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Financial Terms | |
P/E effect |
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Definition of P/E effectP/E effectThat portfolios with low P/E stocks have exhibited higher average risk-adjusted returns than high P/E stocks.
Related Terms:Abnormal returnsPart of the return that is not due to systematic influences (market wide influences). In Adjusted Cash Flow Provided by Continuing OperationsCash flow provided by operating Adjusted EarningsNet income adjusted to exclude selected nonrecurring and noncash items of reserve, gain, expense, and loss. Adjusted EBITDAConventional earnings before interest, taxes, depreciation, and amortization (EBITDA) revised to exclude the effects of mainly nonrecurring items of revenue or gain and expense or loss. Adjusted Income from ContinuingOperations Reported income from continuing operations Adjusted present value (APV)The net present value analysis of an asset if financed solely by equity Allowance for bad debtsAn offset to the accounts receivable balance, against which ![]() Allowance for doubtful accountsA contra account related to accounts receivable that represents the amounts that the company expects will not be collected. Allowance for Doubtful AccountsAn estimate of the uncollectible portion of accounts receivable Allowance methodA method of adjusting accounts receivable to the amount that is expected to be collected based on company experience. Arithmetic average (mean) rate of returnArithmetic mean return. Asset-specific RiskThe amount of total risk that can be eliminated by diversification by AverageAn arithmetic mean of selected stocks intended to represent the behavior of the market or some Average accounting returnThe average project earnings after taxes and depreciation divided by the average Average (across-day) measuresAn estimation of price that uses the average or representative price of a Average age of accounts receivableThe weighted-average age of all of the firm's outstanding invoices. ![]() Average Amortization PeriodThe average useful life of a company's collective amortizable asset base. Average Collection Periodaverage number of days necessary to receive cash for the sale of Average collection period, or days' receivablesThe ratio of accounts receivables to sales, or the total Average-Cost Inventory MethodThe inventory cost-flow assumption that assigns the average Average cost of capitalA firm's required payout to the bondholders and to the stockholders expressed as a Average inventoryThe beginning inventory for a period, plus the amount at the end of Average lifeAlso referred to as the weighted-average life (WAL). The average number of years that each Average maturityThe average time to maturity of securities held by a mutual fund. Changes in interest rates Average Propensity to ConsumeRatio of consumption to disposable income. See also marginal propensity to consume. Average Propensity to SaveRatio of saving to disposable income. See also marginal propensity to save. Average rate of return (ARR)The ratio of the average cash inflow to the amount invested. Average tax rateTaxes as a fraction of income; total taxes divided by total taxable income. average tax rateTotal taxes owed divided by total income. Bankruptcy riskThe risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk. Basis riskThe uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for Beta equation (Stocks)The beta of a stock is determined as follows: Beta riskrisk of a firm measured from the standpoint of an investor who holds a highly diversified portfolio. Blow-off topA steep and rapid increase in price followed by a steep and rapid drop. This is an indicator seen Book ReturnsBook yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets. Business riskThe risk that the cash flow of an issuer will be impaired because of adverse economic Call riskThe combination of cash flow uncertainty and reinvestment risk introduced by a call provision. Capital Consumption AllowanceSee depreciation. Capital Cost Allowance (CCA)The annual depreciation expense allowed by the Canadian Income Tax Act. Capital FlowsPurchase by foreigners of our assets (capital inflows) or our purchase of foreign assets (capital outflows). CARs (cumulative abnormal returns)a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock. Cash flowIn investments, it represents earnings before depreciation , amortization and non-cash charges. cash flowAn obvious but at the same time elusive term that refers to cash cash flowthe receipt or disbursement of cash; when related Cash flowCash received and paid over time. Cash FlowIn investments, NET INCOME plus DEPRECIATION and other noncash charges. In this sense, it is synonymous with CASH EARNINGS. Investors focus on cash flow from operations because of their concern with a firm's ability to pay dividends. Cash flow after interest and taxesNet income plus depreciation. Cash-flow break-even pointThe point below which the firm will need either to obtain additional financing Cash flow coverage ratioThe number of times that financial obligations (for interest, principal payments, Cash Flow ForecastAn estimate of the timing and amount of a company's inflows and outflows of money measured over a specific period of time typically monthly for one to two years then annually for an additional one to three years. cash flow from operating activities, or cash flow from profitThis equals the cash inflow from sales during the period minus the cash Cash flow from operationsA firm's net cash inflow resulting directly from its regular operations Cash flow matchingAlso called dedicating a portfolio, this is an alternative to multiperiod immunization in Cash flow per common shareCash flow from operations minus preferred stock dividends, divided by the Cash Flow Provided by Operating ActivitiesWith some exceptions, the cash effects of transactions Cash Flow Provided or Used from Financing ActivitiesCash receipts and payments involving Cash Flow Provided or Used from Investing ActivitiesCash receipts and payments involving CASH-FLOW STATEMENTA statement that shows where a company’s cash came from and where it went for a period of time, such as a year. Cash Flow statementA financial report that shows the movement in cash for a business during an accounting period. Cash flow time-lineLine depicting the operating activities and cash flows for a firm over a particular period. Cash Flow–to–Income Ratio (CFI)adjusted cash flow provided by continuing operations CASH FLOWS FROM FINANCING ACTIVITIESA section on the cash-flow statement that shows how much cash a company raised by selling stocks or bonds this year and how much was paid out for cash dividends and other finance-related obligations. CASH FLOWS FROM INVESTING ACTIVITIESA section on the cashflow statement that shows how much cash came in and went out because of various investing activities like purchasing machinery. CASH FLOWS FROM OPERATIONSA section on the cash-flow Stockholders’ equity statement that shows how much cash came into a company and how much went out during the normal course of business. Circular FlowIncome payments to factors of production are spent to buy output. The receipts from these sales are used to pay factors of production, creating a circular flow of income. Commercial riskThe risk that a foreign debtor will be unable to pay its debts because of business events, Company-specific riskRelated: Unsystematic risk Companyspecific RiskSee asset-specific risk Completion riskThe risk that a project will not be brought into operation successfully. Consigned stocksInventories owned by a company, but located on the premises Counterparty riskThe risk that the other party to an agreement will default. In an options contract, the risk Country financial riskThe ability of the national economy to generate enough foreign exchange to meet Country risk GeneralLevel of political and economic uncertainty in a country affecting the value of loans or Credit riskThe risk that an issuer of debt securities or a borrower may default on his obligations, or that the Credit RiskFinancial and moral risk that an obligation will not be paid and a loss will result. Cross-border riskRefers to the volatility of returns on international investments caused by events associated Currency riskRelated: Exchange rate risk Currency risk sharingAn agreement by the parties to a transaction to share the currency risk associated with Default riskAlso referred to as credit risk (as gauged by commercial rating companies), the risk that an Departmental stocksThe informal and frequently unauthorized retention of excess inventory on the shop floor, which is used as buffer safety stock. Depreciation AllowancesTax deductions that businesses can claim when they spend money on investment goods. Discounted cash flowA technique that determines the present value of future cash Discounted Cash FlowTechniques for establishing the relative worth of a future investment by discounting (at a required rate of return) the expected net cash flows from the project. Discounted cash flow (DCF)Future cash flows multiplied by discount factors to obtain present values. Discounted cash flow (DCF)A method of investment appraisal that discounts future cash flows to present value using a discount rate, which is the risk-adjusted cost of capital. discounted cash flow (DCF)Refers to a capital investment analysis technique Discretionary cash flowCash flow that is available after the funding of all positive NPV capital investment Diversifiable riskRelated: unsystematic risk. Dividend yield (Stocks)Indicated yield represents annual dividends divided by current stock price. Dow Jones industrial averageThis is the best known U.S.index of stocks. It contains 30 stocks that trade on Dow Jones Industrial AverageIndex of the investment performance of a portfolio of 30 “blue-chip” stocks. Economic riskIn project financing, the risk that the project's output will not be salable at a price that will Equilibrium market price of riskThe slope of the capital market line (CML). Since the CML represents the Equivalent annual cash flowAnnuity with the same net present value as the company's proposed investment. Event riskThe risk that the ability of an issuer to make interest and principal payments will change because Excess returnsAlso called abnormal returns, returns in excess of those required by some asset pricing model. Exchange rate riskAlso called currency risk, the risk of an investment's value changing because of currency Exchange riskThe variability of a firm's value that results from unexpected exchange rate changes or the Expected future cash flowsProjected future cash flows associated with an asset of decision. Fallout riskA type of mortgage pipeline risk that is generally created when the terms of the loan to be Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |