Financial Glossary
Clear definitions, formulas, and examples for every stock and investment term. Click any term to learn more.
Valuation Metrics
Enterprise Value
Total company value
Price-to-Sales
Revenue-based valuation
WACC
Weighted Average Cost of Capital
Valuation Methods
How to value a company
PE Ratio
Price-to-Earnings ratio
PB Ratio
Price-to-Book ratio
EPS
Earnings Per Share
Market Cap
Total market value
EV/EBITDA
Enterprise Value to EBITDA
PEG Ratio
PE adjusted for growth
Diluted EPS
EPS including dilutive securities
Dividend Terms
Dividend Yield
Annual dividend as % of price
Payout Ratio
% of earnings paid as dividends
Dividend Stripping
Buying for the dividend payout
Dividend Aristocrats
25+ years of dividend growth
Dividend Reinvestment (DRIP)
Reinvesting dividends automatically
Returns & Performance
CAGR
Compound Annual Growth Rate
ROI
Return on Investment
ROE
Return on Equity
ROA
Return on Assets
Free Cash Flow
Cash after capital expenditures
CAPM
Capital Asset Pricing Model
Sharpe Ratio
Risk-adjusted return measure
Compound Interest
Interest on interest
Technical Analysis
Moving Average
Smoothed price trend indicator
RSI
Relative Strength Index
Support & Resistance
Key price levels
Volume
Shares traded per period
Beta (β)
Stock volatility vs market
52-Week High/Low
Annual price range
Stop Loss
Automatic sell order
Order Book
Buy and sell orders queue
Market Concepts
Bull vs Bear Market
Rising vs falling markets
Blue Chip Stocks
Large, established companies
ETF
Exchange-Traded Fund
Index Fund
Passive market tracking
DCA
Dollar Cost Averaging strategy
Inflation
Rising prices over time
IPO
Initial Public Offering
Stock Split
Dividing existing shares
Liquidity
How easily you can buy/sell
Earnings Report
Quarterly financial results
Recession
Economic downturn
Sector Rotation
Rotating investments by cycle
Yield Curve
Bond yield vs maturity
Asset Allocation
Diversifying across asset classes
Capital Gains Tax
Tax on investment profits
Trading & Risk
Market vs Limit Order
Order types explained
Margin Trading
Borrowing to invest
Short Selling
Betting on price declines
Debt-to-Equity
Financial leverage measure
Options Trading
Trading contracts, not shares
Call Option
Right to buy at a set price
Put Option
Right to sell at a set price
The Greeks
Delta, Gamma, Theta, Vega
Implied Volatility
Market's expectation of future volatility
Black-Scholes Model
Options pricing formula
Funds & Bonds
Hedge Fund
Active investment partnerships
Mutual Fund
Pooled investment vehicles
Bond Yield
Return from bond investments
Treasury Bond
US government debt securities
Credit Rating
Issuer creditworthiness grade
Preferred Stock
Hybrid equity-debt security
Financial Statements
Revenue
Total income from sales
Gross Margin
Revenue minus cost of goods
Operating Margin
Profit from core operations
Net Profit Margin
Bottom-line profitability
EBITDA
Earnings before interest, tax, depreciation
Depreciation
Allocating asset cost over time
Amortization
Spreading intangible asset cost
Cash Flow
Money in and out of a business
Working Capital
Short-term financial health
Retained Earnings
Profits kept in the company
Shareholder Equity
Owners' residual claim
Book Value
Net asset value per share
Investing Strategies
Value Investing
Buying undervalued stocks
Growth Investing
Investing in fast-growing companies
Dividend Growth Investing
Growing income stream
DRIP
Dividend Reinvestment Plan
Passive Investing
Buy and hold strategy
DCA vs Lump Sum
Which strategy works better?
Diversification
Reducing risk through variety
Rebalancing
Resetting your allocation
Intrinsic Value
True underlying worth
Advanced & Risk Metrics
Efficient Market Hypothesis
Can you beat the market?
Equity Risk Premium
Extra return for taking risk
Standard Deviation
Measuring return volatility
Correlation
How assets move together
Drawdown
Peak-to-trough decline
Alpha
Excess return above benchmark
Capital Gain
Profit from selling assets
Dividend Tax
Tax on dividend income
Stock Buyback
Company repurchasing shares
Price-to-Book
Market vs book value