Finance Dictionary ( daily finance terms and concepts will be added and discussed)

Price-Buy Zone Ratio

A ratio that indicates whether the current price meets the target buy zone set in your analysis. If the Price-Buy Zone Ratio is above 1, the stock is more costly than your target price.
 
Price Dividend Will Support

A company with a large dividend yield will have substantial price support. A large dividend yield is anything larger than ½ the bank interest rate.
 
Price-To-Book Ratio

Also known as Market-to-Book Ratio. Compares a stock’s market value to its book value, calculated by dividing the current price by Common Stockholders’ Equity Per Share (book value). A lower Price-To-Book Ratio might imply a stock is undervalued.
 
Price-To-Cash-Flow Ratio

Price per share divided by Cash Flow Per Share. A measure of the market’s expectations regarding a firm’s future financial health. Provides an indication of relative value, similar to the Price-Earnings Ratio.
 
Price-To-Sales Ratio

Calculated by dividing a stock’s current price by its revenues per share. This equation is another technique for finding a stock’s valuation relative to its own past performance, other companies, or the market itself.
 
Primary Market

The first opportunity that investors have to buy a newly-issued security occurs in the Primary Market. After the first purchases, subsequent trading is said to occur in the Secondary Market.
 
Profit-Sharing Plan


An employee benefit plan established and maintained by an employer whereby the employees receive a share of the profits of the business. The money may be paid directly to the employee, deferred until retirement, or a combination of both approaches.
 
Program Trading

Computerized trading used primarily by institutional investors, typically for large volume trades, where orders from the trader’s computer are entered directly into the market’s computer system and executed automatically.
 
Projected PE Ratio

Also known as Leading PE Ratio. This ratio uses 4 consecutive quarters of EPS, at least one quarter of which is forecasted. The market drives stock prices up or down in anticipation of company results. Using forecasted EPS with the current price gives a PE which is more balanced with the current market value of the stock. See also Price-Earnings Ratio.
 
Prospectus

A formal written statement that discloses the terms of a public offering of a Security or a Mutual Fund. The prospectus is required to divulge particular essential information to investors about the proposed offering.
 
Proxy

A formal document signed by a shareholder to authorize another shareholder, or commonly the company’s management, to vote the holder’s shares at the annual meeting. The Proxy Statement discloses important information about issues to be discussed at an annual meeting, as well as information about closely-held shares.
 
Quick Ratio

Also known as the Acid-Test Ratio. A liquidity measure calculated by subtracting inventories from current assets, then dividing by current liabilities. The Quick Ratio is an indicator of a company’s financial strength. A ratio of 1 to 1 or higher is usually satisfactory.
 
12b-1 fees

A provision of the Investment Company Act of 1940 that allows a Mutual Fund to collect a fee for the promotion, sale, or other activity connected with the distribution of its shares. The fee must be reasonable (typically 1/2 to 1% of net assets managed), up to a maximum of 8.5% of the offering price per share.
 
Accounts Receivable

Money owed to a business for merchandise or services sold on an open account. It is found on the Balance Sheet under Current Assets. It is used in analyzing a company’s liquidity.
 
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