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What is stock screening?Stock screening is the process of filtering through a list of stocks based on a pre-defined set of criteria. [Read More]
What is market capitalization?Market capitalization, or market cap for short, is what a company’s total number of outstanding shares are worth. [Read More]
What is the P/E ratio?The price-to-earnings ratio (P/E ratio) is a common and quick way to assess the value of a company. [Read More]
What is return on investment?Return on Investment (ROI) is a metric used to assess an investment’s performance and/or compare different investment opportunities in a standardized manner. [Read More]
What is stock picking?Stock picking is when a trader utilizes an analysis platform to assess a set of stocks to find the best investment opportunity, and then adds that stock or stocks to his/her portfolio. [Read More]
What is a mutual fund?A mutual fund is an investment product that consists of a pooled set of resources (usually cash) that is used by a professional investment manager to purchase a wide variety of securities. [Read More]
What is an ETF?ETF stands for exchange-traded fund. An ETF a special kind of security that is like a mutual fund in its composition, but has a share price that allows trading throughout the trading day, unlike mutual funds which only settle at the end of the day. [Read More]
What is an ETN?ETN stands for exchange-traded note. An ETN is a hybrid form of security in that it trades on major exchanges like a stock but acts similar to bonds in terms of performance. [Read More]
What is a derivative?A derivative is a type of security whose value is derived from another asset’s price or value. For example, if oil is expected to go up in price, a trader can buy a derivative whose value is dependent upon the price of oil. [Read More]
What is a micro cap?A company that is considered a micro cap is one that has a market capitalization of $50 million to $300 million. [Read More]
What is a small cap?A company that is considered a small cap is one that has a market capitalization of $300 million to $2 billion. [Read More]
What is a mid cap?A company that is considered a mid cap is one that has a market capitalization of $2 billion to $10 billion. [Read More]
What is a large cap?A company that is considered a large cap is one that has a market capitalization of more than $10 billion. [Read More]
What are sectors?Sectors are sections of an economy that house businesses that offer the same or similar goods and/or services. The primary advantage of segmenting the economy into sectors is that it gives analysts the ability to conduct more thorough research by specializing in a specific sector. [Read More]
What are industries?Industries can be thought of as sub-sectors where companies in a specific industry share the same or similar business operations. [Read More]
What are exchanges? Exchanges are the financial world’s version of a marketplace. The goal of an exchange is to provide corporations, governments, and investors a singular place to meet that facilitates the purchase and sale of various forms of securities. [Read More]
What are liquidity ratios? Liquidity ratios are a group of ratios that financial analysts utilize to examine corporations’ ability to pay their debts without having to go and raise additional funds via stock issuances or bond sales. There are three main ratios within this group, and they are the current ratio, quick ratio, and days sales outstanding. [Read More]
What is the debt ratio? The debt ratio is a specific fundamental analysis ratio that seeks to identify how leveraged, or dependent upon debt, an organization is. It is calculated by taking a company’s total debt and dividing it by its total assets. [Read More]
What are profitability ratios? Profitability ratios give investors insight into a company’s ability to turn revenue into profit over a period of time. Where having a high debt ratio is generally considered a sign of financial weakness, a high profitability ratio is generally considered a sign of financial strength. [Read More]
What are dividends? Dividends are payments made to specific shareholders from a company’s earnings. The size and frequency of these payments are determined by the company’s board of directors, and can take several different forms, such as a cash or additional stock. [Read More]
What does price to book mean? The price-to-book ratio (P/B ratio) is a ratio analysts and investors use as part of a broader trading strategy to identify potential investment opportunities. The P/B ratio compares a company’s stock price per share to its book value per share. [Read More]
What does price to sales mean? The price-to-sales ratio (P/S ratio) that helps analysts and traders standardize the value of a company’s sales so that it can be compared to other companies in that sector. The P/S ratio is calculated several different ways, but the most common is taking the company’s stock price per share and dividing it by the sales per share. [Read More]
What is enterprise value? A company’s enterprise value, or EV, a figure that seeks to measure its total value. Similar to the takeover price, a company’s EV includes its total market capitalization and total debt minus any cash and/or cash equivalents. [Read More]
What is SG&A? A company’s selling, general, and administrative expense (SG&A for short) is a category of income statement expenses that includes both direct and indirect marketing or sales expenses as well as all general or administrative expenses. [Read More]
What is standard deviation? Standard deviation is a type of statistic utilized in financial analysis to identify volatility of a security’s price over time. The larger the standard deviation, the greater the volatility of that security’s price over time. [Read More]
What is corporate grade debt? Debt is the formal term for when a company or individual borrows money from another party in exchange for paying a premium on that amount of money. This premium is also known as interest. [Read More]
What is a 10-K? A company’s 10-K is the large report that the Securities and Exchange Commission (SEC) requires publicly-traded companies to file each year. The size of the company determines the specific filing deadline, but all deadlines are measured from the close of each company’s fiscal year. [Read More]
What is free cash flow (FCF)? Free cash flow (FCF) is a measure of the cash that an organization has on hand after accounting for any cash outlays that pay for ongoing operations and asset purchase and maintenance. [Read More]
What is total liabilities? Total liabilities is a category on a company’s balance sheet, and it includes all financial debts and/or obligations that the company owes other entities. For reporting purposes, total liabilities are often split into short-term liabilities, long-term liabilities, and other liabilities. [Read More]
What is total equity? Total equity is the capital that would be given to a company’s shareholders after all assets were sold and all debts were paid. Found on a company’s balance sheet, total equity is often comprised of shareholder equity and retained earnings. [Read More]
What is alpha? In the financial world, alpha is the difference between an actively managed portfolio’s performance and that of a benchmark index’s performance. While alpha can be negative, the goal of a trader who actively manages a portfolio is to have positive alpha, generating returns above and beyond what the market or benchmark delivers over a given time period. [Read More]
What is beta? Beta is the numerical representation of a security or portfolio’s risk versus the market as a whole. In addition, the beta coefficient helps analysts and traders identify which securities or portfolios will move in the same direction as the overall market, and vice versa. [Read More]
What is annualized performance?Annualized performance is simply the process of taking the performance of a security or portfolio over a time period of less than one year and converting it to its annual equivalent. The process of annualization occurs is many different sectors of the financial world, from loans to market performance. [Read More]
What is percentage revenue growth?Revenue growth percentage is a specific type of growth rate viewed as a percent. Focused solely on a company’s top-line (revenue) growth, it can be calculated over any time period that is applicable to the analysis that is being conducted. Having said that, revenue growth percentage is usually viewed as a month-over-month or year-over-year metric for comparative purposes. [Read More]
What is percentage operating income growth?Operating income growth percentage is a specific type of growth rate viewed as a percent. Focused solely on a company’s operating income growth, it can be calculated over any time period that is applicable to the analysis being conducted. Having said that, operating income growth percentage is usually viewed as a month-over-month or year-over-year metric for comparative purposes. [Read More]
What does rolling returns mean? Rolling returns are similar to annualized returns in that it gives a snapshot of a security’s performance over a given time period. However, whereas annualized returns given a single annualized return for a period (potentially more than one year), rolling returns offers a breakdown of the returns for a specific time period so that the fluctuations in performance are more visible to potential investors. [Read More]
What is cumulative performance? Cumulative performance, or cumulative return, is a security performance measure that is similar to ROI in its calculation. In its most simple form, cumulative performance is expressed as a percentage, and is simply the value of the security at the time of analysis or sale minus the original purchase price, which is then divided by the original purchase price. [Read More]
What are yearly returns? Yearly returns, or the yearly rate of return, is the amount gained or lost by a security over a one-year period. Also known as the nominal rate of return, the yearly return is expressed as a percentage. [Read More]
What does institutional ownership mean? Institutional ownership is the term given to the amount of a particular stock that is owned by institutional investors, such as mutual funds, endowments, and pension funds. Since institutional investors represent a large amount of capital, both reputationally and fiscally, their investments are closely watched by market participants and highly valued by corporations. [Read More]
What does insider ownership mean? Insider ownership is a term that applies to two groups of investors. The first is any individual that holds more than 10% of a company’s voting stock. The second is as the term relates to insider trading. For the purposes of insider trading, insider ownership is defined as anyone who trades the company’s stock utilizing information that is not available to the public. This second group is not determined by ownership stake, but by the actions that they choose to take. [Read More]
What is the current ratio? The current ratio is a comparison of a company’s current assets to its current liabilities. The current ratio gives analysts and investors the ability to easily assess if a company is in potential distress, positioned inline with industry benchmarks, or is not efficiently utilizing its assets to generate income. [Read More]
What is the quick ratio? The quick ratio, also known as the acid test ratio, is a measure of a company’s ability to pay its current liabilities without having to liquidate inventory or obtain financing. This ratio is obtained in one of two ways, with the most prevalent being the adding up of a company’s most liquid current assets, and then dividing that number by the total current liabilities. [Read More]
What is credit quality? Credit quality is a measure of the risk of default of a bond or a bond-related security. When the concept is applied to a company, it is known as identifying the company’s “bond rating”, or creditworthiness. [Read More]
What is a CUSIP? The Committee on Uniform Securities Identification Procedures, or CUSIP, is the group that is responsible for assigning unique identification numbers to all stocks and bonds that are issued, bought, and sold in the US and Canada. The CUSIP number is different from the ticker symbol for a specific security and is often the primary identifier for publicly traded securities as well as for record-keeping. There are several systems for international securities, including the International Securities Identification Number (ISIN) and the CUSIP International Numbering System (CIN). [Read More]
What is the Sortino ratio?The Sortino ratio is a modified version of the Sharpe ratio. The Sharpe ratio incorporates the total standard deviation of returns, whereas the Sortino attempts to refine that measurement of risk by using the standard deviation of the negative returns. [Read More]
What is the Sharpe ratio?The Sharpe ratio is a method for investors and analysts to gauge the return they would receive on a given investment in relation to its risk. In the Sharpe ratio, the ROI of the investment is reduced by the return on a “risk-free” investment like a U.S. Treasury bond. This figure is then divided by the standard deviation of the investment’s excess return, which acts as a proxy for the investment’s volatility. [Read More]
What are assets under management? Assets under management (AUM) is a generic term in the financial industry to describe the amount of assets that either a financial company or financial professional oversees on behalf of clients. AUM is comprised of assets like cash, bank deposits, and mutual fund holdings. The term usually refers to assets under management for all clients but can be used to refer to a single client if specified. [Read More]
What is an expense ratio? The expense ratio, also known as the management expense ratio, is a ratio that gives potential investors an insight into how much of a fund’s assets go towards paying administrative and other management costs. This ratio gives potential investors a method to compare different types of investment opportunities in terms of their costs. [Read More]
What are high-yield bonds? High-yield bonds, or junk bonds, are a type of bond that pays out a larger interest rate than other types of bonds. The reason for the larger interest rate is that the companies that issue so-called junk bonds usually present a greater default risk than other companies. Since the default risk is greater, issuers of junk bonds must pay a premium in terms of higher interest rates to have access to capital in the bond markets. [Read More]
What are investment grade bonds?Investment grade bonds are bonds issued by either corporations or municipalities that have a low default risk. This type of bond is the opposite of high yield or junk bonds, which carry a significantly higher default risk. Bonds must have a rating that starts with the letter “A” or have a complete rating of “BBB” to be considered investment grade. [Read More]