Financial Terms Beginning with M - Comprehensive Guide
Major Terms Starting with M
Margin
Definition: The difference between a product's selling price and cost of production, or the collateral
that an investor must deposit with their broker when borrowing money to buy securities.
Types: Gross margin, operating margin, net margin, initial margin, maintenance margin
Usage: Used in profitability analysis and leveraged trading
Market Capitalization (Market Cap)
Definition: The total value of a company's shares of stock, calculated by multiplying share price by
number of outstanding shares.
Categories: Large-cap, mid-cap, small-cap, micro-cap
Importance: Key metric for company valuation and investment classification
Mutual Fund
Definition: An investment vehicle that pools money from many investors to purchase securities like
stocks, bonds, and other assets.
Types: Open-end, closed-end, index funds, actively managed funds
Benefits: Diversification, professional management, liquidity
Mortgage
Definition: A loan used to purchase real estate, where the property serves as collateral for the loan.
Types: Fixed-rate, adjustable-rate (ARM), FHA, VA, conventional
Key Terms: Principal, interest, amortization, down payment
Money Market
Definition: A segment of the financial market where short-term borrowing and lending occurs,
typically for instruments with maturities of one year or less.
Instruments: Treasury bills, commercial paper, certificates of deposit, repurchase agreements
Characteristics: High liquidity, low risk, low returns
Merger
Definition: A combination of two companies into one entity, typically involving the exchange of
stock.
Types: Horizontal, vertical, conglomerate mergers
Process: Due diligence, valuation, regulatory approval, integration
Macroeconomics
Definition: The branch of economics that studies the behavior and performance of an economy as a
whole.
Key Indicators: GDP, inflation, unemployment, interest rates
Policy Tools: Fiscal policy, monetary policy
Moving Average
Definition: A technical analysis indicator that smooths price data by creating a constantly updated
average price.
Types: Simple moving average (SMA), exponential moving average (EMA)
Usage: Trend identification, support/resistance levels, trading signals
Maturity
Definition: The date when a financial instrument expires and the principal amount must be repaid.
Applications: Bonds, loans, derivatives, certificates of deposit
Considerations: Interest rate risk, reinvestment risk
Minimum Wage
Definition: The lowest hourly pay rate that employers can legally pay their workers.
Determination: Set by federal, state, or local governments
Economic Impact: Employment levels, cost of living, business operations
Additional Important M Terms
Monetary Policy
Definition: Actions by central banks to influence money supply and interest rates to achieve
economic objectives.
Tools: Open market operations, discount rate, reserve requirements
Goals: Price stability, full employment, economic growth
Monopoly
Definition: A market structure where a single company controls the entire market for a product or
service.
Characteristics: No competition, price maker, high barriers to entry
Regulation: Antitrust laws, government oversight
Mortgage-Backed Security (MBS)
Definition: Investment securities backed by a collection of mortgages.
Types: Pass-through securities, collateralized mortgage obligations (CMOs)
Risk Factors: Credit risk, prepayment risk, interest rate risk
Market Maker
Definition: A firm or individual that provides liquidity to markets by buying and selling securities.
Function: Maintains bid-ask spreads, ensures market liquidity
Compensation: Spread between bid and ask prices
Margin Call
Definition: A demand from a broker for an investor to deposit additional money or securities to
meet minimum margin requirements.
Triggers: Declining security values, increased margin requirements
Response: Deposit funds, sell securities, or face forced liquidation
Mark-to-Market
Definition: An accounting method that values assets and liabilities at their current market prices.
Applications: Trading securities, derivatives, fair value accounting
Implications: Volatility in reported earnings, real-time valuation
Money Supply
Definition: The total amount of monetary assets available in an economy at a specific time.
Measures: M0, M1, M2, M3 (different levels of liquidity)
Control: Central bank monetary policy
Multiplier Effect
Definition: The proportional amount of increase in final income that results from an injection of
spending.
Types: Fiscal multiplier, investment multiplier, money multiplier
Economic Theory: Keynesian economics, stimulus effectiveness
Market Order
Definition: An instruction to buy or sell a security immediately at the current market price.
Characteristics: Immediate execution, price uncertainty
Alternative: Limit orders, stop orders
Moral Hazard
Definition: A situation where one party takes risks because they don't bear the full consequences of
their actions.
Examples: Insurance markets, banking, government bailouts
Solutions: Proper incentives, monitoring, regulation
Investment and Trading Terms
Maximum Drawdown
Definition: The largest peak-to-trough decline in the value of an investment portfolio.
Importance: Risk measurement, performance evaluation
Usage: Portfolio management, strategy comparison
Market Volatility
Definition: The degree of variation in trading prices over time.
Measurement: Standard deviation, VIX index
Implications: Risk assessment, option pricing, investor sentiment
Momentum Investing
Definition: An investment strategy that involves buying securities that have shown upward price
trends.
Theory: Trends tend to continue in the short term
Risks: Reversal risk, market timing challenges
Modern Portfolio Theory (MPT)
Definition: A framework for constructing portfolios to maximize expected return for a given level of
risk.
Key Concepts: Efficient frontier, diversification, correlation
Developer: Harry Markowitz
Municipal Bond
Definition: Debt securities issued by state, city, or county governments to finance public projects.
Types: General obligation bonds, revenue bonds
Tax Benefits: Often exempt from federal and state taxes
Business and Corporate Finance
Management Fee
Definition: A charge levied by investment managers for managing an investment fund.
Structure: Usually a percentage of assets under management
Range: Typically 0.5% to 2% annually for mutual funds
Mergers and Acquisitions (M&A)
Definition: The consolidation of companies or assets through various financial transactions.
Types: Mergers, acquisitions, consolidations, tender offers
Motivations: Synergies, market expansion, cost reduction
Market Share
Definition: The percentage of total sales in an industry generated by a particular company.
Calculation: Company sales / Total industry sales × 100
Strategic Importance: Competitive position, pricing power
Manufacturing Cost
Definition: The total cost incurred in producing goods, including materials, labor, and overhead.
Components: Direct materials, direct labor, manufacturing overhead
Importance: Pricing decisions, profitability analysis
This guide covers major financial terms beginning with "M". Each term includes its definition, key
characteristics, and practical applications in finance and investing.
