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Notes
Stock Terminology
Stock Terminology
Term
Short summary
Additional notes
1
Shares outstanding
Number of pieces a company has been divided into (aka total share count)
2
EPS
The profit one share makes for an entire year
Earnings per share. This is calculated after all the employees have been paid, etc This is the money that is left at the end of the year (per share)
Calculation:
Income statement > Net Income / Basic Weighted Average Shares
3
Diluted EPS
Earnings / (Market Shares + Diluted Shares)
When a company says they give stock benefits to the employees, they dont be really giving the existing shares from the market but they provide an agreement on paper. In other words the company is creating more shares even though they’re not on the market, it’s called diluting the company.
This is a more real number than the one that’s reported on the market
Calculation:
Income statement > Net Income / Diluted Weighted Average Shares
4
P / E Ratio
Price to earnings ratio
For example: If a company’s P/E is 4.5, it means that for every 4.5$ you spend on this company’s share you expect 1$ in return as earnings one year later.
Calculation:
Market price / EPS
5
Volume
The number of shares traded on a given day
6
Dividend Rate
The amount of money you will receive in a year per one share.
If the rate is 2.44, you will receive 25% of it every quarter. If you own 10 shares, you will receive 24.4 instead
7
Dividend Yield %
Dividend Rate / Market Price
8
Debt / Equity
Calculation
Go to Balance Sheet. Add all those “Debt” numbers and divide it by “Total Equity”
9
Book Value
Equity of the company per share
MSN Money Stock summary page > Analysis > Key Statistics
Calculation:
Go to Balance Sheet: Total Equity / Shares Outstanding
10
P / BV
Price to Book Value
If P / BV of a company is 3.4, it means for every 3.4$ you spend buying this company you own 1$ of its equity.
High price to book means you have a very low margin of safety. Safety as in, if the earnings drop the market price will drop pretty soon as there isn’t much in the equity to back up the market price against.
12
ROE
Return on Equity
Calculation
Net Income / Equity or EPS / BV
13
Current Ratio
Total Current Assets / Total Current Liability
Current Asset → anything that will get liquidated in next 12 months
Current Liability → anything the company pays off to someone in next 12 months
For example if it is 2.68, it means for every $2.68 that the company receives in the next 12 months it has to pay $1 as a liability
14
Net Debt / Equity
(Debt - Cash) / Equity
There are no rows in this table
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