Earnings per share
The latest reported net earnings, divided by the number of outstanding shares of common stock; one of the most widely used forms for reporting earnings, also called basic earnings per share and distinguished from diluted earnings per share.
Similar financial termsRetained Earnings
The retained earnings are the net profits kept to accumulate in a business after dividends are paid. It can be written as follows: Retained earnings: EPS - DIV1 where EPS are earnings per share and DIV1 is the (announced) dividend
Diluted earnings per share
A calculation of earnings per share. Add conversion value or preferred stock and convertible bonds to net profit, then divide the result by the number of outstanding shares of common stock that would exist after full conversion; the result is expressed as a dollar value per share.
Growth in earnings per share
A ratio comparing current earnings per share to the same ratio in a base year; it is used to track rates of growth for the economy.
Earnings of a firm as reported on its income statement.
Shows the "multiple" of earnings at which a stock sells. Determined by dividing current stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher "multiple" means investors have higher expectations for future growth, and have bid up the stock's price.
Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to outperform portfolios consisting of stocks with a high price-earnings ratio.
Short-term, unsecured promissory notes issued by corporations with a high credit ratings. Their maturity ranges up to 270 days.
The SuperMontage is NASDAQ's trading system to aggregate quotes and orders, providing access to more possible trades. Launched in 2002, SuperMontage is a fully integrated order display and execution system, capable of handling an expanded universe of orders. The key features include pre-trade anonymity, the ability to aggregate interest five price levels deep on each side of the market, internalization of orders still available, time stamps of individual orders to preserve position and priority, ...
A trader who holds positions for a very short period of time.
Performance Related Pay
Performance Related pay is a remuneration system whereby the employee's pay is based on his or her performance. It is basically a payments by results system that is designed to give incentive to the employee to work harder or more productively. In its simplest form, this may be an annual bonus based on subjective assessment of performance. In many larger organisations this can be more structured, based on a set of pre-agreed objectives or targets. Performance related pay is becoming increasingly ...
Book value per share
The intrinsic value of a company's stock. BVPS is calculated by dividing tangible capital dollar value by the number of outstanding shares of common stock.
Realignment period of a temporary misaligned yield relationship that sometimes occurs in fixed income markets.
Annual fund operating expenses
For investment companies, the management fee and "other expenses," including the expenses for maintaining shareholder records, providing shareholders with financial statements, and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.
Annual percentage rate (APR)
The periodic rate times the number of periods in a year. For example, a 5% quarterly return has an APR of 20%.
Annual percentage yield (APY)
The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an APY of 12.68% (1.01^12).
Annualized holding period return
The annual rate of return that when compounded t times, would have given the same t-period holding return as actually occurred from period 1 to period t.
Time during which the SEC studies a firm's registration statement. During this time the firm may distribute a preliminary prospectus.
When a security is expected to appreciate at a slower rate than the overall market.
CDs purchased by accounts that are likely to resell them. The term is commonly used in the Euromarket.
T-period holding-period return
The percentage return over the T-year period an investment lasts.
Provision in a company's charter requiring a majority of, say, 80% of shareholders to approve certain changes, such as a merger.
The return of a portfolio over a shorter period of time than the evaluation period.
Short-run operating activities
Events and decisions concerning the short-term finance of a firm, such as how much inventory to order and whether to offer cash terms or credit terms to customers.
Set of contracts perspective
View of corporation as a set of contracting relationships, among individuals who have conflicting objectives, such as shareholders or managers. The corporation is a legal contrivance that serves as the nexus for the contracting relationships.
The property that portfolio choice can be separated into two independent tasks: (a) determination of the optimal risky portfolio, which is a purely technical problem, and (b) the personal choice of the best mix of the risky portfolio and the risk-free asset.
Rights of individuals and companies to own and utilize property as they see fit and to receive the stream of income that their property generates.
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a stated date. A limit is placed on the value of the shares the investor receives.
An interest in an asset held by a trustee for the benefit of another person.
Personal tax view (of capital structure)
The argument that the difference in personal tax rates between income from debt and income from equity eliminates the disadvantage from the double taxation (corporate and personal) of income from equity.
Personal benefits, including direct benefits, such as the use of a firm car or expense account for personal business, and indirect benefits, such as up-to-date office décor.
Warrants that have no expiration date.
Shares of stock given to managers on the basis of performance as measured by earnings per share and similar criteria. A control device used by shareholders to tie management to the self-interest of shareholders.
The calculation of the return realized by a money manager over some time interval.
The evaluation of a manager's performance which involves, first, determining whether the money manager added value by outperforming the established benchmark (performance measurement) and, second, determining how the money manager achieved the calculated return (performance attribution analysis).
Performance attribution analysis
The decomposition of a money manager's performance results to explain the reasons why those results were achieved. This analysis seeks to answer the following questions: (a) What were the major sources of added value? (b) Was short-term factor timing statistically significant? (c) Was market timing statistically significant? And (d), Was security selection statistically significant?
Perfected first lien
A first lien that is duly recorded with the cognizant governmental body so that the lender will be able to act on it should the borrower default.
Perfectly competitive financial markets
Markets in which no trader has the power to change the price of goods or services. Perfect capital markets are characterized by the following conditions: a) trading is costless, and access to the financial markets is free, b) information about borrowing and lending opportunities is freely available, c) there are many traders, and no single trader can have a significant impact on market prices.
Perfect market view (of dividend policy)
Analysis of a decision on dividend policy, in a perfect capital market environment, that shows the irrelevance of dividend policy in a perfect capital market.
Perfect market view (of capital structure)
Analysis of a firm's capital structure decision, which shows the irrelevance of capital structure in a perfect capital market.
A financial result in which the profit and loss from the underlying asset and the hedge position are equal.
An idealized market environment in which every market participant is too small to affect the market price by acting on its own.
Perfect capital market
A market in which there are never any arbitrage opportunities.
Paper gain (loss)
Unrealized capital gain (loss) on securities held in portfolio, based on a comparison of current market price to original cost.
Money market instruments, commercial paper and other.
When a security is expected to appreciate at a rate faster than the overall market.
Operationally efficient market
Also called an internally efficient market, one in which investors can obtain transactions services that reflect the true costs associated with furnishing those services.
The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is created by operating leverage. Also called business risk.
Fixed operating costs, so-called because they accentuate variations in profits.
Short-term, cancelable lease. A type of lease in which the period of contract is less than the life of the equipment and the lessor pays all maintenance and servicing costs.
Operating profit margin
The ratio of operating margin to net sales.
Degree to which exchange rate changes, in combination with price changes, will alter a company's future operating cash flows.
The average time intervening between the acquisition of materials or services and the final cash realization from those acquisitions.
Operating cash flow
Earnings before depreciation minus taxes. It measures the cash generated from operations, not counting capital spending or working capital requirements.
Open-market purchase operation
A systematic program of repurchasing shares of stock in market transactions at current market prices, in competition with other prospective investors.
Purchase or sale of government securities by the monetary authorities to increase or decrease the domestic money supply.
In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not start or end on either a Friday or the day before a holiday.
The period of time between the end of the discount period and the date payment is due.
Net operating margin
The ratio of net operating income to net sales.
Net operating losses
Losses that a firm can take advantage of to reduce taxes.
A portfolio strategy in which a portfolio is created that will be capable of satisfying more than one predetermined future liability regardless if interest rates change.
This terms refers to all assets of a company that have an intellectual nature to them. They are often referred to as "soft" assets such as trademarks, logos, patents, software, trade secrets, brands, industrial designs, music, colors, designs, etc. They usually have intangible value unlike hard assets such as land, buildings, and equipment.
This refers to very rapid, out-of-control inflation. There is no exact definition of what consitutes hyperinflation. In 1922 this occurred in Germany when the country printed banknotes so liberally that consumers had to take bags full of currency to make purchases. Inflation has been over 100% for many countries at various times in their history. Since inflation for stable economies is in the low single-digits, it is generally understood that inflation above 10% would constitute hyperinflation. ...
BARRA's performance analysis (PERFAN)
A method developed by BARRA, a consulting firm in Berkeley, California. It is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performances.
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of asymmetric information, asymmetric taxes, and transaction costs.
Cash flow from operations
A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus non-cash expenses that were deducted in calculating net income.
Cash flow per common share
Cash flow from operations minus preferred stock dividends, divided by the number of common shares outstanding.
The length of the time period (for example, a quarter in the case of quarterly compounding) that elapses before interest compounds.
The length of time for which the customer is granted credit.
Basel Committee on Banking Supervision
A committee that meets under the auspices of the Bank for International Settlements in Basel, Switzerland to set bank regulatory standards.
The time period stipulated in most loan contracts and insurance policies in which a late payment will not result in default or cancellation.
Foreign Investor in Real Property Tax Act of 1980
Under FIRPTA (Foreign Investor in Real Property Tax Act of 1980), and the Economic Recovery Act of 1981, unless an exemption is granted by the IRS, upon the sale of real property owned by offshore (foreign) persons, the agency, attorney or escrow officer handling the transaction is required to withhold capital gains taxes at the closing of the sale transaction. Unless withheld and submitted to the IRS, the party handling the sale transaction is personally liable for the taxes.
High Net Worth (HNW) Person
An individual with more than $1,000,000 in liquid assets to manage.
A perpetuity is a stream of payments or a type of annuity that starts payments on a fixed date and such payments continue forever, or perpetually. Often preferred stock which pays a dividend is considered as a form of perpetuity. However, one must assume that the firm does not go bankrupt or is otherwise impeded for making timely payments. The formula for evaluating a perpetuity is relatively straight forward. It is simply the expected income stream divided by a discount factor or market rat ...
Short-term promissory notes issued in bearer form by large corporations, with maturities ranging from 5 to 270 days. Since the notes are unsecured, the commercial papers market generally is dominated by large corporations with impeccable credit ratings.
Companies issue shares as a means of raising equity finance and determining ownership. Purchasers of shares pay money into the company's bank account in return for a Share Certificate signifying their ownership of the shares. The shareholders legally own the company and are therefore entitled to a share in its profits. Shares in public limited companies are traded on the Stock Market and as such the value of the shares will fluctuate depending on the demand.
Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign issuer. The certificates represent claims to foreign equities.
Certificates or book entries representing ownership in a corporation or similar entity.
A section of an annual report where one can find jargon-free discussions by management of successful and failed strategies which provides guidance for the probing of the rest of the report.
This is a company's total assets minus total liabilities. A company's net worth is the same thing. Also referred to as ownership interest in the UK.
Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.
Preferred shares give investors a fixed dividend from the company's earnings. And more importantly: preferred shareholders get paid before common shareholders.
Shares that are currently owned by investors.
Outstanding share capital
Issued share capital less the par value of shares that are held in the company's treasury.
Management/closely held shares
Percentage of shares held by persons closely related to a company, as defined by the Securities and exchange commission. Part of these percentages often is included in Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.
A stock with only the surface appearance of quality and worth, that is in fact worth very little.