- amortization
- the process of spreading business costs in accounting; similar to depreciation, but differs in that it generally refers to intangible assets such as patents or copyrights
- capital employed
- also known as funds employed; the total amount of capital used for the acquisition of profits by a firm or on a project
- common stock
- a security that represents partial ownership of a corporation
- comparable company analysis (comps)
- a method for valuating a company using the metrics of other businesses of similar size in the same industry
- depreciation
- the process of spreading business costs in accounting; similar to amortization, but differs in that it generally refers to fixed, tangible assets such as buildings, machinery, furniture, fixtures, and equipment
- discounted cash flow (DCF)
- a method for estimating the value of an investment based on the present value of its expected future cash flows
- dividend
- a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits or reserves
- dividend discount model (DDM)
- a quantitative method for predicting the price of a company’s stock based on the theory that its present-day price is worth the sum of all of its future dividend payments when discounted back to their present value
- dividend yield
- a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price, expressed as a percentage
- earnings per share (EPS)
- the ratio of a company’s profits to the outstanding shares of its common stock; serves as an indicator of a company’s profitability
- EBIT
- short for earnings before interest and taxes; an indicator of a firm’s profitability before the effects of interest or taxes; also referred to as operating earnings, operating profit, and profit before interest and tax
- efficient markets
- markets in which costs are minimal and prices are current, fair, and reflective of all available relevant information
- enterprise value (EV)
- a company’s total value; often used as a more comprehensive alternative to equity market capitalization
- enterprise value (EV) multiples
- also known as company value multiples; ratios used to determine the overall value of a company and, by extension, the value of its common stock
- equity multiples
- metrics that calculate the expected or achieved total return on an initial investment
- Gordon growth model
- a methodology used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate
- growth rate
- the rate at which the dollar amount of dividends paid on a specific stock holding increases
- intangible assets
- assets that are not physical in nature, such as goodwill, brand recognition, and intellectual property (i.e., patents, trademarks, and copyrights)
- intrinsic value
- the value of a firm’s stock based entirely on internal factors, such as products, management, and the strength of company brands in the marketplace
- market capitalization
- the value of a company traded on the stock market, calculated by multiplying the total number of shares by the current share price
- NASDAQ (National Association of Securities Dealers Automated Quotations)
- short for National Association of Securities Dealers Automated Quotations; an American stock exchange based in New York City, ranked second behind the New York Stock Exchange in terms of total market capitalization of shares traded
- net book value
- also called net asset value (NAV); the total assets of a company minus its total liabilities
- NYSE (New York Stock Exchange)
- the world’s largest stock exchange by market capitalization of its listed companies, based in New York City; often referred to as the “Big Board”
- perpetuity
- in terms of investments, an annuity with no end date
- precedent transaction analysis (precedents)
- a method for valuating a company in which the price paid for similar companies in the past is considered an indicator of the company’s current value
- preferred stock
- stock that entitles the holder to a fixed dividend, the payment of which takes priority over payment of common stock dividends
- price-to-book (P/B) ratio
- also called the market-to-book (M/B) ratio; a metric used to compare a company’s market capitalization, or market value, to its book value
- price-to-cash-flow (P/CF) ratio
- a stock valuation indicator or multiple that measures the value of a stock’s price relative to its operating cash flow per share
- price-to-earnings (P/E) ratio
- a ratio that indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings
- price-to-sales (P/S) ratio
- a ratio that indicates how much investors are willing to pay for a company’s stock per dollar of that company’s sales
- required return
- the minimum return an investor expects to achieve by investing in a project
- secondary markets
- markets where investors buy and sell securities they already own
- stock value
- also called intrinsic value; the fundamental, objective value of a share of stock