Concepts in Focus
The Gap Between Bid and Ask Belongs in a Trading Example
A quote can show one price at which buyers are bidding and another at which sellers are asking. Treating those as a single interchangeable price hides the…
Financial ideas, carefully read
Concepts in Focus
Plain-language explanations of financial ideas, with room for assumptions, limitations and further reading.
Concepts in Focus
Net Asset Value Needs a Per-Share Step Before You Compare It with a Share Price
A fund’s total net asset value and its net asset value per share are related numbers with different scales. Comparing the total directly with one share’s…
Concepts in Focus
A Sunk Cost Belongs to the Past, Even When the Decision Still Feels Unfinished
A money book may describe a decision made worse by a payment that cannot be recovered. The useful question is which costs still change between the options…
Concepts in Focus
Opportunity Cost Is About the Best Alternative You Give Up
A choice can have a cost even when no money changes hands. Opportunity cost gives a name to the value of the best alternative that the decision leaves…
Concepts in Focus
Markup and Margin Use Different Starting Points for the Same Sale
An item bought for eighty and sold for one hundred has a difference of twenty. Describing that difference as a percentage requires choosing a denominator,…
Concepts in Focus
A Bond’s Face Value and Its Market Price Answer Different Questions
A bond example may display both a face value and a purchase price. They can differ, so a reader needs to know which amount is being used before following…
Concepts in Focus
A Currency Conversion Needs a Direction Before a Multiplication
Use an invented exchange-rate example to distinguish units per currency and avoid applying the same multiplication in both directions.
Concepts in Focus
A Loan Payment Is Not All a Reduction of Principal
Read a loan example by separating the amount paid from the amount applied to principal, and keep fees and other components visible.