Financial Definitions

Annual Report

An annual report is a comprehensive financial statement published every year by a company which outlines the company’s financial performance and corporate operations for the last year.

Asset

An asset is a resource of value owned by an individual, a company, or a country. Assets are reported on a company's balance sheet.

Balance Sheet

A balance sheet is a financial statement that is a snapshot of a company's finances at a specific point in time

Blue-chip stock

A blue-chip stock is a stock of a generally well-known company with an excellent track-record that is considered to be a safe investment

Bond

A bond is a financial instrument that represents debt and is generally emitted by a company or a country to raise money for a specific purpose.

Cash Flow Statement

An cash flow statement is a financial statement that outlines the cash inflows and outflows of a business over a given period of time.

Compound Annual Growth Rate (CAGR)

The Compound Annual Growth Rate (CAGR) is a measure of an investment's performance as a percentage change over the number of years over which it is held.

Current Ratio

The Current Ratio is a financial ratio that measures the ability of a company to pay its short-term obligations.

Day-trading

Day-trading is the act of buying and selling stocks, bonds, options or any other security within the same trading day.

Debt

Debt is a financial concept that can refer to various types of obligations, such as borrowing money from a lender, obtaining a loan, or purchasing an asset such as real estate.

Debt-to-Equity ratio

Debt-to-Equity Ratio (D/E) is a financial ratio used to measure a company's ability to pay its debts.

Discounted Cash Flow (DCF)

Discounted Cash Flow (DCF) is a valuation method used to estimate the fair value of a company based on the expected future cash flows

Dividend

A dividend is a payment made to stockholders in exchange for holding shares of the company.

Dollar-Cost Averaging (DCA)

What is Dollar-Cost Averaging ?

EBITDA

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is a measure of a company's financial perfomance

Enterprise Value

Enterprise Value (EV) is a measure of the total value of a company and its ability to generate future cash flows.

Exchange-Traded Funds (ETFs)

An Exchange-Traded Fund (ETF) is a type of financial asset that groups different securities together such as stocks, bonds or commodities

Fair Value

The Fair Value of a stock represents the estimated worth of a security or company based on intrinsic measures like cash flow, revenue, and expected growth.

Financial Ratio

A financial ratio is a quantitative tool used to analyze and evaluate the financial performance and health of a company.

Financial Statements

Financial statements are key documents used by investors, business owners, and financial analysts to gain insight into the financial health of an organization, track its performance, and make projections about the future.

Free cash flow (FCF)

Free cash flow (FCF) is a financial metric commonly used to assess and compare a company's financial performance.

Income Statement

An Income Statement or P&L is a financial statement that shows how a company or unit has performed financially over a specified period.

Inflation

Inflation is a state of rising prices for goods and services, and an important economic concept.

Initial Public Offering (IPO)

An Initial Public Offering (IPO) is the first sale of company shares to the public. The sale of these shares is handled by an underwriting bank or firm and the stock issued is sold in the public markets.

Internal Rate of Return (IRR)

Internal Rate of Return (IRR) is a type of metric used to measure the expected return on an investment using cash flows and the original investment amount

Intrinsic Value

The intrinsic value is the underlying value of a company or stock based on fundamental analysis that can enhance profitability or discounted future cash flow analysis.

Magic Formula

The Magic Formula is a system developed by Joel Greenblatt to select stocks that have a good chance of providing market-beating returns. It uses two quantitative metrics, Earnings yield and Return on capital.

Margin of Safety

The Margin of Safety is a concept of taking a significant discount relative to intrinsic value to reduce the risk of an investment

Market Capitalization

Market capitalization is a measure of the total value of a company or stock calculated by multiplying the number of outstanding shares by the current price per share.

Penny stock

A penny stock is a stock traded outside a major stock exchange trading at a very low price per share, usually under $5.

Price-to-Earnings Ratio (PE)

The PE Ratio (Price-to-Earnings ratio) is a measure of the current price of a company's stock price relative to its earnings.

Price-to-Earnings-to-Growth (PEG)

The PEG Ratio (Price-to-Earnings-to-Growth ratio) is a financial ratio similar to the PE Ratio but taking into account the growth rate of the company.

Pump and dump

Pump and dump is a scheme, most often used by scammers, to artificially inflate the price of a stock in order to gain profits.

Return on Assets (ROA)

Return on Assets (ROA) is a profit ratio that measures how efficiently a business utilizes its assets to generate profit.

Return On Capital Employed (ROCE)

Return on capital employed (ROCE) is a measure of how much money a company makes from its capital investments. It is typically expressed as a percentage and compares the operating profitability of a firm to the amount of capital employed in its operation.

Return on Equity (ROE)

Return on Equity (ROE) is a financial raito to measure the profitability of a company using net income and shareholder's equity.

Return on Invested Capital (ROIC)

Return on Invested Capital (ROIC) is a financial metric used to measure how efficient a business is in generating profits from its long-term capital investments net of taxes for each unit of capital invested.

Return On Investment (ROI)

Return On Investment (ROI) is a measure of profitability that is used to compare different investments using net returns from the initial capital investments.

Stocks

A stock is a financial asset that represents a fraction of the ownership of a company and gives investors access to profits.

Value Investing

Value investing is an long-term investment strategy that involves buying stocks that are underpriced compared to the company's intrinsic worth of a company and its assets.

Value Trap

A value trap is a stock or investment that looks like a good deal because of its low price, but in reality is not.

Z-Score

The Z-Score is a financial metric used to measure a company's probability of insolvency, and it's calculated by analyzing the company's financial health and overall performance