Financial Term Glossary
- Beta
- A quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market, usually the S&P 500. Specifically, the performance the stock, fund or portfolio has experienced in the last 5 years as the S&P moved 1% up or down. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile.
- Book Value
- A company's total assets minus intangible assets and liabilities, such as debt. A company's book value might be higher or lower than its market value.
- Cash
- The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and banker's acceptances. Cash equivalents on balance sheets include securities that mature within 90 days (e.g., notes)
- Cash Flow
- A measure of a company's financial health. Equals cash receipts minus cash payments over a given period of time; or equivalently, net profit plus amounts charged off for depreciation, depletion, and amortization.
- Current Ratio
- Indicator of company's ability to pay short-term obligations, calculated by dividing current assets by current liabilities. Useful to compare companies within the same industry. The higher the ratio, the more liquid the company.
- Float
- The number of shares of a security that are outstanding and available for trading by the public.
- Gross Margin
- Gross income divided by net sales, expressed as a percentage.
- Market Capitalization
- The total dollar value of all outstanding shares. Computed as shares times current market price. Capitalization is a measure of corporate size.
- EBIT Margin
- A profitability measure equal to EBIT divided by net revenue. This value is useful when comparing multiple companies, especially within a given industry, and also helps evaluate how a company has grown over time.
- Payout Ratio
- The percentage of earnings paid out in dividends, calculated by dividing dividends per share by earnings per share. The payout ratio provides an idea of how well earnings support the dividend payments - the lower the ratio, the more secure the dividend.
- Profit Margin
- Net profit after taxes divided by sales for a given 12-month period, expressed as a percentage.
- Quick Ratio
- Calculated by subtracting inventories from current assets, then dividing by current liabilities. The Quick Ratio is an indicator of a company's financial strength. Also known as the Acid Test. How quickly a company's assets can be turned in cash.
- Transfer Agent
- An agent used by a corporation to maintain records of stock or bond owners and deal with associated problems such as lost or stolen certificates. This is often a commercial bank although some corporations choose to act as their own transfer agent.