Earnings Before
Interest and Tax (EBIT)
A measure of a company's total annual earnings before deduction of provisions.
EBIT is one of the key measures used by investment analysts to assess corporate
performance.
Earnings Per Share
(EPS) A company’s
total earnings divided by the number of shares outstanding; a measure of a
company's performance.
Ex-Dividend Refers to the day when the dividend
is subtracted from the price of a stock (the ex-dividend date). Investors who
own the stock are paid their dividend on that date. Investors who are short the
stock must pay the dividend on that date.
Candlestick Charts A charting method, developed in Japan, that
visually shows the relationship between the opening and the closing share
price. The price range between the open and close is plotted as a rectangle. If
the close is above the open, the body of the rectangle is white. If the close
of the day is below the open, the body of the rectangle is black. The lines
from the high and low, to the rectangle, are called ‘shadows’ or ‘tails’.
Cash Flow A measure of a company’s financial
health. Calculated as net income plus amounts charged off for depreciation,
amortisation, and extraordinary charges; or cash receipts minus cash payments.
Consumer Price Index
(CPI) An index
which measures the prices of a selected group of goods and services which
typify those bought by ordinary Australian households. It is used as a measure
of inflation and allows comparisons of the relative cost of living over time.
Contingent Liability A liability or obligation which is
difficult to quantify or may arise in the event of a certain occurrence, such
as the damages which might have to be paid as the result of a successful legal
action.
Current Account The part of Australia's Balance of
Payments relating to imports and exports of goods and services and the net
effect of income received and payments made on Australia's foreign debt and
investments. If a negative figure arises from the sum of all these activities,
it is a current account deficit
Initial Public
Offering (IPO) The
first sale of stock of a company to the public.
Liabilities Financial obligations, such as
company dividends and pension payments, or debts.
Limit Order An order to buy or sell at a fixed
price. A person can also place a limit order ‘with discretion’. This enables
the broker to buy or sell within a small range of prices.
Liquid Assets Assets held as cash or which are easily
convertible to cash, such as bank bills.
Merger The combining of two or more
entities in a corporate restructuring, through a purchase acquisition or a
pooling of interests. A merger is usually negotiated by the management of the
two companies concerned. It differs from a consolidation in that a new entity
is not created; and from a takeover in that negotiation occurs.
Overbought Market condition where prices have
risen too steeply and too quickly and are in danger of reversing.
Oversold Market condition where prices have
declined too steeply and too quickly and are in danger of reversing.
Oversubscribed Term used to describe a situation
in which the buyers for a new share issue want more shares than the amount to
be allocated.
Portfolio Investment holdings of an
individual investor or organization usually composed of a mix of different
asset classes of securities, such as shares, fixed interest and property. A
share portfolio would include a mix of different sectors and stocks.
Price/Earnings Ratio
(P/E Ratio) The
market price of a company’s shares divided by its earnings per share to
determine its attractiveness and how expensive in relation to other companies.
Primary Market The market in which new securities
are sold when first issued. The opposite of Secondary Market.
Private Sector The part of a nation’s economy owned/operated
by corporations and individuals and not controlled by the government. The
opposite of Public Sector.
Public Sector The part of the economy concerned
with providing basic government services such as health, education, transport
and utilities. The opposite of Private Sector.
Recession A significant decline in the
general economy of a nation. Sometimes measured by a decline over two
consecutive quarters in a nation's GDP. Not of the same severity or duration as
a depression.
Reserves Funds set aside for emergencies or other
future needs. Companies often retain a portion of profits rather than
distribute 100% to shareholders. Also, superannuation funds keep reserves to
cover declines in asset values or investment returns.
Resistance A price level where a security's
price stops rising and moves sideways or down. It indicates an abundance of
supply. Because of this, the stock may have difficulty rising above this level.
There are short term and longer term resistance levels. Opposite of Support.
Return On Assets The net earnings of a company
divided by its assets.
Return On Equity The net earnings of a company
divided by its equity.
Rights Issue An offering of common stock made to
a holder of an existing security which entitle them to purchase new issues by
the same company at a discount to the existing market.
Surplus The extent to which revenue or
income exceeds expenditure. The opposite of Deficit.
Split An increase in the number of
outstanding shares in a company, with the market price dropping proportionately.
An example would be a four for one split of a $40 share into four times as many
shares each valued at $10. The usual purpose of a split is to make a stock with
a high per-share price more accessible to smaller investors.
S&P 500 A market-weighted index of 500
leading U. S. companies, maintained by Standard & Poors (S&P).
Considered to be a benchmark of the overall stock market as it is composed of
industrial, utility, transportation, and financial companies.
Scrip A certificate representing
entitlement to a parcel of shares. Such certificates are no longer issued since
the introduction of the Clearing House Subregister System.
Sector A group of securities that share
similar characteristics, such as building materials, transport and engineering
companies.
Short A trader who is short the market is
of the opinion that the price of a security or securities will go down, and has
more sold than bought positions. See also Short Selling.
Selling Short The strategy of selling a security
you do not already own in the belief that the price will fall and the security
can be bought back at a lower price.
Takeover Acquiring control of a company by
purchasing shares so as to gain a controlling interest. A takeover could be
hostile or friendly.
Undervalued A security or currency whose price
is below its perceived value.
Underweight Refers to a portfolio that has less
exposure to a particular sector, compared with a neutral or benchmark position.
Volume The total number of securities
traded during a given period.
Venture Capital Funds used for startup businesses with
exceptional growth potential, which are subject to more than a normal degree of
risk. Management and technical expertise are sometimes provided.
Warrant A security similar to an option but
usually with a longer term till expiry. A stock warrant allows a trader to
purchase shares at a fixed price for a certain period of time.