Value Investing Blog

Investopedia

Search for glossary terms (regular expression allowed)
Begin with Contains Exact termSounds like

Glossaries

  • investopedia
TermDefinition
Asset

An asset is something a company owns which generates money. Examples of current assets are cash, inventory, and accounts receivable. Examples of fixed assets are equipment, buildings, and real-estate.

at-the-money

If the underlying stock price is equal to the strike price of the option contract. This means that exercising the option will not earn you money.

Balance sheet

A financial statement which provides an overview of a company's assets, liabilities, and shareholders equity

Benjamin Graham

A Columbia Business School professor and mentor of Warren Buffett. Graham is the so called “father of value investing”. He wrote the best selling books Security Analysis and The Intelligent Investor in which he explains the value investing framework in detail.

call option

A contract which gives the holder the right (but not the obligation) to buy a stock at a specified price (strike price) within a specified time period (before exercise date). A call option increases in value if the underlying stock increases in value.

Capital expenditures

A cash flow statement item which includes investments in property, plant and equipment, either for maintenance or growth purposes. Used to calculate free cash flow in the Discounted Cash Flow model.

Cash flow statement

A financial statement which depicts the actual cash inflows and outflows of the company.

Cash from operating activities

A cash flow statement item which indicates the amount of cash a company earns from its core, ongoing business activities.

covered call

An option strategy where you hold a long position in a stock while also writing (selling) call options to generate extra income from the option premium.

Discount rate

An imaginary interest rate, most often equal to the long-term historical return of the stock market, which is used to calculate how much a dollar amount in the future is worth in today's money. This is the minimum return you would have to earn to justify stock picking over investing in an index fund.

Dividend payout ratio

The percentage of net income which is paid out to shareholders in the form of dividends, instead of being reinvested into the company.

Dividend yield

 

The return you earn from dividends paid out by a company. This percentage is calculated as follows:
 
Dividend yield = Annual dividend per share / Current share price
Earnings per share

 

Earnings per share is the amount of net income a company has earned in the last 12 months, divided by the amount of shares outstanding.

Earnings per share = Net income / Shares outstanding
EPS

Earnings per share (EPS) is the amount of net income a company has earned in the last 12 months, divided by the amount of shares outstanding.

Earnings per share = Net income / Shares outstanding
exchange traded fund

A low-cost, flexible investment fund which trades on an exchange, much like a stock. Most ETFs track an index or commodity.