Subject Guide
Definitions
Helpful Definitions
Assets: Any possessions that have value in an exchange.
Beta: A measure of the volatility of a stock relative to the overall market. A beta of less than one (1) indicates lower risk than the market; a beta of more than one (1) indicates a higher risk than the market.
Consensus Rating: The average of analysts' recommendations for a single entity. As many brokers have different ratings systems, their recommendations must be standardized so that a consensus can be calculated. The I/B/E/S ratings are calculated using a standard set of recommendations, each with an assigned numerica value:
- Strong Buy
- Buy
- Hold
- Underperform
- Sell
Debt-to-Equity Ratio: Long-term debt divided by shareholders' equity, showing relationship between long-term funds provided by shareholders; high ratio may indicate high risk, low ratio may indicate low risk.
Dividend: The distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (dividends per share).
Earnings per share: The portion of a company's earnings, after taxes and preferred stock dividends, that is allocated to each share of a company's outstanding stock.
Ex: A company has 1 million in outstanding stock that earns $1.2 million in profits. The earnings per share are 1.2 million/1 million or $1.20 per share earnings.
P/E Ratio (price-earnings ratio): Current price of the stock divided by the current earnings per share of the issuing firm. A high P/E ratio indicates that investors believe that the company's earnings are likely to grow.
Ex: A company's stock sells for $50 per share. The investor earns $2 per share. The P/E ratio is 50/2 or 25.
Return on Equity: (net income divided by shareholders' equity) a measure of the net income that a firm is able to earn as a percent of stockholders' investment.
Return on Total Assets: (net income divided by total net assets) a measure of the net income that a firm's management is able to earn with the firm's total assets.
Stock symbol: A unique combination of letters assigned to a NASDAQ security. These letters represent a particular company in the stock market.
Today's high: The intra-day high trading price.
Today's low: The intra-day low trading price.
Total Shares Outstanding (TSO): The number of shares of capital stock that have been issued and are in public hands.
Volatility: The degree of price fluctuation for a given asset, rate, or index.
Yield: In general, a return on an investor's capital investment.
