Mentor box Stuff Flashcards
EPS
Earnings per share
It is the amount of earnings paid out to their shareholders per month.
Why don’t investors typically invest in companies that pay their total EPS to shareholders?
Being conservative is a sign that a company is financially cautious.
The sweet spot for a payment ratio is: 20-70%
How do you find the EPS?
By dividing a companies earnings by its total number of shares
Consumer non-cyclical industry
These are companies that make products consumers need on a regular basis.
Detergent-Softdrinks- beauty products.
REIT
Real Estate Investment Fund
They pay dividends through collecting rent.
COGS
Cost of Goods sold
Communicates how much money the company is spending to manufacture their products.
Gross margin
Company makes product at .90 cents
Sellers it for $1.00
That is a gross margin of %10
What does it mean if a companies revenue is growing but it’s net earnings are flat?
The companies operating costs have gone up
What is PE ratio?
Taking stock price and dividing it by earnings per share.
Dividend yield
Dividend payout relative to its share price.
Ideally between 2-5%
What do you do if you don’t want to reinvest your dividends with your broker?
Use a DRIP
Dividend reinvestment plan.
What are “disruptive Technologies”
Smaller companies challenge established businesses and invent new markets
Net income
Residual amount of earnings after all expenses have been deducted from sales. Gross income is an intermediate figure before all expenses are included and net income is the amount of profit or loss after all expenses are included
Non-cash charge
Non-cash charges can be found in the income statement. They are unaccompanied by a corresponding cash outflow.
Accounting expenses that change a companies financial standing without affecting short term capital.
Amortization, depreciation, stock-based compensation, asset impairments:
(Reduces earnings but NOT cash flows)
How can you distinguish between cash and non-cash expenses?
Non-cash expenses from actual accounting are different from non-recurring charges related to special events. One-time charges may not reflect actual operations during that period.
Cash charge appears as an extraordinary expense in the company’s income statement and reduces net income. (A company might make a cash charge against earnings to provide early retirement packages to higher paid employees.)
Limit down
Limit down also refers to the maximum decline permitted in individual stocks on certain exchanges before trading curbs kick in. The limit is generally set as a percentage of the market price of the futures or stock or occasionally as a dollar amount.
Reversal
reversal is a change in the price direction of an asset. A reversal can occur to the upside or downside. Following an uptrend, a reversal would be to the downside. Following a downtrend, a reversal would be to the upside. Reversals are based on overall price direction and are not typically based on one or two periods/bars on a chart. Certain indicators, such a moving average or trendlines, may help in isolating trends as well as spotting revers
Leverage
Leverage us a business term that refers to how a business acquires new assets for startup or expansion. When a business is leveraged it means that business has borrowed money to finance the purchase of an asset. Businesses can also use leverage through equity, raising money from investors.
How do you determine leverage in a company?
Debt to equity ratio
EPS
A company’s profit divided by its number of OUTSTANDING shares. If a company earning $2 million in one year had 2 million common shares of stock OUTSTnAnDInG its eps would be $1 per share. Uses a weighted average of shares outstanding over reporting term.
What is a short term investment?
It’s an investment of 5 years or shorter. The returns should easily conver to cash when the time is right. Examples are high-yield savings accounts, CDs, money market accounts, treasury bills and gov.t bonds.
Qualified dividend
Taxed at 15% (capital gains tax rate)
Risk of REIT overweighted investment
REIT avoids corporate tax therefore the individual pays normal income tax rates.
You have to file a tax return and also return or capital.
What’s another word for total assets?
Shareholder equity
