PA-Life-Christmas-Party-2022
PA Show
pa-show-advert
Landmark
landmark-advert
City Cruises
city-cruises-advert

‘Equity’ is the most misunderstood financial term

equity-most-misunderstood-financial-term

New reports show that UK inflation decreased to 4% in December 2023. It’s good news, but what does it really mean in the context of the current financial climate? Many people still find financial jargon confusing and intimidating. With this in mind, City Index used Ahrefs, a search analytics tool, to find the top 50 most confusing financial terms based on their annual and monthly search popularity…

The results from the research into financial terms

Rank Finance term Monthly average searches for the definition (UK) Annual average searches for the definition (UK) Average monthly searches for definition (worldwide) Average annual searches for definition (worldwide)
1 Equity 22,700 272,400 277,000 3,324,000
2 GDP 12,100 145,200 162,000 1,944,000
3 Acquisition 2,900 34,800 106,000 1,272,000
4 Principal 2,400 28,800 104,000 1,248,000
5 Correlation 2,100 25,200 82,000 984,000
6 Asset 1,400 16,800 73,000 876,000
7 Net Worth 3,400 40,800 41,400 496,800
8 Gross Income 5,800 69,600 40,000 480,000
9 Overdraft 3,700 44,400 30,400 364,800
10 Investment 3,400 40,800 30,000 360,000

Please find the full data set and definitions of all terms used in this study, here.

Equity is the most misunderstood finance term

Equity ranks as the most confusing finance term with an average of 277,000 monthly searches for its definition, with 8.1% (22,700) of these searches coming from the UK. In comparison, the meaning and definition of ‘equity’ are searched 9,700 times each month in Australia and just 2,950 times in Singapore. Overall, the meaning of ‘equity’ is searched 58.4% more frequently than the term ‘GDP’ in second place with 162,000 monthly searches around the world.

Rebecca Cattlin, a financial market expert at City Index, comments: “Equity refers to the figure that would be returned to a company’s shareholders if the business liquidated its assets and paid off any liabilities or debts. In simpler terms, if you own a business and your inventory, cash, and other assets equal £18,000 and any debts add up to £6,000 — you have £12,000 worth of equity — by subtracting any liabilities from your assets.”

‘GDP’ is the second most confusing finance term, with an average of 162,000 monthly searches for its definition around the globe, with 12% of these searches coming from the UK. ‘GDP’ has almost 35% more searches than acquisition in third place with 106,000 monthly searches. The definition of GDP is Googled over twice as frequently in India (17% of all global searches) than in the UK (6%). In total, the meaning of GDP is searched almost two million times each year (1,944,000).

Rebecca Cattlin continues: “Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. GDP is used as a measure of the size and health of a country’s economy over a period of time. GDP falling shows that the economy is shrinking, and can be a sign of a looming recession.”

Acquisition is the third most widely misunderstood finance term, with its meaning searched for on average 106,000 times each month. Interestingly, as many as 90% of all searches for acquisition definitioncome from the United States. 

According to Rebecca Cattlin An acquisition is when a company purchases most, or all of another company’s shares to gain control of that company. An example of an acquisition occurred in 2017 when Amazon purchased Whole Foods for £10.7bn, or Google’s acquisition of Android in 2005.”

Why it’s key to understand financial jargon

It may be surprising to some that Equity is the most misunderstood finance term worldwide, with an average of 277,000 monthly searches for its definition. But why is it so important to understand financial jargon and specialised language?

Rebecca concludes:

Financial terms, such as GDP, have a huge impact on both business owners and the average consumer; perhaps, without many even realising it.

A looming recession as a result of shrinking GDP can lead to increasing mortgage prices for homeowners and increasing financial risks, such as business failure and bankruptcy

Therefore, it has never been more important to understand financial jargon, the economic world around us and how we are being affected.”

All data was collected in January 2024 and is accurate as of then.