Glossary, aka the De-Jargonizer

Analysts

People who write reports on publicly traded companies. (check buy and sell-side)

Annual Report (10k)

Typically 100 pages that details a lot about a company including a summary of the business, risk factors, and financial data.

 

Assets

Something owned (i.e. a car, a house, but not a loan)

Asset Class 

The category an asset falls under. Stocks, gold, real estate, commodities are all asset classes. 

 

Bear Market

Any time the market is down more than 20% from the latest high

 

Board of Directors

A group that has control over the management of a company

 

Bull Market

Any time the market has not dropped lower than that magical 20% threshold of the bear market. Bull = up, bear = down.

 

Buybacks

When a company buys back its own stock either because it is cheap or it doesn’t know what else to do with the money. This is the opposite of diluting your stock ownership, so it is good.

Buy-Side Analysts

The analysts who aid in the decision making process for companies who invest in stocks. These can be mutual funds, investment funds, of asset management firms.

 

Call Options

Make extra money when a stock goes up, you can lock in a buy price. For instance, you buy a call option at $100 per share and it goes to $150. You can buy it at $100 and immediately sell at $150.  

 

Capital Expenditures

Investments a company makes into equipment or for the expansion of its business

 

Cash Flow

Usually called operating cash flow which is the net income adjusted for non-cash expenses

 

CEO (Chief Executive Officer)

The head honcho

Commodities

Goods like soybeans, coffee and corn that people can buy and sell in the markets.

 

Cost of goods sold (COGS)

How much money it takes to produce the good you are selling.

 

Current Assets

All assets that will turn into cash in less than one year

 

Current Liabilities

All debts that must be paid in less than one year

 

Current Ratio

Current assets divided by current liabilities

 

Debt

Money owed, the opposite of an asset

 

Debt to Equity Ratio

Debt divided by shareholder’s equity

 

Dividends

Cash that corporations can pay to shareholders

 

Earnings

Also known as net income: Revenue – cogs – operating expenses – interest - taxes

Earnings Call

The call where analysts ask questions to a company's management team. 

 

EBIT

Earnings before interest and taxes. Another name for it is operating income.

 

EBITDA

Earnings before interest, taxes, depreciation, and amortization (

 

Enterprise Value

Market cap + debt - cash

 

Equity

The amount of assets not funded by debt

 

Federal Reserve

The government body that decides where interest rates will be based on economic data

 

Free Cash Flow

Operating cash flow minus capital expenditures

 

GAAP

Generally accepted accounting principles, these are how publicly traded companies have to report earnings. Basically a general account standard. 

 

Gross Margin

(Revenue - COGS)/ Revenue

Gross Profit

Revenue - COGS

 

Index Funds

Baskets of stocks that serve as a general indicator for the market. Example, the S&P 500 holds 500 stocks that give investors broad diversification.

 

Initial Public Offering

Also known as IPO, the event where a private company becomes publicly traded.

Inflation

When your money becomes less valuable because the economy grows and therefore wages grow and so prices must be raised in order to pay employees. 

 

Interest Rate

The rate that is passed through to consumers that dictate how much it costs to borrow money.

 

Inventory

The amount of goods that you have stored that have not be sold yet

Investment Banking

Deals with debt and equity offerings for companies. For example, if you wanted to buy another company, you'd need to hire some of these guys (or gals that is.)

 

Market Cap

The market value of a company (shares outstanding * price of stock)

Market Share 

Sales of a company divided by the total addressable market. 

 

Net Income Margin

Net income divided by revenue

 

Operating Expenses

Items like sales & marketing, research & development, and general & administrative on the income statement.

Options

A guarantee that you can buy or sell a stock at a certain price (check put and call option for more.)

Portfolio 

The collection of stocks that you own. 

 

Price to Earnings Ratio

Price of stock divided by earnings per share

 

Price to Free Cash Flow

Price of stock divided by free cash flow

Private Equity

A company that buys and sells other companies in order to make a profit.

Prospectus

The document a company must file to become a public company. It is essentially a more detailed version of an annual report. 

Put Option

You can lock in a price to sell a stock at and make money from the price going down. For example, buy a put option at $40 a share and it goes to $30. You can buy it at $30 and immediately sell it at $40.   

Quick Ratio

(Current assets - inventories)/current liabilities

R&D (Research and Development)

Operating expenses that pertain to the creation of new products and services in a business

 

Return on Equity

Net income divided by stockholder’s equity

 

Return on Investment

Sometimes considered the same as ROA (return on assets) as it is net income divided by net assets.

 

Revenue

Also known as sales, (quantity of good/service * price of good/service)

 

S&M (Sales and Marketing)

Operating expenses associated with getting the word out about a good or service.

Sell-Side Analysts

The analysts that cover stocks for banks and other institutions to sell research to the buy-side. 

 

SG&A (Sales, General, and Administrative)

Operating expenses associated with the general operations of a business like legal costs, building rents, wages, insurance, and office supplies

Shorting

Making money when a stock goes down. 

 

Stock

Represents ownership in a corporation.

 

Stock Based Compensation

The expense a company has to record for promising employees stock for payment

Strike Price

The price you lock in when buying an option. 

Total Addressable Market

The sum of the sales for a particular industry or sub-industry. 

Valuation

How cheap or expensive an asset class is. 

Venture Capital

A company that makes investments in smaller companies in order to make a lot of money, typically dealing with fast-growing businesses in industries like technology. 

Volatility 

When stocks go up and down a lot. 

Working Capital 

Current assets minus current liabilities

 

Yield

The return based on a price. For instance a dividend yield of 2% at a stock price of $100 would change if the stock dropped to $50. Then the yield would be 4%.