Financial Glossary – R

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Racketeering – the act of engaging in criminal activities, such as extortion or fraud, as part of an organized effort to profit from illegal business schemes.

Random Walk Theory – also called the random walk hypothesis, states that it is not possible to forecast accurately and consistently which way stock prices will go, regardless of how carefully you think you have observed and detected past trends. Shares and markets move randomly and unpredictably, and our ability to determine whether prices might go up or down or by how much is no better than trying to guess where a drunkard might go next as he zig-zags up and down the road. Some economists – those who support the non-random walk theory, disagree.

Ransom – a payment demanded for the release of someone or something from captivity, often involving money or other valuables.

Ransomware – a type of malware that infects a computer. The computer owner cannot access files or data unless they pay a ransom to the cybercriminal who placed the malware. It is a type of cyber blackmail.

Rate of Return – the profit or loss that you can make on an investment. This is usually a ‘per year’ calculation. It is the ratio of the income from an investment over the cost of that investment. We use ‘rate of return’ to measure economic or financial success. When deciding which investment to buy, we usually compare their different historical rates of return.

Ratings – in the business world there are several meanings: 1. An assessment by a credit agency on a company’s or government’s ability to pay back a debt (bond). 2. An analyst’s or expert’s recommendation on whether to sell, purchase or hold onto a specific company stock. 3. The percentage of viewers who chose a particular channel or program on television or radio at a specific time on a specific date.

Rational Expectations Theory – a behavioral economics theory that states that, on average, most people can predict future conditions fairly accurately, because we analyze ALL available data and then take measures accordingly. It contrasts with adaptive expectations theory. It is also known as the rational expectations hypothesis or the theory of rational expectations (TRE).

Rationing – a system of limiting how much of something each citizen is allowed to buy or consume. It may include food, fuel, certain clothing or materials for making clothing, other household items, and utilities (water, electricity, natural gas). Rationing is common in times of war, after natural disasters, or following a terrorist attack. It was also common in the old communist Soviet Union and its satellite nations, as well as in Cuba and North Korea today.

Raw Materials – also known as Primary Materials or Primary Commodities, are basic, unprocessed substances obtained from the earth, used in the production of goods and services. These include metals, oil, grains, and wood, essential for manufacturing and construction.

Real Estate Investment Trust (REIT) – a company that owns and typically operates a portfolio of real estate properties and mortgages. REITs investors earn a share of the income that is generated through the ownership of commercial real estate.

Real Interest Rate (RIR) –  the amount by which the nominal interest rate is more than than the inflation rate, i.e. it is the nominal interest rate minus the inflation rate.

Real Options Theory – a relatively new theory on how to make decisions on capital investment projects when the future is uncertain. Real options relate to tangible projects, such as renewing a factory, building a new plant, purchasing or leasing land for oil exploration, or deciding when to pump oil. Real options do not include financial instruments such as bonds or shares, i.e. intangible things.

Real Terms – after adjusting for the effects of inflation. It contrasts with ‘nominal value’. If my salary goes up by 10% today, and the inflation rate for the past 12 months was 8%, my pay increase has been: 1. Two percent in real terms. 2. Ten percent in nominal value.

Rebranding – the process of changing the image of a product or whole company. Rebranding means changing the company’s or product’s whole ‘look and feel.’ It is a marketing strategy that may involve changing its name, logo, slogans, symbols, or a combination of those things.

Receipt – a document or slip stating that the buyer has paid. The receipt typically has the date, the amount the buyer paid, and a description of the good(s) or service the seller provided.

Recession – a contraction in the business cycle. It is characterized as a decline in economic activity, which can be measured by various macroeconomic indicators (such as GDP and the unemployment rate). There was a global recession (Great Recession) following the 2008 financial crisis.

Reciprocity – the practice of doing as we are done by. Reciprocity is common among individuals, companies and governments. One country or organization might grant privileges to another, usually in return for a gesture in kind. Reciprocity may also refer to harmful acts – tit-for-tat behaviors – if one country kicks out three of our embassy staff, we will expel three of theirs from our country. Reciprocity is an important skill to learn and use for negotiators and sales people.

Record – a documented form of evidence that captures and preserves data, events, or activities, serving as an official account for future reference, analysis, or proof in various contexts.

Recruitment – what organizations do to find and take on new members. Employers do it when they hire new staff and armies when they enlist soldiers. Clubs also do it when they wish to increase their membership. The process typically begins with a vacancy and ends when the new starter is settled in the post.

Recurring Revenue Selling – or Recurring Revenue Sales is a sales strategy focused on generating consistent, repeat income from customers through long-term relationships, often via subscriptions, contracts, or ongoing services. The goal is to secure predictable revenue over time by ensuring customers continue purchasing regularly rather than relying on one-time sales.

Recycling – the recovery and conversion of waste into materials for making new products. The combination of mechanical and advanced recycling could do much to reduce the worldwide problem of plastic waste.

Red Chip Shares – shares in Chinese companies that are listed in the Hong Kong Stock Market but belong to entities (such as local and regional governments) in mainland China. Also known as red chip stocks. The companies are called red chip companies.

Redlining – the practice of refusing financial services, such as loans or insurance, to people who live in certain parts of a city, because they are considered ‘a poor financial risk’. Historically, those ‘poor risk’ areas have had a majority black or Hispanic population. When a loan or insurance applicant is ‘redlined’, he or she is not assessed according to his income or credit history, but rather where he or she lives. Redlining is illegal if the bias is for racial or ethnicity reasons. It is allowed if there is a fault line going through the area (earthquake risk), or it is especially prone to flooding.

Redundancy – a form of dismissal. Employees are laid off permanently because their jobs no longer exist. If a person is dismissed and his or her post is filled by another individual, it is not redundancy. With redundancy that post disappears. Voluntary redundancy is usually offered before the employer has to choose who to dismiss.

Reflation – refers to measures taken by the government and/or the central bank to boost demand so that the economy grows and inflation goes up to its long-term annual target rate. Measures taken by the central bank include altering interest rates and changing the money supply, while those taken by the government include increasing spending and reducing taxes.

Refund – the amount of money a customer got back from the seller. The customer was not happy with the product and asked for his or her money back. The ‘money back’ is the ‘refund.’ If you pay too much tax, the tax authorities will give you a tax refund.

Regional Policy – refers to government policy that targets specific regions of a country or trading bloc, such as the European Union. In the majority of cases, regional policy targets economically poorer regions or those experiencing greater problems than their neighbors. The term may also refer to targeting wealthier regions to prevent them from becoming over-congested.

Registered Independent Advisor – a person or company that gives clients advice or recommendations on investments. Sometimes, they also manage people’s investment. They have a fiduciary duty, i.e., they must put their clients’ interest ahead of their own.

Regression Analysis – in statistical modeling it is a way to mathematically determine which variables affect something you are focusing on. For example, if you want to know what affects your sales figures (dependent variable), you might look at special offers, price discounts, the weather, competitors’ prices, etc. (independent variables). Regression analysis is commonly performed by investment and financial managers, sales and marketing managers, and professionals in several different fields.

Regressive Tax – a tax system that takes a greater proportion of income from people on low wages compared to their better-off counterparts. It is the opposite of progressive tax. Sales tax is usually a regressive tax – the sales tax on $100’s worth of supermarket shopping represents a greater percentage of an office cleaner’s salary who earns $1,500 per month than that of a brain surgeon in a top hospital on $10,000 per month.

Regulatory Capture – when a regulatory agency fails to accomplish what it was set out for – to protect consumers. A ‘captured’ agency fights more for the interests of the very industry it is supposed to be policing than those of the people it should be protecting. Some economists believe that the only solution is not to set up these regulatory agencies in the first place.

Regulatory risk – refers to all the bad things that can happen to businesses, sectors, markets, or the economy in general due to changes in laws and regulations. Since the global financial crisis of 2007/8, regulatory bodies across the world have become much stricter. Regulatory risk management is today an important focus for companies.

Relationship Selling – a sales technique focused on building long-term relationships with customers through trust, understanding, and meeting their needs, rather than prioritizing quick transactions. This approach emphasizes personalized interactions and consistent communication to foster customer loyalty and satisfaction.

Relative Income Hypothesis – states that a person’s attitude to saving and consumption is determined more by his or her income in relation to other people rather than by abstract standard living. In other words, I perceive my own well being according to how I see those around me. I’d rather get a $50 wage rise if nobody else got one than receiving a $100 wage rise along with everybody else. Poorer individuals spend more of their income than their wealthier counterparts because they want to close the consumption gap.

Relocate – to move from one place to another. Individuals do it when they move house. Businesses also relocate when they move to a new site or relocate employees. Relocation can be local or distant, domestic or international. Employee relocation is a multi-billion dollar industry.

Remittances – funds sent by migrants to family or friends in their home countries, often used for living expenses, education, healthcare, and investment in local communities.

Remote Selling – the selling of goods or services at a distance. If you are the salesperson or sales representative, you do not see your clients or prospects face-to-face. They are far away; possible thousands of miles away.

Remote Working – working away from where your employer’s central workplace is. In most cases, this means working from home. A growing number of people are working remotely. We also use the terms teleworking and telecommuting with the same meaning.

Renewable Energy – energy that comes from a source that lasts for ever. The source never runs out. For example, wind energy comes from energy from the wind. We never run out of wind. Other examples of renewable energy are solar energy, hydropower, geothermal energy, and biomass energy.

Rent – this word has several meanings. 1. Income from hiring out something like land, property, a vehicle or any other durable good. 2. The difference between what one is paying for a factor of production and the minimum amount of money required to keep it going – often referred to as ‘economic rent’. Technically, ‘to rent’ means to borrow and pay for it, while ‘to hire’ means to lend and be paid. However, in North America, ‘to hire’ is commonly used with both meanings (a trend that is spreading into the other English-speaking nations).

Rent-Seeking – refers to trying to increase one’s share of the total current wealth in one sector without creating any additional wealth in return. It is the equivalent of attempting to obtain a larger slice of the wealth pie, without trying to make that pie any larger. The rent-seeker’s gain is another entity’s loss – it is a zero-sum game.

Replacement Cost – also known as replacement value or replacement cost value, refers to the total cost of replacing a current asset at today’s market prices with an asset that performs the same function. The term is also used to determine the cost of replacing an item that a company has sold, or inventory that became unsalable.

Replacement Rate – in the world of economics, demographics and geography, the term has two meanings: 1. How much of an employee’s pre-retirement income his or her current pension represents. 2. The rate at which the people who die in a country and emigrate is replaced by the rate of babies being born and individuals who come in from abroad to live in that country. In the rich countries, a replacement rate of 2.1 babies per mother is required to prevent the population from shrinking.

Reputation – the opinion that other people have about you, others, a company, a government or even a country. In business, a good reputation can boost sales and profits.

Rescheduling – in finance, the term means to renegotiate the terms of a loan. Rescheduling usually occurs when the borrower is having problems keeping up with his or her repayment obligations. Rescheduling may also apply to rearranging a booking, as in “I will have to reschedule my flight to Moscow.”

Reservation Wage – the lowest pay that a person would accept for doing a particular job. The reservation wage of a brain surgeon will be significantly higher than that of a window cleaner. People usually have a lower minimum for jobs they find pleasant, compared to unpleasant or dangerous occupations. Our reservation wage can change during our lives.

Reserve Currency – a hard, foreign currency that is traditionally held by governments and central banks as part of the nation’s official reserves. The most important reserve currency today is the US dollar. Other currencies, including the French franc, Dutch guilder, Portuguese and Spanish real, Greek drachma, and the British pound sterling have all been dominant currency reserves.

Reserve Ratio – is the proportion of customers’ deposits that a bank or any other financial institution has in the form of available cash. Reserve ratio requirement is the statutorily enforced proportion. Most countries’ central bank sets a reserve ratio requirement (some don’t). The reserve ratio may be referred to as the ‘bank reserve ratio’, ‘cash reserve ratio’, or ‘bank reserve requirement’.

Reserves – liquid assets held by an individual, business, bank, central bank, or government in order to meet expected payments in the future, unexpected emergency needs, and take advantage of opportunities that may arise. Energy reserves are the oil, gas and coal reserves we know of around the world or specific to countries or regions, which we could extract with our current technology.

Reshoring – the opposite of offshoring. It is a term used to describe bringing back offshored manufacturing to a country. For example, a US automobile company closing manufacturing facilities in other countries and opening new ones in the US. This typically occurs when production costs, such as labor or raw materials, become cheaper at home or more expensive abroad.

Residual Risk – a risk that is still there after all attempts have been made to either eliminate or minimize the risks that an investment or business project might face. Sometimes the residual risk-taker knows it exists, but often he or she doesn’t.

Responsible Investment – an investment which the investor hopes will provide not just an economic return, but also some kind of benefit, which could be environmental, related to justice and human rights, the reduction of poverty, etc. Also known as sustainable investing, ethical investing, green investing, and triple-bottom-line investing.

Responsive Design – also known as Responsive Web Design, an approach to web development that ensures a website adapts to fit the screen size of any device.

Restrictive Practice – or ‘restrictive practices‘ (plural) refers to an arrangement by a group of people, often workers, to restrict the entry of other workers or limit output. Companies that abuse their dominant power in the market are guilty of restrictive practice. Another example is when a trade union only allows its members to work in certain jobs – a closed shop.

Résumé – a page containing all relevant information about an applicant. It is used for the job positions. It is your opportunity to tell employers about your work experience, education, and skills. In the UK and other Commonwealth countries, the term CV (curriculum vitae) is more common. In the US, a résumé is shorter than a CV.

Retail – the sector of the economy in which the ultimate consumer purchases products. The ultimate consumer does no resell what he or she buys. Shops and stores are in the retail sector – they are retailers.

Retail Banking – the banking service provided to individuals (members of the public) and small companies, as opposed to the service banks provide to other banks, financial institutions, and large corporations.

Retail Investor – a person who invests using his or her own money, rather than other organizations’ or people’s funds. Retail investors tend to trade in much smaller amounts than institutional investors.

Retained Earnings (RE) – the earnings of a company that have accumulated since it started doing business, after dividends are paid. On a company’s balance sheet its accumulated retained earnings appears as owner’s equity.

Retargeting – a digital marketing strategy that shows personalized ads to users who have previously visited a website, encouraging them to return and complete a purchase or desired action.

Return on Capital – how much people get back from an investment in one year in relation to the total they invested in that year.

Return on Equity (ROE) – an important metric of profitability. It compares a company’s net profit directly to the value of the company’s equities  (what the shareholders outright own).

Return on Investment (ROI) – also known as return on net worth or return on owners’ investment, it is a measure of how profitable an investment is. A high ROI means that an investment generates favorable profit when compared to its investment cost. In other words, it measures how much you got back from your initial investment.

Revealed Preference Theory – a theory that suggests that we can determine what consumers’ preferences are by observing their purchases under a range of different circumstances, particularly different levels of incomes and prices. According to the theory, our preferences are fairly constant – given a set of choices, we tend to make the same choices again and again over time – if our circumstances have not changed.

Revenue – the money a company receives from the sale of goods and services to clients and customers, as well as income from royalties and interest. It is a business’ income over a specified period.

Reverse Mortgage – a special kind of home loan that lets the homeowner convert a portion of the equity of his or her house into cash. It is a mortgage where the bank pays the borrower, rather than the other way round. The borrower must be aged at least 62 years.

Reverse Stock Split – when a company reduces its total number of shares outstanding by merging them. The total could be halved, brought down to one quarter, or any fraction. Each share will go up in value proportionally. Also known as a stock merge, reverse split or reverse share split.

Revolving Credit – a type of credit line that renews every time the borrower pays it off, as opposed to installment credit. Also known as an evergreen loan.

Ricardian Equivalence – a proposition that suggests that when the government boosts spending with borrowed money, it does not result in increased consumer demand. The theory was developed by David Ricardo, and later elaborated by other economists.

Ricardo, David – David Ricardo was an early 19th century English political economist whose writings and concepts continue to influence modern economic thinking. He was a believer in free trade and a free market economy. He became interested in economics after reading Adam Smith’s The Wealth of Nations. He is one of the few people in history who apart from having a significant impact on how economists think today, also became immensely rich.

Rightsizing – adjusting the size of a company, usually its workforce, so that it is better able to make a profit in the current conditions of the marketplace. Rightsizing nearly always means reducing the workforce – making employees redundant, but it could in theory mean taking on more staff. Hence, its meaning is similar to downsizing.

Rip-Off – something or a situation in which the consumer paid too much. We use the term when we are not happy with our purchase because we realize it is worth much less than what we paid. The term can be a verb or a noun, as in (noun) “That is a rip-off,” or (verb) “The shop ripped me off.”

Ripple – a real-time gross settlement system, remittance network, and currency exchange created by the Ripple company. Ripple or XRP is also the name of the company’s cryptocurrency. The company claims that with its system, people can send money across the world securely and much more cheaply than with traditional systems.

Risk – refers to the likelihood or threat of damage, injury, loss, liability or any other undesirable occurrence resulting from internal or external vulnerabilities. There are many types of business risks, including  interest rate risk, capital risk, settlement risk, liquidity risk, operations risk, political risk,  country risk, sovereign risk, default risk, delivery risk, economic risk, exchange rate risk, reinvestment risk, refinancing risk, and underwriting risk.

Risk Analysis – the process of determining, analyzing and defining the risk of danger to individuals, companies, governments and even the whole economy, posed by potential human-caused and natural adverse events. It is the systematic study of the uncertainties and risks we encounter in business, and many other areas.

Risk Assets – assets that carry an element of risk, such as stocks, currencies, property, commodities, high-yield bonds, and other financial products that fluctuate in price.

Risk Averse – not wanting to take risks. A risk averse investor prefers secure investment, such as bonds or savings accounts, even if the returns are relatively low. The opposite is a risk loving investor.

Risk-Free Rate – the theoretical rate of return that an investment that carries no risk yields over a given period. An example of a risk-free investment is government stock, such as US Treasury bonds. An investment with a risk-free rate has a guaranteed rate of return – the expected return and actual return are always the same. Risky investments are compared with risk-free ones to determine several aspects of a business, including the cost of capital.

Risk Intelligence – the ability to gather, analyze, and apply information to identify, assess, and manage uncertainties, enabling better decision-making. It involves understanding potential risks, weighing them against potential benefits, and making informed choices to protect assets and ensure long-term success. This intelligence is crucial for navigating complex environments and achieving strategic goals in business.

Risk Management – the process of identifying, quantifying and managing the risks that a company, organization or any entity might face. As a business activities’ outcomes are unpredictable, they have some element of risk. These risks include operational failures, strategic failures, market disruptions, financial failures, regulatory violations, environmental disasters, etc.

Risk Neutral – describes people who are totally insensitive to risk. A risk neutral investor is only interested in the possible return, and ignores the potential risks or losses completely. Risk neutral contrasts with risk averse, which describes a person who prefers certainty.

Risk Premium – the difference between the expected return on a high-risk investment and a risk-free one. For example, if a US Treasury bond (risk-free) yields 3% per year, while a company-issued corporate bond (higher risk) yields 6%, the risk premium is 3%. Investors say that a greater expected return – risk premium – is required for higher-risk investments, otherwise they are unwilling to bear the risk.

Risk-Seeking – or risk-loving, describes a person who loves risky investments. The term might also refer to an individual who is willing to give up his or her secure job to set up a company. Risk-seeking is the opposite of risk-averse. People who have nothing to lose tend to be more risk-seeking than those in secure, well-paying jobs.

Risk Tolerance – the degree of variability in investment returns that an individual is willing to withstand in their financial planning.

Rival – someone who competes against another, challenging them in a pursuit of common objectives, such as status, success, or a specific prize, often fueling motivation and a desire to achieve excellence. We can use the term for people, companies, nations, and other entitites.

Robot – a machine or device that we can usually program. We program it to do things. Some robots have artificial intelligence or AI. The AI makes the robot think and behave in a similar way to humans. Some robots look like humans, but most don’t.

Robotic Process Automation (RPA) –  the use of software ‘bots’ to automate repetitive, routine tasks traditionally performed by humans across digital systems.

Rotation in office – a practice that limits the number of terms that a person can serve in a particular role. The term can also mean a system in which two or more individuals of equal rank take it in turns to occupy a more senior role.