BALANCE SHEET – a financial statement which shows what assets and liabilities company has at the end of an accounting period (e.g., year or quarter). Assets should be equal to the sum of company’s liabilities and shareholder equity.
BASIS POINT – 0,01% or 0,0001.
BEAR MARKET – market where prices fall by more than 20% over certain period of time.
BOND – Security, issued for raising capital by company or government agencies through borrowing. Owner of bond is repaid the principal and fixed interest on it at specified dates.
BULL MARKET – market where prices are rising for certain period of time.
BUSINESS CYCLE – a dynamic of economic activity, up and down movements of economy over period of several years.
CASH DIVIDEND – dividend paid to stock owner in cash.
CASH FLOW PER SHARE – earnings per share plus depreciation per share.
CCI – Consumer Confidence Index. It is derived from households‘ survey about their expected major purchases and savings, their view of economy and financial markets. It shows how consumers feel about their conditions and economy overall. Positive value means that consumers are optimistic, negative one that they are pessimistic. It is a leading indicator since allows to judge consumer spending in the near future. The higher is CCI the better.
COUPON – the interest paid to bond owner. It is expressed as a percentage of face value of bond.
CPI – Consumer Price Index. It is a measure of inflation. It shows changes in the prices of a representative basket of goods and services used by consumers daily.
DEBT TO EQUITY RATIO (D/E) – company’s total liabilities divided by shareholder equity, expressed as a percentage. It shows how much debt company is using relative to shareholders equity.
DECLARATION DATE – on this date company announces its next dividend.
DEFENSIVE STOCK – stock which is less sensitive to economic recessions.
DEPOSIT – the money an investor transfers in bank account and can be used from there for investor’s needs.
DIVIDEND – a part of company’s earnings distributed to shareholders.
DIVIDEND YIELD – investor’s annual income from stock expressed as a percentage of market price of stock.
DIVIDEND YIELD ON COST – investor’s annual income from stock expressed as a percentage of stock’s price which investor paid on purchase of stock.
EARNINGS PER SHARE – company’s net profit divided by the number of outstanding shares.
ETF – a pool of capital used to purchase securities, similar to fund. ETF is traded like stock. It usually tracks some index and has lower fees than funds.
EX-DIVIDEND DATE – the first day when a stock is traded after dividend, i.e., owner of stock will not receive declared dividend. From the start of that day the price of stock is automatically reduced by the amount of dividend.
FACE VALUE – the amount paid to bondholder on bond maturity.
FLASH economic indicator – an early estimate of economic indicator(for example, Flash Services PMI). It provides advance indication of a final value of indicator.
FUND – a pool of capital of many investors used to purchase securities. Investor retains ownership of his/her securities in proportion to capital invested.
GDP – Gross Domestic Product. It measures country‘s economic activity and is calculated as the sum of values of all goods and services produced in a country during the measured period. It is calculated annually and quarterly. GDP growth rate is the percent increase in GDP figure year on year or quarter on quarter. Usually real GDP figures are used to remove the effect of inflation.
IFO BUSINESS CLIMATE INDEX – an indicator of economic activity. Ifo Institute for Economic Research in Germany runs monthly surveys of companies in different sectors of economy about current business situation and future business outlook. An indicator is derived based on the results of surveys. It is a leading indicator of the state of economy.
NET PROFIT – a company’s revenue over specified period less all the costs of doing business. Terms net profit, net income and earnings are used interchangeably.
PAY DATE – the date of dividend payment.
PAYOUT RATIO (POR) – proportion of earnings paid out as dividends: dividend per share divided by earnings per share and expressed as percentage.
PMI – Purchasing Managers Index. It represents the results of purchasing managers‘ survey. Composite PMI is calculated based on both manufactoring and services sector surveys. An index reading above 50 indicates economic expansion, below 50 – a contraction and 50 – no change. It is used as an early indicator of GDP growth or decline.
Construction PMI measures the performance of Construction industry.
Manufactoring PMI measures the performance of the Manufactoring industry. It is based on five main indicators: New Orders, Investory Levels, Output, Supplier Delivery Times and Employment.
Services PMI measures the performance of Services industry. It is based on survey of transport, communication, financial and other services companies.
PPI – Producer Price Index. It shows changes in wholesale prices (prices from producer perspective) at various stages of the production process: raw materials prices, prices of goods used in manufactoring process and prices of finished goods. It is early indicator of inflation in economy.
PROFIT MARGIN – net profits of company divided by sales. It shows what part of sales is attributable to earnings.
PROFIT AND LOSS ACCOUNT – a financial statement which shows how much profit or loss company generated over accounting period (e.g., year or quarter).
QE – Quantitative Easing. It is a monetary policy conducted by Central Bank with the aim to increase the money supply and lower interest rates through the purchase of government and corporate bonds.
REAL DIVIDEND YIELD – a dividend yield less a rate of inflation.
REAL RATE OF RETURN – a rate of return less a rate of inflation.
RECORD DATE – the date an investor should be on the company’s record as shareholder to receive the dividend.
REIT – Real Estate Investment Trust – a pool of capital of many investors used to purchase real estate. It is traded on stock exchange like a stock and pays dividends.
RETAIL SALES – the value of end products sold to retail consumers. It is an indicator of the level of consumer spending. Lower Retail Sales can indicate slower economic growth.
RETURN ON EQUITY (ROE) – net profit of company divided by shareholder equity. It shows what return is achieved on shareholders’ money.
STOCK – security that proves ownership in company. It provides the owner rights to share of company’s profits.
STOCK DIVIDEND – dividend payment to stock owner in the form of additional shares in proportion to the amount of shares owned.
TRADE BALANCE – the balance of country‘s exports of goods and services versus imports from other countries.
TREASURY BILL – a government debt with less than one year term.
UNEMPLOYMENT RATE – unemployed workers as percentage of the total labor force. Unemployment is not good for an economy as it reduces the purchasing power of population.
VOLATILITY – the measure of the level of fluctuations in the price of stock or other security.
ZEW ECONOMIC INDICATOR – a monthly survey of economists that shows the balance between optimistic and pessimistic views on economy. Positive indicator‘s value indicates optimism, while negative one – pessimism. Indicator covers Germany and other countries.