Amid recent reports that Britain will have the worst-performing major economy this year, with the UK’s GDP expected to contract by 0.6%, it can be revealed that ‘GDP’ is the most confusing financial term in the UK.
That’s according to new research by CityIndex. The experts utilised the search analytics tool, Ahrefs, to identify the average number of monthly searches for the definitions of the 50 most used financial terms, to determine which are the most confusing.
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The results:
|
Rank |
Finance term |
Average monthly searches for the definition |
Average yearly searches for the definition |
|
1. |
Gross Domestic Product (GDP) |
166,300 |
1,995,600 |
|
2. |
Acquisition |
130,700 |
1,568,400 |
|
3. |
Equity |
111,400 |
1,336,800 |
|
4. |
Principal |
96,000 |
1,152,000 |
|
5. |
Asset |
73,700 |
884,400 |
|
6. |
Net worth |
64,100 |
769,200 |
|
7. |
Amalgamation |
62,500 |
750,000 |
|
8. |
Overdraft |
41,100 |
493,200 |
|
9. |
Overhead |
28,100 |
337,200 |
|
10. |
Capital |
28,000 |
336,000 |
Please find the full data set used throughout this study, here.
Gross Domestic Product (GDP) is the most confusing finance term
‘GDP’ is the most confusing finance term, with an average of 166,300 monthly searches for its definition. This is over a quarter (27%) more searches than ‘acquisition’ in second place with 130,700 monthly searches. The definition of GDP is googled on average almost four times more frequently in India (23% of all searches) than in the UK (6%). Both the US (12%) and the Philippines (12%) search for the meaning of GDP twice as much as the United Kingdom. In total, the definition of GDP is searched almost two million times each year (1,995,600), over four-fifths (83%) more than ‘capital’ in tenth place.
Rebecca Cattlin, financial market expert at CityIndex, comments: “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 second most widely misunderstood finance term, with its meaning searched for on average 130,700 times each month. This is 85% more searches than ‘asset’ in fifth place with 884,400 average monthly searches. Interestingly, as many as 5% of all searches for ‘acquisition definition’ come from the United Kingdom.
Rebecca Cattlin, financial market expert at CityIndex, comments: “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.”
‘Equity’ ranks third for confusing finance terms with an average of 111,400 monthly searches for its definition, with 6% of these searches coming from the UK. In comparison, the meaning of ‘equity’ is searched 1,700 times each month in Australia and just 400 times in Singapore. Overall, the definition of ‘equity’ is searched 16% more frequently than the term ‘principal’ in fourth place with 96,000 monthly searches.
Rebecca Cattlin, financial market expert at CityIndex, 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.”
Capital is the tenth most confusing finance term worldwide
‘Capital’ is the tenth most frequently misunderstood finance term, with an average of 28,000 searches for its definition each month and 8% of the searches coming from the UK population alone. ‘Capital’ is often misinterpreted for a similar term ‘asset’, which ranks fifth, with 96% (884,400) more searches on average each month.
Rebecca Cattlin, financial market expert at CityIndex, comments: “The capital of a business is the funds it has available to pay for its day-to-day operations and to fund its future growth. An example of business capital includes cash at hand, which is money that is accessible for unexpected expenses. This doesn’t necessarily refer to physical cash and includes any liquid assets that can quickly be converted to money.”
Why it’s key to understand financial jargon in the current climate
It may be surprising to some that GDP is the most misunderstood finance term worldwide, with an average of 166,300 monthly searches for its definition. But why is it so important to understand financial jargon and specialised language? Rebecca Cattlin, financial market expert at CityIndex, comments:
• “Financial terms, such as GDP, have a huge impact on both business owners and the average consumer; perhaps, without many even realising it.
• It has been reported that Britain will have the worst-performing major economy this year, as the UK’s GDP is expected to contract by 0.6%
• 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, to understand the economic world around us and how we are being affected.”
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