Total Shareholder Return (TSR)
1. The total return of a stock to an investor (capital gain plus dividends).
2. The internal rate of return of all cash flows to an investor during the holding period of an investment.
Capital Gain
1. An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than
Internal Rate of Return (IRR)
1. The internal rate of return on an investment or project is the "annualized effective compounded return rate" or "rate of return" that makes the net present value (NPV as NET*1/(1+IRR)^year) of all cash flows (both positive and negative) from a particul
Discount Rate
The rate of interest at which member banks can borrow money from their regional Federal Reserve Bank.
Compound Annual Growth Rate (CAGR)
Compound average growth rate; the constant growth rate required to grow a starting value to a specific ending value over a specific period, assuming periodic compounding.
Dividend
Part of the earnings of a corporation that is distributed to its shareholders
Return on Net Assets (RONA)
Profitability Ratio: Shows: how well a company converts assets to sales = Net Income / (Fixed Assets + Net Working Capital)
Volatility
A statistical measure of the dispersion of returns for a given security or market index
Beta
1. A measure of a stock's volatility compared to changes in the overall stock market., A statistical measure of a security's or portfolio's volatility (price fluctuations) relative to the market as a whole. (The beta of the overall market is defined as 1,
Present Value (PV)
The current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows. Determining
Net Present Value (NPV)
The present value of the stream of net cash flows resulting from a project, discounted at the firm's cost of capital, minus the project's net investment. It is used to evaluate, rank, and select from among various investment projects; the contribution of
Long Term Incentive
Include stock options, restricted stock and stock purchase plans, MIP and PUP plans
Short Term Incentive
Incentives usually paid out as bonuses pegged to certain near term performance targets.
Market Capitalization
The total value of a company's stock. Multiply the total number of shares outstanding by the share price. THIS SHOWS YOU THE MARKET VALUE OF THE ENTIRE COMPANY!
Equity
The ownership interest of shareholders in a corporation, also code for "stock ownership".
Bond Holders
Paid first if a corp. fails, usually over stock holders.
Corporate Bonds
Long-term debt issued by private corporations typically paying semi-annual coupons and returning the face value of the bond at maturity
Hurdle Rate
Minimum acceptable rate of return (set by management) for an investment. AKA Required Rate of Return
Future Value
The value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. There are two ways to calculate FV:
1) For an asset with simple annual interest: = Original Investment x (1+(interest rate*number of year
Yield
The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.
This seemingly simple term,
Par Value
The value of a security that is set by the company issuing it
Book Value
Cost - Accumulated Depreciation, the value at which an asset is carried on a balance sheet
Market to Book
Market value of equity/book value of equity, market value of firm/book value of firm(not below 1)
Yield to Maturity
The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and t
Mark to Market
Adjusting the value of a security to reflect current market values. MARGIN ACCOUNTS are marked to the market to ensure compliance with maintenance requirements.
Basis Point
A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.
Weighted Average Cost of Capital (WACC)
The after-tax weighted-average required return on all types of securities issued by a firm, in which the weights equal the percentage of each type of financing in a firm's overall financial structure.
Cost of Equity
Cost of equity = Risk free rate of return + Beta x (market rate of return- risk free rate of return) Where Beta= sensitivity to movements in the relevant market:
Cost of Debt
The cost of debt is computed by taking the rate on a risk free bond whose duration matches the term structure of the corporate debt, then adding a default premium. This default premium will rise as the amount of debt increases (since, all other things bei
Cost of Capital
The rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders.
Capital Asset Pricing Model (CAPM)
A model that relates the required rate of return for a security to its risk as measured by beta.