Acronyms Flashcards
CAPM
Capital Assets Pricing Model: model to find appropriate required rate of return of an asset to make diversification decisions in a portfolio
D/E
Debt-to-Equity Ratio: proportion of equity and debt a company is using to finance its assets; D/E ratio = total liabilities / total shareholders’ equity
EBIT
Earnings Before Interest and Taxes: indicator of company’s profitability; EBIT = Revenue-cost of goods sold- operating expenses
EBITDA
Earnings Before Interest Taxes Depreciation and Amortization: metric to evaluate a company’s operating perf; Net Profit+ Interest + Taxes + D + A
EPS
Earnings Per Share: company’s profit / outstanding shares of common stock
ESG
Environmental and Social Governance: criteria for a company’s operations that socially conscious investors look for
ETF
Exchange-Traded Fund: collection of securities that tracks an underlying index; ex: SPDR S&P500
FCFE
Free cash flow to equity: measures how much cash is available to equity shareholders after all expenses, reinvestment and debt are paid; Cash from operations - Capex +Net Debt Issued
FCFF
Free cash flow to the firm: Amount of cash flow from operations available for distribution after depreciation expenses, taxes, working capital and investments are paid; Net Income + Non-Cash Charges + (Income x (2-Tax Rate)) - Long Term Investments - Investments in Working Capital
FIFO
First in, first out: oldest inventory items are sold first
GDP
Gross Domestic Product: monetary value of all the finished goods and services produced in a country within a specific time; broad measure of a country’s overall economic activity;
GNP
Gross National Product: estimate of total value of all final products and services turned out in a specific period of time by the means of production owned by country residents
IFRS
International Financial Reporting Standards: global language for businesses so accounts are understandable and comparable internationally
IPO
Initial Public Offering: offering shares of a private company to the public in new stock issuance
IIR
Internal Rate of Return: discount rate that makes the NPV of all cash flows zero; estimates profitability of potential investments
Libor
London Interbank Offer Rate: average interest rate at which banks borrow funds from other banks
LIFO
Last in, First Out: the newest inventory is sold first
NAV
Net Asset Value: (Asset Liabilities) / Total Number of Outstanding Shares; represents the per share/ unit price of the fund on a specific date
NPV
Net Present Value: Today’s Value of Expected Cash Inflows - Today’s Value of Invested Cash; difference between present value of cash inflows and the present value of cash outflows in a specific time period
P/B
Price-to-book Ratio: Market Price Per Share / Book Value Per Share; compares a firm’s market to book value by dividing price per share by book value of assets
P/CF
Price-to-Cash Flow Ratio:Share Price / Operating Cash Flow per Share; stock valuation indicator; measures stock value to its operating cash flows per share
P/E
Price to Earnings Ratio: Market Value per Share / EPS; ratio for valuing a company that measures its current share price relative to its EPS
PP and E
Property, Plant and Equipment: Net PPE = Gross PPE + Capital Expenditures - Accumulated Depreciation; long term assets vital to business operations and not easily converted to cash
REIT
Real Estate Investment Trust: allows individual investors to buy shares in commercial real estate portfolios
ROA
Return on Assets: Net Income / Total Assets; how efficiently a company is using its assets to generate returns
ROE
Return on Equity: Net Income / Shareholders’ Equity; measure of efficiency in using assets to create profits
US GAAP
U.S. Generally Accepted Accounting Principles
WACC
Weighted Average Cost of Capital: calculation of a firm’s cost of capital where each category of capital is proportionally weighted
