Week 3 Flashcards
Primary market
Selling of shares
Secondary market
Stock exchange
Market order
Sell stock at best available price
Limit order
Price limit for what someone is willing to buy
P/E ratio
ratio of stock price to earnings per share (EPS)
Dividend yield
Ratio of dividend to price
Exchange-traded funds (ETF)
Portfolios of stocks that can be bought/ sold in one trade
Going-concern value
Collection of assets organised into a healthy operating business
Liquidation value
What investors get when a failed company is shut down and assets are sold off
Comparables
Sample of similar firm
Market-book ratio
Price divided by book value per share
DCF model
Connecting stock prices to cash flow that stockholders receive from the company
Market capitalization rate/ cost of equity capital
Opportunity cost of capital
ROE
Return To Equity, ratio of earnings per share to book equity per share
Current yield
Annual interest on a bond / market price
Discount rate
Opportunity cost of investing in project rather than financial market
Payback period
Number of years it takes before cumulative cash flow equals initial investment
Payback rule
Accept project if packback period is smaller than specific cutoff period
Internal rate of return
Discount rate that makes NPV=0
IRR rule
Accept investment if opportunity cost of capital is less than internal rate of return
