{"id":2333,"date":"2013-08-13T22:25:55","date_gmt":"2013-08-14T05:25:55","guid":{"rendered":"https:\/\/einvestingforbeginners.com\/?page_id=2333"},"modified":"2022-06-01T16:24:21","modified_gmt":"2022-06-01T20:24:21","slug":"investing-glossary","status":"publish","type":"page","link":"https:\/\/einvestingforbeginners.com\/investing-glossary\/","title":{"rendered":"Investing Glossary"},"content":{"rendered":"
Bottom line<\/strong>– refers to the bottom line of a company’s income statement, which is net earnings.<\/p>\n Dividend<\/strong>– a part of company earnings paid back to shareholders. Earnings<\/strong>– a company’s net profit. Total revenue minus total expenses.<\/p>\n Revenue<\/strong>– total sales.<\/p>\n Shares<\/strong>– units of stock.<\/p>\n Shareholders<\/strong>– the owners of a stock.<\/p>\n Top Line<\/strong>– refers to the top line of a company’s income statement, which is revenue.<\/p>\n 10-k<\/strong>– form that every company with at least 100 million in market cap must file with the SEC. Contains the company’s annual report and financial information.<\/p>\n Annual report<\/strong>– see 10-k.<\/p>\n Income statement<\/strong>– Shows money that is flowing into the business. It is the part of annual report that displays revenue, earnings, gross margins, and other income numbers.<\/p>\n Balance sheet<\/strong>– Describes everything that the company owns, along with everything they owe. It is the part of annual report that breaks down all assets, liabilities, and shareholder’s equity of a company.<\/p>\n Statement of cash flows<\/strong>– Presents cash flow numbers from operating activities, investing activities, and financing activities. This includes things like inventories, capital expenditures, and short and long term debt.<\/p>\n Book value<\/strong>– Describes a company’s worth. If you were buying the business, this would be its value. Calculated by subtracting total assets minus total liabilities. Buying a stock that is trading below book value gives the investor a margin of safety.<\/p>\n Assets<\/strong>– Things of value that can produce or be converted into cash. You can find assets listed in a company’s balance sheet, found in the 10-k. Can vary from real estate to inventory and more.<\/p>\n Liabilities<\/strong>– A company’s expenses, which can include debt commitments, contingencies accounts payable and more. Can also be found in a company’s balance sheet in the 10-k.<\/p>\n Shareholder’s equity<\/strong>– Total assets minus total liabilities. See also book value.<\/p>\n Market cap<\/strong>– Also called market capitalization. This is the market value of a stock. It is the company’s share price multiplied by the shares outstanding.<\/p>\n Shares outstanding<\/strong>– the number of shares in the market.<\/p>\n Stock split<\/strong>– When a company doubles the amount of shares outstanding, thus halving the share price. This doesn’t create extra value for shareholders, as is believed. Instead it makes the stocks appear to be more affordable, when in reality nothing has changed. An investor has more shares but owns the same percentage of the company.<\/p>\n For example, a company with 1,000 shares trading at $20 can do a stock split, increasing the total number of shares to 2,000 with a new stock price of $10. As you can see, the market cap doesn’t change– it’s still at $20,000– and so in reality the stock is no more valuable.<\/p>\n Share buybacks<\/strong>– When a company agrees to use profits to buyback its own stock. This creates value for shareholders either by driving up the stock price, or reducing the shares outstanding.<\/p>\n P\/E ratio<\/strong>– price to earnings ratio. It is the relation of a company’s price to its earnings. Calculated by dividing price by earnings. Lower P\/E ratio companies tend to be undervalued and cheaper. Read more about the P\/E ratio<\/a>.<\/p>\n P\/S ratio<\/strong>– price to sales ratio. Relation of a company’s price to its sales. Calculated by dividing price by total sales. This ratio is an underused tool in the investing world, yet it can be extremely effective in finding undervalued companies.\u00a0Read more about the P\/S ratio<\/a>.<\/p>\n P\/B ratio<\/strong>– price to book value ratio. Relation of a company’s price to its book value. Calculated by dividing price by book value. It is a tool frequently used by value investors to identify a stock’s valuation.\u00a0Read more about the P\/B ratio<\/a>.<\/p>\n
\nUsually paid every quarter, or once a year. Read more about how to double your money<\/a> with dividends.<\/p>\n