How to Use This Financial Glossary
As the gentle reader explores the financial posts on wymhacks.com (or any other site for that matter), he/she can refer to this Financial Glossary to gain additional clarity and insight.
I recommend you go to Investopedia for additional definitions and details on financial terms.
| Financial Term | Definition |
|---|---|
| 10-K Forms | Corporate financial statements submitted to the SEC (Securities and Exchange Commission) on a yearly basis. |
| 10-Q Forms | Corporate financial statements submitted to the SEC (Securities and Exchange Commission). The 10-Qs are submitted in the 1st, 2nd, and 3rd quarters of the year (Q4 data is captured in the 10-K submittal). |
| Accounting | Accounting relates to the recording of a business's transactions. Corporations follow specific accounting rules and guidelines in order to provide their information in a transparent and structured way. The analysis and verification of the data is also a component of Accounting. |
| Accounting Equation | Assets - Liabilities = Equity. Equity is also knows as Shareholder's Equity or Owner's Equity. |
| Additive Series (Progression) | In an Arithmetic Series (Progression), the difference between consecutive numbers in a data set is the same. |
| Amortization | Amortization is the loss in value of an intangible asset (e.g. a patent) due to its deterioration over time. Corporations pay taxes on cash flow less amortization. NIAT, Net Income After Tax, represents cash flow adjusted for (+)amortization and (-)taxes. Note that depreciation of tangible (physical) assets is called Depreciation. |
| Average | A term that that needs additional specificity to be useful. The "Average" typically means "the Arithmetic Mean". It is an indication of the central tendency of a set of data. The Average is the sum of a data set divided by the number of data points in the set. It could also be referring to a Geometric Mean so , the term needs additional specificity to be useful. |
| Balance Sheet | A corporation's financial statement that shows a snapshot in time of a company's financial condition. The Balance Sheet reflects the Accounting Equation: Assets - Liabilities = Shareholders' Equity. |
| Bi-Modal Distribution | On a frequency vs value chart (typically a histogram) a Bi-Modal Distribution of data shows two peaks or humps in the distribution. A Normal Distribution would display a single centralized peak. There can also be multi-modal (multi peak) distributions. When distributions deviate from a Normal shape, the user needs to be careful in their interpretation of the meaning and significance of the average and standard deviation. |
| Bond | A bond is effectively an I.O.U agreement whereby the borrower (a corporation or a government entity) agrees to (1) pay interest on some frequency during the borrowing period and (2) pay back the original borrowed amount (principal) at the end of the borrowing period. Sometimes described as a fixed-income security or instrument. |
| Book Value per Share | Balance Sheet metric. Shareholders Equity/Total Shares. Note that Book Value is not the Market Value at any given time. |
| Business Cycle | A Business Cycle describes the sequential "movements" of economic activity (typically in a nation). Namely: a trough (low inflection point) in business activity develops into a growth period (Expansion) until a top or Peak is hit. The economy then begins to slow down (Contraction) until it hits another trough. |
| CAGR | Compound Annual Growth Rate CAGR = (End Value/Start Value)^(1/number of years) - 1 where the caret symbol ^ represent power (exponent) function i.e. CAGR = [ (End/Start) raised to power of (1/years) ] - 1 The CAGR is used with multiplicative series of numbers (like growth rates of prices). The CAGR is the constant yearly rate of return that will progressively convert a starting value to its ending value over a certain time period. It assumes that profits (interest) are reinvested at the end of each year. The CAGR does not necessarily tell you what the actual rate of return is in any given year. It gives you a smoothed out 'average" rate of return. The CAGR is the proper equation to use to compute the annualized rate of return. A simple average of actual yearly returns will NOT provide an accurate annualized rate of return. Use the CAGR for this! Be aware that the smoothing effect of the computation will hide the magnitude of the actual price movements from year to year (i.e. volatility of the price will not be indicated). The CAGR can be computed a number of ways using Microsoft Excel. ( by constructing the actual formula or using one of several excel functions like RRI(), Geomean(), Power(), Rate() etc. ) |
| CapEx | Capital Expenditures. Capital Expenditures are costs related to the addition or significant modification or replacement of an asset. |
| Capital Employed | Total Assets - Current Liabilities |
| Capital Gains | A capital gain is the profit from the sale of an asset (any asset). The IRS will tax these differently based on how long the asset was held before sale. Short Term Capital Gains refer to assets held less than or equal to to 1 year and Long Term Capital Gains refer to assets held greater than 1 year). |
| Capital Structure | The combination of Debt (Bonds) and Equity (Stocks) a corporation uses to finance its operations. |
| Capitalism | An economic system where people voluntarily agree on the exchange of goods and services at mutually agreed prices. Adam Smith, the Father of Modern Economics, was one of the first to articulate this system with the publication (in 1776) of his book "An Inquiry into the Nature and Causes of the Wealth of Nations". |
| Capitalization | Refers to Market Capitalization. Market Capitalization (Cap) is a publicly traded corporation's 'size' which is defined as shares outstanding x price per share. Market Cap categories commonly used are Nano Cap, Micro Cap, Small Cap, Mid Cap, Large Cap, and Mega Cap stocks. Various organizations (Dow Jones, FTSE-Russell, Wilshire, S&P, CRSP, Morningstar etc. ) have developed their own methodologies and definitions for these Cap categories. Assume the following size categories unless you use specific data that is defined otherwise: Nano Cap Stock (less than $50 Million Market Cap) Micro Cap Stock ($50 to $250 Million Market Cap) Small Cap Stock ($250 Million to $2 Billion Market Cap) Mid Cap Stock ($2 Billion to $10 Billion Market Cap) Large Cap Stock ($10 Billion to $200 Billion Market Cap) Meg Cap Stock ( Greater than $200 Billion Market Cap) |
| Cash Ratio | Cash Ratio = (Cash + Marketable Securities)/Current Liabilities |
| COGS | See Cost of Goods Sold |
| Cost of Goods Sold (COGS) | Cost item on the income financial statement. Direct cost of producing a good or service. Raw materials costs and production labor costs are examples of COGS. |
| CPI | The CPI, Consumer Price Index, is an inflation indicator published by the U.S Bureau of Labor Statistics. It reflects prices paid by urban consumers for various goods and services. |
| Current Ratio | Balance Sheet metric. Current Ratio = Current Assets/Current Liabilities |
| Date Set | A Data Set is a list of values. |
| Debt Instruments | Borrowed monies that must be paid back. Examples of Debt instruments are bonds, loans, mortgages, lines of credit etc. The borrower typically must repay amount owned (principal) plus interest. Business can have short term (paid back within year) or long term debt (paid back after more than a 1 year). |
| Demand (Law of Demand) | An Economic Concept: Price Increase = Demand Decrease and vice versa. On a Price vs Quantity chart, a Demand Line decrease from top left to bottom right. Factors other than Price can shift the Demand Line. |
| Depreciation | Depreciation is the loss in value of an asset due to its deterioration over time. Corporations pay taxes on cash flow less depreciation. NIAT, Net Income After Tax, is an accounting term defined as "cash flow adjusted for (+)depreciation and (-)taxes". Note that depreciation of intangible assets like patents or trademarks is called Amortization. |
| Derivatives | A financial contract that derives its value from the value of an associated or underlying asset. |
| Discount Rate | The Discount Rate is the short term loan rate offered by the Federal Reserve Bank to certain institutions. A completely different meaning of the Discount Rate is the hurdle "interest" rate used in Discounted Cash Flow analysis. |
| Drawdown | A measure of the decline of a value from its maximum (peak) value. Typically the historical peak value is used. That is, Drawdown = Min( % Change from Historical Peak , 0 ) where, % Change from Historical Peak = (Current Value - Historical Maximum Value) / (Historical Maximum Value) The Drawdown Formula gives a negative value (describing the extent of the drawdown from the historical peak) or zero (describing the new historical peak price). Graphing these values can help us visualize the maximum drawdowns and the duration of time between peaks. |
| Earnings Yield | Earnings Yield as defined by Joel Greenblatt = EBIT/Tangible Capital Employed. Where Tangible Capital Employed = Net Working Capital + Net Fixed Assets. Net Working Capital = Current Assets - Current Liabilities and Net Fixed Assets are Property Plant and Equipment (PPE) - depreciation. |
| EBIT | On the Income Statement, EBIT are the Earnings Before Interest and Taxes. Interest represent the interest payments from bond issuance. EBIT is sometimes called Operating Earnings or Operating Profit. EBIT/Revenue = Operating Profit Margin. |
| EBITDA | Pronounced ee'-bit-dah. On the Income Financial Statement, it is the Earnings before interest, taxes, depreciation, and amortization. Interest represent the interest payments from bond issuance. |
| Economic Indicators | Economic Indicators are key factors that affect the state of an economy. Helps determine if the economy is expanding or contracting. In the United States the Conference Board tracks and reports on Leading (e.g. S&P500 Price and Interest Rate Spread), Coincident (e.g. Employment and Industrial production), and Lagging Economic Indicators (e.g. Prime Rate and Inflation). |
| Economics | Economics describes how goods and services are supplied to people. Economics is a Social Science which describes the flow of money and resources in society. It is Social in that it addresses the wants and needs of humans. Government fiscal and monetary policies are based on economic concepts (e.g. supply and demand, interest rates, inflation etc.) |
| Enterprise Value | A company (stock) valuation measure. Enterprise Value = EV = Market Capitalization + Total Debt - Cash & Equivalents |
| Enterprise Value/EBITDA | A company (stock) valuation measure. Enterprise Value/EBITDA = EV/EBITDA where Enterprise Value = EV = Market Capitalization + Total Debt - Cash & Equivalents and EBITDA = Earnings Before Interest Tax Depreciation Amortization |
| Enterprise Value/Revenue | A company (stock) valuation measure. Enterprise Value/Revenue = EV/Revenue = where Enterprise Value = EV = Market Capitalization + Total Debt - Cash & Equivalents |
| Equilibrium Price | An Economic Concept: The intersection of the Supply Line and the Demand Line on a Price vs Quantity chart. One of three conditions exist in a Market. (1) Excess Demand where there will be shortages. (2) Excess Supply where there will be surpluses and (3)Equilibrium where the Supply and Demand quantities are the same. The price at this equilibrium is called the Equilibrium Price. |
| ETF | Exchange Traded Fund are similar to Mutual Funds in that they invest in collections or baskets of various investments like stocks, bonds, commodities, etc. Unlike mutual funds , ETFs can be bought and sold during the trading day like individual stocks. Also ETF Options (derivative types of investment) can be traded whereas this cannot be done with mutual funds. |
| EV | A company (stock) valuation measure. Enterprise Value = EV = Market Capitalization + Total Debt - Cash & Equivalents |
| EV/EBITDA | A company (stock) valuation measure. Enterprise Value/EBITDA where Enterprise Value = EV = Market Capitalization + Total Debt - Cash & Equivalents and EBITDA = Earnings Before Interest Tax Depreciation Amortization |
| EV/Revenue | A company (stock) valuation measure. Enterprise Value/Revenue = EV/Revenue where Enterprise Value = EV = Market Capitalization + Total Debt - Cash & Equivalents |
| Finance | Finance is the science of analyzing assets (money and other) in order to make investment decisions. The end goal of Finance is to maximize value. |
| Fiscal Policy | Fiscal Policy describes the way a governments taxes and spends. Adjustments are made according to Economic Principles. Spending affects GDP. For example, to revive a slowing economy, a government might decrease taxes and increase spending. |
| Fixed Income Investment | Fixed Income investments pay out periodic interest or dividend payments. Some Examples of Fixed Income investments would be : Bonds, Bank Certificates of Deposit, Money Market Funds, Savings Accounts etc. |
| Free Cash Flow | From the Statement of Cash Flow. FCF = Free Cash Flow = Net Operating Cash Flow - Capital Expenditures Net Operating Cash Flow = NIAT + Dep/Amort + Change in Working Capital + Other |
| GDP (Gross Domestic Product) | A measure of aggregate output of a nation. GDP = Consumer Spending + Corporate Spending + Government Spending + Exports - Imports. Note that "- Imports" means money spent on imports leaves or subtracts from the aggregate output of the nation's economy. |
| Geometric Mean | For a data set of V1, V2..Vn values, the Geometric Mean (GM) is the nth root of their product. GM = nth root of (V1 x V2 x ..Vn) = (V1 x V2 x ..Vn)^(1/n). The Geometric Mean is used to represent the average of a Multiplicative Series like investment returns over time. The CAGR, Compound Annual Growth Rate, = Geometric Mean -1. |
| Geometric Series (Progression) | In a Geometric Series (Progression), the ratio of consecutive numbers in a data set is the same. |
| Gross Margin | Gross Margin = Gross Profit/Revenue = (Revenue - Cost of Goods Sold)/Revenue |
| Gross Profit | On the Income Statement, Gross Profit = Revenue - Cost of Goods Sold = Revenue - COGS. |
| Growth Factor | Typically used in the context of describing the change in value of an investment from one period to the next. For example, if an investment increases in value by 30% over a year, then the Final Value = Growth Factor x Original Value = (1+.3) x Original Value. Another example: If an investment decreases by 20% over a years time, the Final Value = Growth Factor x Original Value = (1-.2) x Original Value. |
| Income Statement | A financial statement submitted quarterly and annually by a corporation. Computes the Net Income after Tax or NIAT for a defined period. Also known as a Profit and Loss Statement or P&L Statement or Statement of Operations. |
| Income Statement | A corporation's financial statement that computes Net Income After Tax over a defined period of time. |
| Inflation | Inflation is the loss of purchasing power of a currency. Inflation is reflected in rising prices due to loss of this purchasing power. i.e. a dollar buys less today than it did in the past. The U.S. uses the CPI, Consumer Price Index, to track inflation. |
| Intangible Assets | Intangible are non-material assets (not physical) like copyrights, brand names, and intellectual property like patents. |
| Invested Capital | Invested Capital = Total Debt +Shareholder Equity - Cash |
| IPO | Companies issue stock to the public for the first dime in an Initial Public Offering |
| IRS | The Internal Revenue Service is the tax collecting agency of the federal government. According to the IRS web site, about 78,000 people worked full time for the IRS in 2021. |
| Kurtosis | Describes the shape of a data distribution on a frequency vs value graph. Describes how thick the tails of a distribution are. A Normal Distribution of data has a Kurtosis of 3. In Microsoft Excel 2016 (and its is assumed in later versions as well) , Kurtosis is computed as "Excess Kurtosis" where the computation is normalized to 0 to represent a Kurtosis of 3. A positive Excess Kurtosis will show a taller/skinnier distribution whereas a negative Kurtosis will show a fatter/shorter distribution. |
| Large Cap Stock | Large Capitalization (Cap) Stock will typically have a Market Capitalization (Cap) between $10 Billion and $200 Billion. Assume this approximation unless you have more specific data. |
| Long Term Debt | Business can have short term (paid back within year) or long term debt (paid back after more than a 1 year). |
| Long Term Debt/Equity | Balance Sheet metric. Long Term Debt/Equity where Equity = Total Assets - Total Liabilities |
| Market Capitalization | A company (stock) valuation measure. Market Capitalization (Cap) is a publicly traded corporation's 'size' which is defined as shares outstanding x price per share. Market Cap categories commonly used are Nano Cap, Micro Cap, Small Cap, Mid Cap, Large Cap, and Mega Cap stocks. Various organizations (Dow Jones, FTSE-Russell, Wilshire, S&P, CRSP, Morningstar etc. ) have developed their own methodologies and definitions for these Cap categories. Assume the following size categories unless you use specific data that is defined otherwise: Nano Cap Stock (less than $50 Million Market Cap) Micro Cap Stock ($50 to $250 Million Market Cap) Small Cap Stock ($250 Million to $2 Billion Market Cap) Mid Cap Stock ($2 Billion to $10 Billion Market Cap) Large Cap Stock ($10 Billion to $200 Billion Market Cap) Meg Cap Stock ( Greater than $200 Billion Market Cap) |
| Mean | The Mean denotes the Average but must be further specified to be useful . For example it could refer to an Arithmetic Mean or a Geometric Mean. |
| Median | If you take a list (set) of n numbers and order the numbers from lowest to highest, the Median is the middle value. For an ordered odd set of data, the Median is in the middle which will be the value in position = { (n+1)/2 }. For an ordered even numbered set, the Median will be the average of the values in in positions n/2 and (n/2+1). |
| Medium Cap Stock | Medium Cap Stock will typically have a Market Capitalization (Cap) between $2 Billion and $10 Billion. Assume this approximation unless you have more specific data. |
| Mega Cap Stock | Meg Cap Stock will typically have a Market Capitalization (Cap) greater than $200 Billion. Assume this approximation unless you have more specific data. |
| Micro Cap Stock | Micro Cap Stock will typically have a Market Capitalization (Cap) between $50 Million and $250 Million. Assume this approximation unless you have more specific data. Market Capitalization (Cap) is a publicly traded corporation's 'size' which is defined as shares outstanding x price per share. Market Cap categories commonly used are Nano Cap, Micro Cap, Small Cap, Mid Cap, Large Cap, and Mega Cap stocks. Various organizations (Dow Jones, FTSE-Russell, Wilshire, S&P, CRSP, Morningstar etc. ) have developed their own methodologies and definitions for these Cap categories. |
| Mode | For a set of data, the mode is "a" most frequent value. Data sets can have no modes or multiple modes. |
| Monetary Policy | In the United States the Federal Reserve's Monetary Policy involves (1) manipulating short term interest rates, (2) buying/selling bonds and (3) setting Member Bank reserve requirements (Reserve Ratio). In an inflationary booming economy, for example, the government might begin raising the Discount Rate and/or raising the Reserve Requirement and/or selling Bonds. All these actions would reduce the Money Supply. This would be called a Contractionary Monetary Policy which would be expected to reduce inflation and "cool off" the economy. |
| Money Supply | Money Supply = Currency Outside Banks + Checking Accounts + Traveler's Checks + Savings Accounts + Money Market Accounts |
| Moving (as in moving average) | Moving refers to the same computation being done on a data set of the same number of data points where each subsequent computation drops the oldest value from the data set and adds the newest value to the data set. Sometimes call "Rolling". For example, 5 Day Moving Average or 5 day Rolling Average. |
| Mutual Fund | Mutual Funds are financial instruments that invest in pools or baskets of various investments (e.g. stocks, bonds, commodities, etc. or mixes of these). Many mutual funds are actively managed by their fund managers. |
| Nano Cap Stock | Nano Cap Stock will typically have a Market Capitalization (Cap) less than $50 million. Assume this approximation unless you have more specific data. |
| Net Financing Cash Flow | NFCF = Net Financing Cash Flow = One of the three sections of a Statement of Cash flow showing net cash flows from financing activities. |
| Net Investing Cash Flow | Net Investing Cash Flow = NICF = One of the three sections of a Statement of Cash flow showing net cash flows from investments. |
| Net Operating Cash Flows | Net Operating Cash Flow = NOCF = One of the three sections of a Statement of Cash flow showing net cash flows from operations. Net Operating Cash Flow = NIAT + Dep/Amort + Change in Working Capital + Other |
| Net Working Capital | Current Asses - Current Liabilities. Also know as Working Capital. |
| NFCF | NFCF = Net Financing Cash Flow = One of the three sections of a Statement of Cash flow showing net cash flows from financing activities. |
| NICF | Net Investing Cash Flow = NICF = One of the three sections of a Statement of Cash flow showing net cash flows from investments. |
| NOCF | Net Operating Cash Flow = NOCF = One of the three sections of a Statement of Cash flow showing net cash flows from operations. Net Operating Cash Flow = NIAT + Dep/Amort + Change in Working Capital + Other |
| Nominal | A Nominal price or value is the actual unadjusted value. The effects of inflation would be included. For example, a Nominal Dollar in 1950 is equivalent to about $12.3 today (July 2020) in terms of equal purchasing power. So our 1$ historical "Nominal" value has been expressed as $12.3 today, "Real" terms. |
| Normal Distribution | A set of data exhibits a Normal distribution if the data clusters around a central value and the scatter of data around the central value is symmetrical. In a Normal Distribution about 68% of the data will be within 1 standard deviation of the average or mean. (95% for 2 standard deviations and 99.7% for 3 standard deviations). |
| Open Market Operations | The buying and selling of treasury securities (bonds) by the U.S. Federal Reserve. Buying bonds increases the Money Supply and selling bonds decreases the Money Supply. |
| Operating Cash Flow | Cash Flow Statement cash flow from operations. Also called Net Operating Cash Flow. Net Operating Cash Flow = NIAT + Dep/Amort + Change in Working Capital + Other |
| Operating Profit | On the Income Statement, EBIT are the earnings before interest and taxes. Interest represent the interest payments from bond issuance. EBIT is sometimes called Operating Earnings or Operating Profit. |
| Operating Profit Margin | EBIT/Revenue = (Earnings Before Interest and Taxes)/Revenue |
| OpEx | Operating Expenditures. These are costs related to the operation and maintenance of existing assets. |
| PE Ratio | A company (stock) valuation measure. Price/Earnings Ratio = PE Ratio = (Stock Share Price)/(Stock Earnings/Share) |
| PEG Ratio | A company (stock) valuation measure. PEG Ratio = (Share Price)/EPS/(EPS Growth) where EPS is Earnings Per Share |
| Price/Book Ratio | A company (stock) valuation measure. Price/Book = (Stock Price/Share)/(Stock Book Value/Share) |
| Price/Earnings Ratio | A company (stock) valuation measure. Price/Earnings ratio = PE ratio = (Stock Share Price)/(Stock Earnings/Share) |
| Price/Sales Ratio | A company (stock) valuation measure. Price/Sales = (Stock Market Capitalization)/(Revenue) |
| Primary Market | Stocks are first issued by companies (in an Initial Public Offering or IPO) in what is called a Primary Market in order to raise cash for funding. |
| Productivity | Productivity is a measure of efficiency. Productivity is the ratio of output/s to input/s. For example, the (number of cars manufactured)/(number of hours of labor to produce them) could be described as a car production productivity ratio. The lower the input relative to the output the higher the productivity and efficiency. |
| Public Corporation | A company or business whose shares are traded on a public stock exchange or market. A public corporation is considered a separate legal entity from its owners. |
| Quick Ratio | Quick Ratio = (Current Assets - Inventory)/Current Liabilities |
| Real | A Real price or value has been adjusted for inflation. For example, a Nominal Dollar in 1950 is equivalent to about $12.3 today (July 2020) in terms of equal purchasing power. So our 1$ historical "Nominal" value has been expressed as $12.3 today, in "Real" terms. |
| Reserve Requirement | The amount of cash a U.S. bank is required to hold. It is set by the Federal Reserve. |
| Return on Assets | Return on Assets = ROA = (Net Income)/(Total Assets) |
| Return on Average Capital Employed | Return on Capital Employed = ROACE = EBIT/ Average Capital Employed where Average Capital Employed = Total Assets - Current Liabilities; averaged over two most recent periods. EBIT is Earnings before Interest and Tax. |
| Return on Capital | Return on Capital as defined by Joel Greenblatt = ROC = EBIT/Enterprise Value. Where Enterprise Value = Market Capitalization + Total Debt - Cash & Equivalents. EBIT is Earnings before Interest and Taxes. |
| Return on Capital Employed | Return on Capital Employed = ROCE = EBIT/Capital Employed where Capital Employed = Total Assets - Current Liabilities. EBIT is Earnings before Interest and Tax. |
| Return on Equity | Return on Equity = ROE = (Net Income)/(Shareholder Equity) |
| ROA | Company (stock) profitability measure. Return on Assets = (Net Income)/(Total Assets) |
| ROACE | Return on Capital Employed = ROACE = EBIT/ Average Capital Employed where Average Capital Employed = Total Assets - Current Liabilities; averaged over two most recent periods. EBIT is Earnings before Interest and Tax. |
| ROC | Return on Capital as defined by Joel Greenblatt = ROC = EBIT/Enterprise Value. Where Enterprise Value = Market Capitalization + Total Debt - Cash & Equivalents. EBIT is Earnings before Interest and Taxes. |
| ROCE | Return on Capital Employed = EBIT/Capital Employed where Capital Employed = Total Assets - Current Liabilities |
| ROE | Company (stock) profitability measure. Return on Equity = (Net Income)/(Shareholder Equity) |
| ROIC | Return on Invested Capital = ROIC = NOPAT/Invested Capital where NOPAT is Net Operating Profit after Tax = EBIT(1-Tax Rate). EBIT is Earnings before Interest and Tax. |
| Rolling (as in rolling average) | Rolling refers to the same computation being done on a data set of the same number of data points where each subsequent computation drops the oldest value from the data set and adds the newest value to the data set. Sometimes call "Moving". For example, 5 Day Moving Average or 5 Day Rolling Average. |
| S&P 500 | A stock index (benchmark) representing 500 leading American companies (~80% of U.S. Stock Market Capitalization). Established in 1957, the S&P 500 represents a blend of Growth and Value style Large/Mega Cap companies. Learn more about it at the S&P Global web site: https://www.spglobal.com/ |
| Secondary Market | After the initial issue , stocks are bought and sold in a Secondary Market between investors. The company DOES NOT directly gain or lose value with the rise and fall of the stock price in a Secondary Market. The Secondary market is what the typical individual investor with his/her brokerage account is investing in |
| Security | An asset (like a stock or a bond) that can be traded in an open market. The word Security implies it is a secure, tradeable, contract. |
| SG&A | Indirect production costs associated with Sales , General and Administrative items. An income statement input. |
| Shareholders' Equity | Shareholder Equity = Assets - Liabilities. This equation is called the Accounting Equation. Shareholders' Equity is also known as Owners' Equity or Stockholders' Equity. |
| Short Term Debt | Business can have short term (paid back within year) or long term debt (paid back after more than a 1 year). |
| Skewness | Describes the extent of symmetry in a distribution of data. Normal Distributions are perfectly symmetrical and have a skewness of 0. A negative skewness will show a longer left tail on a distribution chart. A positive skewness will show as a longer right sided tail. |
| Small Cap Stock | Small Cap Stock will typically have a Market Capitalization (Cap) between $250 Million to $2 Billion. Assume this is approximation unless you have more specific data. |
| Standard Deviation (Arithmetic) | A statistical measure that shows the extent of spread around an average value. In a data set that is normally distributed, about 68% of the data will be within 1 standard deviation and about 95% of the data will lie within 2 standard deviations. Graphically, a normal distribution is represented by a Bell shaped probability curve where data is disbursed symmetrically around the center (mean or average). For n sample points, the Standard Deviation = Square Root((Sum(Each Data Point - Average)^2 )/n). |
| Standard Deviation (Geometric) | For n sample points, the Geometric Standard Deviation = GSD = Exponent ( Square Root ( ( Sum ( ln of Each Data Point-ln GM )^2 )/n ) ). Where GM = Geometric Mean and ln is the natural log. If the data are sampled from a lognormal distribution (i.e. continuous distribution of random variables whose natural logarithm is normally distributed), about 2/3 of the values (66.7%) will range from (GM/GSD) to (GM x GSD). |
| Statement of Cash Flow | A corporation's financial statement that computes Net Cash Flow over a defined period of time. Net Cash Flow = NCF = Net Operating, Investing, and Financing Cash flows. NCF = NOCF + NICF + NFCF |
| Supply (Law of Supply) | An Economic Concepts: Price Increase = Supply Increase and vice versa. On a Price vs Quantity chart, a Supply Line increases from bottom left to top right. The Supply Line can be shifted by factors others than Price. |
| Tangible Assets | Tangible are the material or physical possessed by companies. |
| Time Series | A series of values that are ordered by time (e.g. on Day 1, value is X, Day 2 value is Y, etc.). |
| Total Debt/Equity | Balance Sheet metric. Long Term Debt/Equity where Equity = Total Assets - Total Liabilities |
| Total Debt/Total Assets | Balance Sheet metric. Long Term Debt/Total Assets |
| Treasury Bill | A type of U.S. government Bond. Treasury Bills or T-Bills are backed by the U.S. Treasury Department and have maturities of one year or less. Refer to https://www.treasurydirect.gov/ for more information. |
| Treasury Bond | A type of U.S. government Bond. Treasury Bonds are backed by the U.S. Treasury Department and have maturities of between 10 and 30 years. Refer to https://www.treasurydirect.gov/ for more information. |
| Treasury Note | A type of U.S. government Bond. Treasury Notes are backed by the U.S. Treasury Department and have maturities between 2 to 10 years. Refer to https://www.treasurydirect.gov/ for more information. |
| Working Capital | Current Asses - Current Liabilities. Also know as Net Working Capital. |
| Yield Curve | A yield curve chart shows the Yield Value (Y-axis) of same-quality bonds at different maturity durations (X-axis). The shape of the curve is an indicator of the health of the economy (is it growing or contracting?). In a healthy economy , the curve's shape is upward sloping (imagine the left side of a hill). A flat curve or an inverted curve is a recession indicator and occurs when higher maturity rates come closer in value (or even less) to short term rates. In the U.S., the Federal Reserve ultimately affects the yield curve shape when it increases/decreases short term interest rates to decrease/increase the Money Supply (to decrease/increase inflation). |
| Compounding Formula | F= P(1+i/c)^cn where F= future value, P = present value, i = annual percentage rate, c = number of compoundings per year, n is number of years |
| Annuity Formula | Ordinary Annuity where first payment received at end of period: F = P( (1+i)^n-1)/i Annuity Due where first payment received at beginning of period: F = (1+i)P( (1+i)^n-1)/i Where F = future value, P = present value, i = interest rate, n = number of years |
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