The Term ‘Negative’ in a Business, Financial, and Trading Context Explained

What is the meaning of the term negative?

The term ‘negative’ has numerous definitions, including the following one: Negative denotes decrease or reversal. Regarding a number or amount, negative is an indication of less than zero. This article will use the term ‘negative’ as described above when the following subjects are briefly explained in a business, financial, and trading context.

• Negative amortisation
• Negative bond yield
• Negative carry
• Negative equity
• Negative growth
• Negative return

 

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What is negative amortisation?

Negative amortisation, also written negative amortization, occurs when the principal of a borrower’s loan increases as a result of not paying all of the interest for a certain period. Amortisation is the process of paying off debt through pre-agreed instalments that comprise both the principal and interest on the debt account. Principal refers to the original amount of a loan.  Example to explain negative amortisation: Let us say Jane borrowed R10 000 from a lender and the amortisation schedule determines that she pays a monthly instalment of R860, comprising R800 (principal) and R60 (interest). If Jane only pays R800 per month, she only repays part of the principal and defaults on the interest payment. Hence, the R60 will be added to the principal balance of Jane’s loan.  

What is a negative bond yield?

A negative bond yield happens when a bondholder receives less money than the original purchase price when the bond matures. Bonds that cause bondholders to incur losses when they mature are called negative-yielding bonds. Express differently, the occurrence of a negative-yielding bond compels the bondholder to pay the bond issuer to borrow money. Example of negative bond yield Bond XXX has the following features:

• Maturity date of five years
• Face value (Par value): R100
• Coupon interest rate of 0%
• Bond price: R110

The bond was purchased for a premium, which means the purchase price was higher than its face value of R100 - to be paid at maturity. The bondholder receives no coupon payments during the five years. If the investor holds the bond for five years until maturity, he or she will lose R10 (R100 - R110), making it a negative-yielding bond.  

What is negative carry?

Negative carry refers to a situation in which the cost of holding (carrying) an investment or security exceeds the income received while carrying it. In other words, a negative carry is a carry trade with a negative yield. Negative carry applies to a variety of investments and assets, such as shares, bonds, futures, forex positions, and real estate. Negative carry is often undesirable to investors because the value of an investment decreases as long as the principal amount of the investment stays the same or decreases. Although, one of the main reasons why investors hold an investment with a negative carry is the anticipation that the investment will eventually generate a capital gain.  

What is negative equity?

Negative equity is the result when the value of an asset, which was financed through a loan, drops below the amount of the loan. Negative equity, commonly referred to as ‘upside down’ or ‘being underwater,’ is the opposite of positive equity. Examples of positive equity are:

• When the increase in the value of an asset causes the value of the asset to exceed the original purchase price.
• When a borrowed asset is worth more than the amount owed on it.

  Examples of negative equity:

• Negative equity for an asset

When the value of an asset, such as residential property or vehicle, falls below the principal of the loan or mortgage, it represents negative equity.

• Negative equity of an individual

An individual’s equity (positive or negative) is described in terms of net worth. A person with a negative equity is said to have a negative net worth, meaning the person’s liabilities (debt) exceed his or her assets.  

What is negative growth?

Negative growth refers to a decline in value over a given period. It can also be described as a contraction in a country’s economy over a certain period of time or a decrease in the sales or earnings of a business. Negative growth is typically expressed as a negative percentage rate over a period of time.

Negative growth in a country’s economy

Negative growth in a country’s economy is reflected in a decrease in its gross domestic product (GDP), which is the monetary value of all final goods and services produced within a country’s borders within a given period such as a quarter or fiscal year.

Negative growth in business

Growth (positive and negative) in a business can be calculated by conducting horizontal analysis, which indicates changes in financial figures over given periods of time, such as quarter or financial year. Negative growth in a business occurs when there is a decline in sales and/or revenue from one period to the following period. For example, company Endurance reported revenue of R2 million for the 2026 financial year and R1.8 million for the 2026 financial year. In monetary terms, the company had a negative growth of R200 000. Expressed as a percentage, the company’s negative growth was -10%.  

What is a negative return?

A negative return is an indication of an economic or financial loss incurred by a business or experienced by investors in the value of their investment during a given period of time. A negative return in investment occurs when the total amount of money received over the length of time of an investment is less than the original amount of capital invested. A negative return in business happens when a business reports a loss in a given financial period. For instance, if a business generated R100 000 in sales (revenue) but incurred R120 000 expenses, it would then have a negative return of R20 000 (R100 000 - R120 000).

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