E Flashcards
Earned Income
Income that is designated by Canada Revenue Agency for RRSP calculations. Most types of revenues are included with the exception of any form of investment income and pension income.
Earnings Per Share (EPS)
A value ratio that shows the portion of net
income for a period attributable to a single
common share of a company. For example,
a company with $100 million in earnings
and with 100 million common shareholders
would report an EPS of $1 per share.
Economic Indicators
Statistics or data series that are used to
analyze business conditions and current
economic activity. See also leading,
lagging, and coincident indicators.
Economies of Scale
An economic principle whereby the per
unit cost of producing each unit of output
falls as the volume of production increases.
Typically, a company that achieves
economies of scale lowers the average cost
per unit through increased production since
fixed costs are shared over an increased
number of goods.
Efficient Market Hypothesis
The theory that a stock’s price reflects all
available information and reflects its true
value.
Election Period
When an investor purchases an extendible
or retractable bond, they have a time
period in which to notify the company if
they want to exercise the option.
Elliot Wave Theory
A theory used in technical analysis based
on the rhythms found in nature. The theory
states that there are repetitive, predictable
sequences of numbers and cycles found in
nature similar to patterns of stock
movements
Emerging Industries
Brand new industries in the early stages of
growth. Often considered as speculative
because they are introducing new products
that may or may not be accepted and may
face strong competition from other new
entrants.
Equilibrium Price
The price at which the quantity demanded
equals the quantity supplied.
Equipment Trust Certifi cate
A type of debt security that was historically
used to finance “rolling stock” or railway
boxcars. The cars were the collateral behind
the issue and when the issue was paid down
the cars reverted to the issuer. In recent
times, equipment trusts are used as a
method of financing containers for the
offshore industry. A security, more common
in the U.S. than in Canada.
Equity
Ownership interest in a corporation’s stock
that represents a claim on its revenue and
assets. See also Stock.
Equity Accounting Method
An accounting method used to determine
income derived from a company’s
investment in another company over which
it exerts significant influence.
Escrowed Shares
Outstanding shares of a company which,
while entitled to vote and receive dividends,
may not be bought or sold unless special
approval is obtained. Mining and oil
companies commonly use this technique
when treasury shares are issued for new
properties. Shares can be released from
escrow (i.e., freed to be bought and sold)
only with the permission of applicable
authorities such as a stock exchange and/or
securities commission
Eurobonds
Bonds that are issued and sold outside a
domestic market and typically denominated
in a currency other than that of the domestic
market. For example, a bond denominated
in Canadian dollars and issued in Germany
would be classifi ed as a Eurobond
European-Style Option
An option that can only be exercised on a
specified date – normally the business day
prior to expiration.
Event-Driven Hedge Funds
A type of hedge fund that seeks to profit
from unique events such as mergers,
acquisitions, stock splits or buybacks.
Ex-Ante
A projection of expected returns – what
investors expect to realize as a return.
Exchange Fund Account
A special federal government account operated by the Bank of Canada to hold and conduct transactions in Canada’s foreign exchange reserves on instructions from the Minister of Finance.
Exchange Rate
The price at which one currency exchanges
for another.
Exchange-Traded Funds (ETFs)
Open-ended mutual fund trusts that hold
the same stocks in the same proportion as
those included in a specific stock index.
Shares of an exchange-traded fund trade on
major stock exchanges. Like index mutual
funds, ETFs are designed to mimic the
performance of a specified index by
investing in the constituent companies included in that index. Like the stocks in
which they invest, shares can be traded
throughout the trading day.
Ex-Dividend
A term that denotes that when a person purchases a common or preferred share, they are not entitled to the dividend payment. Shares go ex-dividend two business days prior to the shareholder record date. See also Cum Dividend.
Exempt List
Large professional buyers of securities,
mostly financial institutions, that are
offered a portion of a new issue by one
member of the banking group on behalf of
the whole syndicate. The term exempt
indicates that this group of investors is
exempt from receiving a prospectus on a
new issue as they are considered to be
sophisticated and knowledgeable.
Exercise
The process of invoking the rights of the
option or warrant contract. It is the holder
of the option who exercises his or her
rights. See also Assignment.
Exercise Price
The price at which a derivative can be
exchanged for a share of the underlying
security (also known as subscription price).
For an option, it is the price at which the
underlying security can be purchased, in
the case of a call, or sold, in the case of a
put, by the option holder. Synonymous
with strike price.
Expansion
A phase of the business cycle characterized
by increasing corporate profits and hence
increasing share prices, an increase in the
demand for capital for business expansion,
and hence an increase in interest rates.
Expectations Theory
A theory stating that the yield curve is
shaped by a market consensus about future
interest rates.
Expiration Date
The date on which certain rights or option
contracts cease to exist. For equity options,
this date is usually the Saturday following
the third Friday of the month listed in the
contract. This term can also be used to
describe the day on which warrants and
rights cease to exist.
Ex-Post
The rate of return that was actually
received. This historic data is used to
measure actual performance.
Ex-Rights
A term that denotes that the purchaser of a
common share would not be entitled to a
rights offering. Common shares go ex-rights
two business days prior to the shareholder
of record date.
Extendible Bond or Debenture
A bond or debenture with terms granting
the holder the option to extend the maturity
date by a specified number of years.
Extension Date
For extendible bonds the maturity date of
the bond can be extended so that the bond
changes from a short-term bond to a long-
term bond.
