Profit
The money made over and above the required expenses and deductions of a certain venture like a transaction.
A shop sells goods for profit. They make an income of R1,000 but made expenses during the time of R800. They made a profit of R200.
Real Estate
Property or pieces of land serving as investment opportunities. Real estate could be used for either residential or retail (business) purposes. Real estate generally has the potential to grow in value.
Return On Equity (ROE)
Equity serves as the measurement of exposure towards a business. Your equity will be R100 if you invested R100 into a business. Then you’ll make a yearly ROE of 10% if your R100 investment gives you a R10 payout per year.
Secured Loan
A form of credit that is secured by collateral. A home loan is a secured loan. The home itself serves as security for the loan. The lender will repossess (take back) the home if the borrower fails to repay the loan.
Solvency Ratio
This measures your solvency. It takes the total value of your income for a set period and divides it by the total required debt repayments for that same period. A solvency ratio of more than 1 is good. Anything lower than 1 is bad.
Stock Market
The financial platforms that facilitate the buying and selling of securities, stocks, bonds, and similar financial tools.
The Johannesburg Stock Exchange is the biggest one in Africa. The two largest stock exchanges in the U.S. are called the New York Stock Exchange (NYSE) and NASDAQ (National Association of Securities Dealers Automated Quotations).
Supply
Supply refers to the abundance of a specific good or service. Supply could even refer to something like labour. A low supply of something drives prices higher. Prices will be low when the supply of something is abundant (high).
A bottle of water could cost R20 at a store situated in the desert. That same bottle of water might cost less than R10 in a shop in an urban area.
Tax
People and businesses pay tax. Governments require a portion of the money generated within their borders. SARS (South African Revenue Service) oversee tax-collection in South Africa. They are the branch of government that gathers the tax due to the government (as determined by the tax laws). Those who don’t comply with tax laws are subject to fines or, even worse, jail sentences.
Taxable Income
People and businesses pay tax based on their taxable income. Not all types of income are taxed. Personal loans don’t count as taxable income.
The government taxes different groups at different rates. Companies pay 28% of their taxable income to SARS. Individuals pay tax according to a sliding scale. People with a taxable income lower than the tax threshold don’t pay personal income tax.
A company with a taxable income of R1,000 owes R280 to SARS. A person with a taxable income less than the threshold does not pay tax since it’s lower than the taxable income threshold.
Tax Year
A calendar year stretches from the 1st of January to the 31st of December. But a tax year starts on 1 March and ends on the last day of February in the following year.
Unemployment
A situation in which people are without work either because of a lack of jobs or other social factors. South Africa has an unemployment rate of about 29% (2019). Sources differ about the figure because it’s difficult to determine the number of work seekers.
Unsecured Loan
A form of credit that is not secured by collateral. A personal loan without a deposit or asset as collateral is an unsecured loan.
Value-Added Tax (VAT)
The percentage of tax added to goods and services taxed by the government. The end consumer (the final consumer) of any good or service pays the full value of VAT. This is usually employed by a government to make up for the shortfall in tax revenues. A tax shortfall means a government won’t have enough money to pay for the things they need to run a country. VAT currently stands at 15% in South Africa. A taxable item with a sale value of R100 must add another R15 to its selling price for VAT purposes.
Wealth
The measurement of your financial well-being. Assets increase wealth whilst liabilities and debt decreases wealth.
It’s difficult to measure wealth since it’s such a relevant term. Some people measure wealth by how long you can keep your current lifestyle by living off your assets without earning any income from a job or paid work. The wealth of the richest people in the world are measured in U.S. Dollars for comparison reasons.
Yield
Something that yields brings increase. Financial tools with a good yield bring much increase in value or an increase of money.
An asset worth R1,000 with a 20% annual yield will produce R200 per year.
Zero-Rated Goods
These are goods as listed by the government that are taxed at 0% VAT. They include the following.
* Brown bread
* Maize meal
* Samp
* Fresh fruit and vegetables
* Dried grains and beans
* Tinned sardines (pilchards)
* Milk powder
* Vegetable oil
* Eggs
* Milk
* Cultured milk
* Edible legumes
Read more Glossary terms here: