Definitions of Investment and Stock Market Terms

Please refer to the basic stock market terms here.

The definitions here expand and augment the list referenced above. These definitions are of interest to intermediate and advanced readers, specially for practicing investors in the stock market. We go into sufficient detail necessary to make the concept clear, and give examples where necessary.

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B

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D

E

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I

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M

N

O

P

Q

R

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T

U

V

W

X, Y

Z

P/E Ratio Definition

What is P/E Ratio? P/E Ratio is one of the most common valuation metric used to identify stocks attractively priced for investment. As the name implies, the Price/Earnings Ratio is simply the price of the stock divided by the earnings per share as reported by the company. Most commonly, the last 12 months of eps… [Read More]

Interest Coverage

Interest coverage ratio measures a company’s ability to pay the interest on its outstanding debt. A high ratio means that the company will have no trouble paying the interest expense, while a low ratio indicates a potential default on the loan payments. Lenders and creditors use this ratio to determine if they would be willing… [Read More]

Financial Ratios

Financial ratios allow an analyst to quickly analyze a business and its operations and understand the financial situation of a company. These ratios answer many different kinds of questions that can be asked about a business performance. Normally, many of these ratios need to be understood in the context of a benchmark, such as, past… [Read More]

What is Book Value Per Share

What is Book Value per Share Book value per share is simply (Common Stockholder’s Equity / Number of Shares of Common Stock) If there are no preferred shares outstanding, Total Stockholder’s Equity can be used in place of Common Stockholder’s Equity. The Balance Sheet is expressed as the following: Assets = Liabilities + Equity Therefore,… [Read More]

January Effect Definition

The January Effect is named after an observation made in 1942 by banker Sydney Wachtel. He noted that small stocks have tended to outperform the market in the month of January since 1925. The hypothesis rests on the belief that in December stocks tend to decline as investors sell off their losing positions to harvest… [Read More]