. Initialisms abbreviate words by using letters or initials, and you pronounce each individual letter, like F-B-I. Acronyms also use letters, but you can pronounce the letters, like the abbreviation for the National Aeronautical and Space Administration or NASA that is pronounced as “na-suh.”
Types of Companies
Let’s start with a company, firm, or corporation (they all mean the same thing) as a legal entity. Registered firms can have a descriptive or distinctive name, but the name also needs to have a legal element. That element must can be “Corporation,” abbreviated as Corp.; “Company,” abbreviated as “Co.”; or “Incorporated,” abbreviated as Inc. Another option that used to be available in the U.S. and that is…
