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| A company's annual report, filed with the SEC(Securities and Exchange Commission) |
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| A company's quarterly report, filed with the SEC(Securities and Exchange Commission) |
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| Annual fees charged by mutual funds, specifically used to pay for advertising and promotion. Sometimes called "hidden loads". |
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| A retirement plan made available by a company to its employees, featuring tax-deferred contributions and growth. The plan may also include matching contributions by the company |
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| A retirement plan available to employees of qualifying non-profit organizations, featuring tax-deferred contributions and growth. |
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| Adjusted Gross Income (AGI) |
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| Income (including wages, interest, capital gains, income from retirement accounts, alimony paid to you) adjusted downward by specific deductions (including contributions to deductible retirement accounts, alimony paid by you); but not including standard and itemized deductions. |
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Document detailing the business activity of a company over the previous year, and containing the three main financial statements:
Income Statement
Cash Flow Statement
Balance Sheet |
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| Any investment product that pays on a scheduled basis over a set amount of time. In particular, a retirement investment that offers tax deferral on growth, but not on contributions. |
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Anything on a company's books considered as having a positive monetary value.
Assets include holdings of obvious market value (cash, real estate), harder-to-measure value (inventory, aging equipment), and other quantities (pre-paid expenses, goodwill) considered an asset by accounting conventions but possibly having no market value at all. |
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| A document detailing a company's assets and liabilities. The two quantities that have to "balance" or equal each other are (1) assets and (2) the sum of liabilities and shareholders' equity; ie the total amount of assets the company controls is equal to what they own plus what they've borrowed. |
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| A mutual fund combining bonds (for income) and stocks (for growth). These funds are typically designed for people like young retirees, who want regular income plus enough growth of principal to beat inflation. |
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| Per-share value of shareholders' equity, excluding goodwill and other intangible assets. |
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| The repurchase of a bond by its issuer before its date of maturity, without requiring the holder's consent. |
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| A profit made from buying something (property, shares of stock, etc) and reselling it at a higher price. |
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| Tax assessed on a capital gain. For most people, the capital gains tax rate is currently 15% for an elapsed time between purchase and sale of more than one year, and your normal tax rate for an elapsed time of 1 year or less. |
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| Spending on items with a useful life of more than one year. The price of these items affects the "investing" section of the cash flow statement in the year purchased, and then gets expensed over many years on the income statement via depreciation. |
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| you start with earnings, add depreciation and possibly other expenses back in, and possibly subtract some sources of income out, to arrive at a number that you think gives a better indication of a company's profitability than earnings does |
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Financial document detailing the exchange of cash between a business and the outside world. The flow is categorized as:
* flow "in" from Operations
(cash the company made by selling goods and services)
* flow "in" from Financing
(cash the company raised by selling stocks and bonds)
* flow "out" to Investing
(cash the company spent investing in its future growth) |
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| Actual cash plus investments that are "as good as cash" and can be cashed in within three months; eg checking accounts, CDs, money market accounts, Treasury bills. |
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| An expense; typically an unusual expense, as opposed to an ongoing and predictable cost of doing business. Management often uses adjectives like "non-recurring" and "cashless" to imply that a charge is harmless and that investors shouldn't worry about it. |
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| Compound Annual Growth Rate (CAGR) |
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Definition
Interest rate at which a given present value would "grow" to a given future value in a given amount of time. The formula is
CAGR = (FV/PV)1/n - 1
where FV is the future value, PV is the present value, and n is the number of years. |
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| Consolidated Financial Statement |
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| Financial statement combining the activities of a business and its subsidiaries. |
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| One of two numbers expressing consumers' feelings about the economy and plans to make purchases |
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| Purchase of goods and services by U.S. individuals, accounting for about 2/3 of the GDP. (News commentators like to say that "consumer spending makes up two-thirds of the economy.") This number includes products of both domestic and foreign origin. |
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| A bond which the holder may convert to a set number of shares of common stock. |
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| Annual interest rate paid by a bond, expressed as a percentage of its par value. |
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A statistical measure of correlation of the fluctuations of two different quantities. In finance, covariance is applied to the annual rates of return of different investments, to measure the correlation of their year-to-year fluctuations in performance
Cov(r1, r2) = 1/n * (r1 i - r1 ave) * (r2 i - r2 ave)
where the terms r1 i and r2 i are actual values of the annual rates of return of two investments, taken over several years, n is the total number of values of r1 i and r2 i used, and r1 ave and r2 ave are the average values of r1 i and r2 i. |
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Definition
| Assets that are expected to be converted to cash within one year. These include cash, accounts receivable, and inventory. |
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| Liabilities that must be paid within one year. |
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| Ratio of a company's current assets to its short-term debt. Used as a measure of a company's ability to survive over the near term, by being able to meet obligations with available funds. A current ratio of 1.0 means that the company could theoretically survive for one year, even if it made no sales. |
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Definition
| Annual interest rate paid by a bond, expressed as a percentage of its current market price |
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| Currently Taxable Investment |
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Definition
| An investment on which taxes are not deferred. In other words, a normal investment, on which you pay income taxes the same year you realize income. |
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| A company's debt divided by its equity |
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| The failure of a bond issuer to meet a payment obligation, either on interest or redemption. |
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| Government spending in excess of what they take in as tax revenue. |
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| Method to account for assets whose value is considered to decrease over time. |
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| An increase in the number of shares of a company's stock, causing the value of each share to decrease. |
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| A bond selling at a market price below its par value. |
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| Discount Rate (Federal Reserve rate) |
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Definition
| Interest rate at which the Federal Reserve lends money to commercial banks. |
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| Discount Rate (present value) |
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Definition
| Term for the annual growth rate of an investment, used when a future value is assumed and you are trying to find the required present value. |
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| Withdrawal from an investment. In particular, distribution is used to refer to withdrawals from a tax-sheltered account like an IRA or annuity, which often have IRS regulations about when you can, can't, or must make withdrawals without incurring a penalty. |
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| Valuation model popularized by John Burr Williams in the 1930s, holding that the value of a share of common stock is equal to the present value of all of its future dividends. This model does apply to "growth" companies not yet paying dividends, but only theoretically. The preferred model today is that stock is worth the present value of its future earnings (or more accurately, of its future free cash flows). |
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Definition
| Earnings Before Interest and Taxes; intended to be a measure of the amount of cash generated by a company's operations |
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| Earnings Before Interest, Taxes, Depreciation, and Amortization; intended to be a measure of the amount of cash generated by a company's operations |
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Definition
Economic Value Added, a measure of the superiority of the return a company is able to realize on invested capital above the baseline return expected by the investment community. The formula is
EVA = NOPAT - ( C x Kc )
where C is the amount of capital a company plans to invest in a project, and Kc is the cost of capital, i.e. the return rate expected by investors. Positive EVA means the project will add value for shareholders; negative EVA means they would be better off if management just gave them the money as a dividend. |
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| Total income minus total expenses; synonymous with profit. |
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| The ratio of a company's annual earnings per share to its stock price;The earnings yield is an estimate of the inflation-adjusted growth you can reasonably expect from a stock investment; in a normal market it should be at least equal to the T-Bill rate, minus the inflation rate, plus a risk premium of about 3 or 4 percent |
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Definition
Total market value that all investors (equity and debt) have placed on a company's operations; equal to
Market Capitalization+Debt-Cash and Equivalents |
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| The portion of a company's assets that the shareholders own, as opposed to what they've borrowed: equal to total assets minus liabilities |
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| Pro-rated annual interest rate paid by a short-term bond, expressed as a percentage of its current market price. |
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| Exchange Traded Fund (ETF) |
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Definition
| Logically similar to an index fund - somebody somewhere is managing a stock portfolio that tracks an index - but it's traded on a stock exchange and you buy shares through a broker. |
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Definition
System of federal banks, charged with regulating the US money supply, mainly by
1. buying and selling US securities; and
2. setting the discount interest rate. |
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| All policy by the government involving the collection and spending of revenue;refers to efforts by the government to stimulate the economy directly, through spending |
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| Number of shares of a stock available to the public. |
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| Similar to earnings, but omitting purely "paper only" expenses, and accounting for capital spending when it actually occurs rather than depreciating it over many years. |
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| A quantity used to relate a stock price with the underlying company's financial strength, performance, or growth potential |
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| An attempt to predict the performance of a stock through the study of its company's financial situation and prospects |
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| A class of intangible assets such as a company's name and reputation |
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Definition
Valuation formula holding that the total return of a stock investment will equal its dividend yield plus its dividend growth rate:
R = D/P + G
where
D is next year's annual dividend;
P is the current share price;
G is the growth rate. |
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Definition
| Spending by the federal, state, and local governments, accounting for about 20% of the GDP. |
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| Gross Domestic Product (GDP) |
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Definition
| Total annual output of the U.S. economy, measured by its final purchase price. |
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| Ratio of gross profit to sales revenue. |
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| Gross National Product (GNP) |
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| Total output of the U.S. economy;measures the production of all Americans, wherever they happen to be working |
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| Sales revenue minus sales costs. |
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| "Raw" sales income; the amount customers actually pay the company when they make their purchases. |
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| A stock that appears attractive because of potential earnings growth by its company. |
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| Individual Retirement Account. One of several specific retirement accounts allowed by the IRS to provide tax-deferral or other tax advantage |
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Definition
| Financial document showing a company's income and expenses over a given period |
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| Mutual fund holding a portfolio of securities that closely matches an established index |
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| The tendency for prices and wages to become more expensive. |
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| Finished product that's ready for sale, but hasn't been sold yet. |
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| On the cash flow statement and in economics, investment means spending that results in an increase in assets |
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| A bond judged likely enough to meet payment obligations that banks are allowed to invest in it. |
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