{"id":496,"date":"2023-03-28T16:04:17","date_gmt":"2023-03-28T16:04:17","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/?post_type=chapter&p=496"},"modified":"2023-04-02T23:40:37","modified_gmt":"2023-04-02T23:40:37","slug":"key-terms-3","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/chapter\/key-terms-3\/","title":{"raw":"Glossary of Key Terms","rendered":"Glossary of Key Terms"},"content":{"raw":"
\r\n \t
\r\n

Chapter 8 Glossary of Key Terms<\/h2>\r\n<\/dt>\r\n \t
amortization<\/dt>\r\n \t
the process of spreading business costs in accounting; similar to depreciation, but differs in that it generally refers to intangible assets such as patents or copyrights<\/dd>\r\n<\/dl>\r\n
\r\n \t
capital employed<\/dt>\r\n \t
also known as funds employed; the total amount of capital used for the acquisition of profits by a firm or on a project<\/dd>\r\n<\/dl>\r\n
\r\n \t
common stock<\/dt>\r\n \t
a security that represents partial ownership of a corporation<\/dd>\r\n<\/dl>\r\n
\r\n \t
comparable company analysis (comps)<\/dt>\r\n \t
a method for valuating a company using the metrics of other businesses of similar size in the same industry<\/dd>\r\n<\/dl>\r\n
\r\n \t
depreciation<\/dt>\r\n \t
the process of spreading business costs in accounting; similar to amortization, but differs in that it generally refers to fixed, tangible assets such as buildings, machinery, furniture, fixtures, and equipment<\/dd>\r\n<\/dl>\r\n
\r\n \t
discounted cash flow (DCF)<\/dt>\r\n \t
a method for estimating the value of an investment based on the present value of its expected future cash flows<\/dd>\r\n<\/dl>\r\n
\r\n \t
dividend<\/dt>\r\n \t
a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits or reserves<\/dd>\r\n<\/dl>\r\n
\r\n \t
dividend discount model (DDM)<\/dt>\r\n \t
a quantitative method for predicting the price of a company\u2019s stock based on the theory that its present-day price is worth the sum of all of its future dividend payments when discounted back to their present value<\/dd>\r\n<\/dl>\r\n
\r\n \t
dividend yield<\/dt>\r\n \t
a financial ratio (dividend\/price) that shows how much a company pays out in dividends each year relative to its stock price, expressed as a percentage<\/dd>\r\n<\/dl>\r\n
\r\n \t
earnings per share (EPS)<\/dt>\r\n \t
the ratio of a company\u2019s profits to the outstanding shares of its common stock; serves as an indicator of a company\u2019s profitability<\/dd>\r\n<\/dl>\r\n
\r\n \t
EBIT<\/dt>\r\n \t
short for earnings before interest and taxes; an indicator of a firm\u2019s profitability before the effects of interest or taxes; also referred to as operating earnings, operating profit, and profit before interest and tax<\/dd>\r\n<\/dl>\r\n
\r\n \t
efficient markets<\/dt>\r\n \t
markets in which costs are minimal and prices are current, fair, and reflective of all available relevant information<\/dd>\r\n<\/dl>\r\n
\r\n \t
enterprise value (EV)<\/dt>\r\n \t
a company\u2019s total value; often used as a more comprehensive alternative to equity market capitalization<\/dd>\r\n<\/dl>\r\n
\r\n \t
enterprise value (EV) multiples<\/dt>\r\n \t
also known as company value multiples; ratios used to determine the overall value of a company and, by extension, the value of its common stock<\/dd>\r\n<\/dl>\r\n
\r\n \t
equity multiples<\/dt>\r\n \t
metrics that calculate the expected or achieved total return on an initial investment<\/dd>\r\n<\/dl>\r\n
\r\n \t
Gordon growth model<\/dt>\r\n \t
a methodology used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate<\/dd>\r\n<\/dl>\r\n
\r\n \t
growth rate<\/dt>\r\n \t
the rate at which the dollar amount of dividends paid on a specific stock holding increases<\/dd>\r\n<\/dl>\r\n
\r\n \t
intangible assets<\/dt>\r\n \t
assets that are not physical in nature, such as goodwill, brand recognition, and intellectual property (i.e., patents, trademarks, and copyrights)<\/dd>\r\n<\/dl>\r\n
\r\n \t
intrinsic value<\/dt>\r\n \t
the value of a firm\u2019s stock based entirely on internal factors, such as products, management, and the strength of company brands in the marketplace<\/dd>\r\n<\/dl>\r\n
\r\n \t
market capitalization<\/dt>\r\n \t
the value of a company traded on the stock market, calculated by multiplying the total number of shares by the current share price<\/dd>\r\n<\/dl>\r\n
\r\n \t
NASDAQ (National Association of Securities Dealers Automated Quotations)<\/dt>\r\n \t
short for National Association of Securities Dealers Automated Quotations; an American stock exchange based in New York City, ranked second behind the New York Stock Exchange in terms of total market capitalization of shares traded<\/dd>\r\n<\/dl>\r\n
\r\n \t
net book value<\/dt>\r\n \t
also called net asset value (NAV); the total assets of a company minus its total liabilities<\/dd>\r\n<\/dl>\r\n
\r\n \t
NYSE (New York Stock Exchange)<\/dt>\r\n \t
the world\u2019s largest stock exchange by market capitalization of its listed companies, based in New York City; often referred to as the \u201cBig Board\u201d<\/dd>\r\n<\/dl>\r\n
\r\n \t
perpetuity<\/dt>\r\n \t
in terms of investments, an annuity with no end date<\/dd>\r\n<\/dl>\r\n
\r\n \t
precedent transaction analysis (precedents)<\/dt>\r\n \t
a method for valuating a company in which the price paid for similar companies in the past is considered an indicator of the company\u2019s current value<\/dd>\r\n<\/dl>\r\n
\r\n \t
preferred stock<\/dt>\r\n \t
stock that entitles the holder to a fixed dividend, the payment of which takes priority over payment of common stock dividends<\/dd>\r\n<\/dl>\r\n
\r\n \t
price-to-book (P\/B) ratio<\/dt>\r\n \t
also called the market-to-book (M\/B) ratio; a metric used to compare a company\u2019s market capitalization, or market value, to its book value<\/dd>\r\n<\/dl>\r\n
\r\n \t
price-to-cash-flow (P\/CF) ratio<\/dt>\r\n \t
a stock valuation indicator or multiple that measures the value of a stock\u2019s price relative to its operating cash flow per share<\/dd>\r\n<\/dl>\r\n
\r\n \t
price-to-earnings (P\/E) ratio<\/dt>\r\n \t
a ratio that indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company\u2019s earnings<\/dd>\r\n<\/dl>\r\n
\r\n \t
price-to-sales (P\/S) ratio<\/dt>\r\n \t
a ratio that indicates how much investors are willing to pay for a company\u2019s stock per dollar of that company\u2019s sales<\/dd>\r\n<\/dl>\r\n
\r\n \t
required return<\/dt>\r\n \t
the minimum return an investor expects to achieve by investing in a project<\/dd>\r\n<\/dl>\r\n
\r\n \t
secondary markets<\/dt>\r\n \t
markets where investors buy and sell securities they already own<\/dd>\r\n<\/dl>\r\n
\r\n \t
stock value<\/dt>\r\n \t
also called intrinsic value; the fundamental, objective value of a share of stock<\/dd>\r\n<\/dl>\r\n \r\n\r\nAttribution:<\/strong>\r\n\r\nThis chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.\r\n\r\nhttps:\/\/openstax.org\/books\/principles-finance\/pages\/1-key-terms<\/a>\r\n\r\nAccess for free at https:\/\/openstax.org\/books\/principles-finance\/pages\/11-key-terms<\/a>","rendered":"
\n
\n<\/dt>\n
amortization<\/dt>\n
the process of spreading business costs in accounting; similar to depreciation, but differs in that it generally refers to intangible assets such as patents or copyrights<\/dd>\n<\/dl>\n
\n
capital employed<\/dt>\n
also known as funds employed; the total amount of capital used for the acquisition of profits by a firm or on a project<\/dd>\n<\/dl>\n
\n
common stock<\/dt>\n
a security that represents partial ownership of a corporation<\/dd>\n<\/dl>\n
\n
comparable company analysis (comps)<\/dt>\n
a method for valuating a company using the metrics of other businesses of similar size in the same industry<\/dd>\n<\/dl>\n
\n
depreciation<\/dt>\n
the process of spreading business costs in accounting; similar to amortization, but differs in that it generally refers to fixed, tangible assets such as buildings, machinery, furniture, fixtures, and equipment<\/dd>\n<\/dl>\n
\n
discounted cash flow (DCF)<\/dt>\n
a method for estimating the value of an investment based on the present value of its expected future cash flows<\/dd>\n<\/dl>\n
\n
dividend<\/dt>\n
a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits or reserves<\/dd>\n<\/dl>\n
\n
dividend discount model (DDM)<\/dt>\n
a quantitative method for predicting the price of a company\u2019s stock based on the theory that its present-day price is worth the sum of all of its future dividend payments when discounted back to their present value<\/dd>\n<\/dl>\n
\n
dividend yield<\/dt>\n
a financial ratio (dividend\/price) that shows how much a company pays out in dividends each year relative to its stock price, expressed as a percentage<\/dd>\n<\/dl>\n
\n
earnings per share (EPS)<\/dt>\n
the ratio of a company\u2019s profits to the outstanding shares of its common stock; serves as an indicator of a company\u2019s profitability<\/dd>\n<\/dl>\n
\n
EBIT<\/dt>\n
short for earnings before interest and taxes; an indicator of a firm\u2019s profitability before the effects of interest or taxes; also referred to as operating earnings, operating profit, and profit before interest and tax<\/dd>\n<\/dl>\n
\n
efficient markets<\/dt>\n
markets in which costs are minimal and prices are current, fair, and reflective of all available relevant information<\/dd>\n<\/dl>\n
\n
enterprise value (EV)<\/dt>\n
a company\u2019s total value; often used as a more comprehensive alternative to equity market capitalization<\/dd>\n<\/dl>\n
\n
enterprise value (EV) multiples<\/dt>\n
also known as company value multiples; ratios used to determine the overall value of a company and, by extension, the value of its common stock<\/dd>\n<\/dl>\n
\n
equity multiples<\/dt>\n
metrics that calculate the expected or achieved total return on an initial investment<\/dd>\n<\/dl>\n
\n
Gordon growth model<\/dt>\n
a methodology used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate<\/dd>\n<\/dl>\n
\n
growth rate<\/dt>\n
the rate at which the dollar amount of dividends paid on a specific stock holding increases<\/dd>\n<\/dl>\n
\n
intangible assets<\/dt>\n
assets that are not physical in nature, such as goodwill, brand recognition, and intellectual property (i.e., patents, trademarks, and copyrights)<\/dd>\n<\/dl>\n
\n
intrinsic value<\/dt>\n
the value of a firm\u2019s stock based entirely on internal factors, such as products, management, and the strength of company brands in the marketplace<\/dd>\n<\/dl>\n
\n
market capitalization<\/dt>\n
the value of a company traded on the stock market, calculated by multiplying the total number of shares by the current share price<\/dd>\n<\/dl>\n
\n
NASDAQ (National Association of Securities Dealers Automated Quotations)<\/dt>\n
short for National Association of Securities Dealers Automated Quotations; an American stock exchange based in New York City, ranked second behind the New York Stock Exchange in terms of total market capitalization of shares traded<\/dd>\n<\/dl>\n
\n
net book value<\/dt>\n
also called net asset value (NAV); the total assets of a company minus its total liabilities<\/dd>\n<\/dl>\n
\n
NYSE (New York Stock Exchange)<\/dt>\n
the world\u2019s largest stock exchange by market capitalization of its listed companies, based in New York City; often referred to as the \u201cBig Board\u201d<\/dd>\n<\/dl>\n
\n
perpetuity<\/dt>\n
in terms of investments, an annuity with no end date<\/dd>\n<\/dl>\n
\n
precedent transaction analysis (precedents)<\/dt>\n
a method for valuating a company in which the price paid for similar companies in the past is considered an indicator of the company\u2019s current value<\/dd>\n<\/dl>\n
\n
preferred stock<\/dt>\n
stock that entitles the holder to a fixed dividend, the payment of which takes priority over payment of common stock dividends<\/dd>\n<\/dl>\n
\n
price-to-book (P\/B) ratio<\/dt>\n
also called the market-to-book (M\/B) ratio; a metric used to compare a company\u2019s market capitalization, or market value, to its book value<\/dd>\n<\/dl>\n
\n
price-to-cash-flow (P\/CF) ratio<\/dt>\n
a stock valuation indicator or multiple that measures the value of a stock\u2019s price relative to its operating cash flow per share<\/dd>\n<\/dl>\n
\n
price-to-earnings (P\/E) ratio<\/dt>\n
a ratio that indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company\u2019s earnings<\/dd>\n<\/dl>\n
\n
price-to-sales (P\/S) ratio<\/dt>\n
a ratio that indicates how much investors are willing to pay for a company\u2019s stock per dollar of that company\u2019s sales<\/dd>\n<\/dl>\n
\n
required return<\/dt>\n
the minimum return an investor expects to achieve by investing in a project<\/dd>\n<\/dl>\n
\n
secondary markets<\/dt>\n
markets where investors buy and sell securities they already own<\/dd>\n<\/dl>\n
\n
stock value<\/dt>\n
also called intrinsic value; the fundamental, objective value of a share of stock<\/dd>\n<\/dl>\n

 <\/p>\n

Attribution:<\/strong><\/p>\n

This chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.<\/p>\n

https:\/\/openstax.org\/books\/principles-finance\/pages\/1-key-terms<\/a><\/p>\n

Access for free at https:\/\/openstax.org\/books\/principles-finance\/pages\/11-key-terms<\/a><\/p>\n","protected":false},"author":101,"menu_order":1,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-496","chapter","type-chapter","status-publish","hentry"],"part":34,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/496","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/users\/101"}],"version-history":[{"count":7,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/496\/revisions"}],"predecessor-version":[{"id":1286,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/496\/revisions\/1286"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/parts\/34"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/496\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/media?parent=496"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapter-type?post=496"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/contributor?post=496"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/license?post=496"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}