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Glossaries

Term Main definition
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.

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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.

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Cash flow statement

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

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Cash from operating activities

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

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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.

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Current ratio

A liquidity ratio which tells us whether a company is able to meet it short-term financial obligations.

The current ratio formula is:

current assets / current liabilities

A current ratio of 2 or higher is considered good.

Author - Nick Kraakman
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