Vocabulary

Question 1

What does IPO stand for?

Answer 1

Initial Public Offering

Question 2

What does SPAC stand for and what is it?

Answer 2

Special Purpose Acquisition Company

A Special Purpose Acquisition Company (SPAC) is a company created solely to merge or acquire another business and take it public — a cheaper, faster alternative to an initial public offering (IPO).

Question 3

What does EBIT stand for?

Answer 3

Earnings Before Interest and Taxes

Question 4

What does PEG stand for and what is it?

Answer 4

The ‘PEG ratio’ (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company’s expected growth.

In general, the P/E ratio is higher for a company with a higher growth rate.

Question 5

What is a TFSA?

Answer 5

Tax-Free Savings Account

In the US the closest equivalent is a Roth IRA account.

Question 6

What does EPS stand for?

Answer 6

Earnings Per Share

Question 7

What does EBITDA stand for?

Answer 7

Earnings Before Interest, Taxes, Depreciation, and Amortization

Question 8

What does amortization mean?

Answer 8

Amortization is an accounting technique used to periodically lower the book value of a loan or intangible asset over a set period of time.

In relation to a loan, amortization focuses on spreading out loan payments over time.

When applied to an asset, amortization is similar to depreciation.

Question 9

What does normalized earnings mean?

Answer 9

Normalized earnings are adjusted to remove the effects of seasonality, revenue, and expenses that are unusual or one-time influences.

Question 10

What is equity?

Answer 10

Equity represents the value that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debts were paid off.

Equity = Total Assets - Total Liabilities

Question 11

What are shares outstanding?

Answer 11

Shares outstanding refer to a company’s stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Outstanding shares are shown on a company’s balance sheet under the heading “Capital Stock.”

Question 12

What does CFPS stand for and what is it?

Answer 12

Cash flow per share functions as a measure of a firm’s financial strength and is calculated as the after-tax earnings of a company plus depreciation on a per-share basis.

Cash Flow Per Share = (Operating Cash Flow – Preferred Dividends) / Common Shares Outstanding

Question 13

What is the market cap?

Answer 13

Market capitalization refers to the total dollar market value of a company’s outstanding shares of stock.

Market cap = share price x # shares outstanding

Question 14

What is capital stock?

Answer 14

Shares outstanding

Question 15

What does YTD stand for?

Answer 15

Year-to-date

Question 16

What does REIT stand for?

Answer 16

Real estate investment trust

Question 17

What does ROC stand for and what is it?

Answer 17

Return of capital occurs when an investor receives a portion of their original investment that is not considered income or capital gains from the investment.

ROC = Net income/ debt + equity

Question 18

What is book value?

Answer 18

The book value of a company is the net difference between that company’s total assets and total liabilities, where book value reflects the total value of a company’s assets that shareholders of that company would receive if the company were to be liquidated.

Question 19

What does BVPS stand for?

Answer 19

Book value per share

Question 20

What does MTM stand for and what is it?

Answer 20

Mark to market (MTM) is a method of measuring the fair value of accounts that can fluctuate over time, such as assets and liabilities. Mark to market aims to provide a realistic appraisal of an institution’s or company’s current financial situation based on current market conditions.

Question 21

What is P/B ratio?

Answer 21

Price-to-book ratio

The P/B ratio measures the market’s valuation of a company relative to its book value.

P/B ratios under 1 are typically considered solid investments.

Question 22

What is ROE?

Answer 22

Return on equity

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity. Because shareholders’ equity is equal to a company’s assets minus its debt, ROE is considered the return on net assets.

ROE = Net income/ average shareholder equity
Shareholder equity (net assets) = assets - debt

Question 23

What is beta?

Answer 23

Beta is a measure of a stock’s volatility in relation to the overall market. Individual stocks are ranked according to how much they deviate from the market.

Question 24

What does SIR stand for and what is it?

Answer 24

Short interest ratio

SIR is a comparison of short interest to average daily trading volume. It represents the theoretical number of days, given average trading volume, short-sellers would need to exit their positions.

Question 25

What is RSI?

Answer 25

Relative strength index

RSI indicates overbought or oversold conditions in the market on a scale of 0 to 100.

A stock with a low RSI means it’s oversold — that is, trading at a very low price — and possibly due to increase; a high RSI indicates the stock is extremely overbought — trading at a high price — and possibly due to drop.

Question 26

What is EMA?

Answer 26

Exponential moving average puts greater weight and significance on the most recent data points.