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

Adjusted Basis

The value attributed to an asset or security that reflects any deductions taken on, or capital improvements to the asset or security. Adjusted basis is used to compute the gain or loss on the sale or other disposition of the asset or security.
 
Adjusted Gross Income

Abbreviated AGI. Sum of Earned Income, net Passive Income, portfolio income, and capital gains. The IRS uses AGI to determine most limitations on credits or deductions in taxes.
 
Advance/Decline Line

A technical analysis tool representing the total of differences between advances and declines of security prices. The advance/decline line is considered the best indicator of market movement as a whole.
 
Alternative Minimum Tax

Abbreviated AMT. An alternative tax computation that adds certain tax preference items back into Adjusted Gross Income. If the AMT is higher than the regular tax liability for the year, then the regular tax and the amount by which the AMT exceeds the regular tax are paid.
 
Analyst

Also known as a Financial Analyst or Security Analyst. Analysts have expertise in evaluating investments, and typically are employed by brokerage firms, investment advisors, or mutual funds. They make buy, sell, and hold recommendations on securities, and many specialize in industries or sectors.
 
Analysists’ Consensus EPS

Abbreviated ACE. An estimate of EPS derived by tabulating the projections of Wall Street analysts who follow a particular company.
 
Asset

(1) Anything that an individual or a corporation owns that has economic value to its owner. Examples of an asset are cash, accounts receivable, inventory, real estate, and securities. (2) A Balance Sheet item expressing what a corporation owns.
 
Asset Allocation

The division of an investment portfolio into major asset categories, such as bonds, common stocks, or cash, usually to balance risk and reward appropriate for an investor’s age.
 
Asset Allocation Fund

A Mutual Fund that splits its investment assets among stocks, bonds, and other vehicles in an attempt to provide a consistent return for the investor.
 
Assets-to-Equity

The ratio of assets to equity in the company; a measure of leverage, which has a bearing on the Profitability of the firm.
 
At-The-Opening Order

An order that is to be executed at the opening of the market or of trading in that security, or else it is to be canceled. The order does not have to be executed at the opening price.
 
Auction Market

A market in which buyers enter competitive bids, and sellers enter competitive offers simultaneously. The NYSE is an auction market.
 
Authorized Stock

The number of shares of stock that a corporation is permitted to issue. This number of shares is stipulated in the corporation’s state-approved charter, and may be changed only by a vote of the corporation’s stock-holders.
 
Average Price

In bond trading, a step in determining a bond’s Yield to Maturity. A bond’s average price is calculated by adding its face value to the price paid for it, and dividing the result by two.
 
Average Dividend Yield

Combined with price appreciation, the average dividend yield (if any) can show a potential total return from a security investment. The formula for the average dividend yield is:
(EPS *Average Payout) / current price
where EPS = Estimated Future High EPS / (1 + EPS Growth) 2.5
Companies that pay a dividend will generally increase the dividend as EPS grow. Share price growth will usually follow the dividend increases, and thus keep dividend yield at a constant percentage.
 
Average Low Price

The average of low prices for the last five years. This represents a possible low price for a cyclical company (e.g. General Motors) whose stock price tends to fluctuate in cycles over approximately a five year period.
 
Average Low Price

The average of low prices for the last five years. This represents a possible low price for a cyclical company (e.g. General Motors) whose stock price tends to fluctuate in cycles over approximately a five year period.
 
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