|Price to Earnings Ratio (P/E, PE Ratio)|
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Definition of Price to Earnings Ratio (P/E, PE Ratio)
Price to Earnings Ratio (P/E, PE Ratio)
A measure of how much investors are willing to pay for each dollar
Shows the "multiple" of earnings at which a stock sells. Determined by dividing current
This key ratio equals the current market price
Capital rationing that under certain circumstances can be violated or even viewed
The use of various forms of gimmickry to distort a company's true financial performance in order to achieve a desired result.
A characterization used by the Securities and Exchange
Clause causing repayment of a debt, if specified events occur or are not met.
Belief that an effort to keep unemployment below its natural rate results in an accelerating inflation.
earnings of a firm as reported on its income statement.
The period of time for which financial statements are produced – see also financial year.
A ratio computed by dividing annual
Expenses that have to be recorded in order for the financial statements to be accurate. Accrued expenses usually do not involve the receipt of an invoice from the company providing the goods or services.
The account that records the short-term, noninterest-
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid
A ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula:
See quick ratio
acid test ratio (also called the quick ratio)
The sum of cash, accounts receivable, and short-term marketable
Adjusted Cash Flow Provided by Continuing Operations
Cash flow provided by operating
Net income adjusted to exclude selected nonrecurring and noncash items of reserve, gain, expense, and loss.
Aggregate Expenditure Curve
Aggregate demand for goods and services drawn as a function of the level of national income.
Annual fund operating expenses
For investment companies, the management fee and "other expenses,"
Annual percentage rate (APR)
The periodic rate times the number of periods in a year. For example, a 5%
annual percentage rate (APR)
Interest rate that is annualized using simple interest.
Annual percentage yield (APY)
The effective, or true, annual rate of return. The APY is the rate actually
Annualized holding period return
The annual rate of return that when compounded t times, would have
The time between each payment under an annuity.
The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard
Arm's length price
The price at which a willing buyer and a willing unrelated seller would freely agree to
Articles of incorporation
Legal document establishing a corporation and its structure and purpose.
A dealer's price to sell a security; also called the offer price.
Asset activity ratios
ratios that measure how effectively the firm is managing its assets.
The ratio of total assets to stockholder equity.
The amount of total risk that can be eliminated by diversification by
asset turnover ratio
A broad-gauge ratio computed by dividing annual
Elements of spending that do not vary systematically with variables such as GDP that are explained by the theory. See also exogenous expenditure.
Average Amortization Period
The average useful life of a company's collective amortizable asset base.
Average Collection Period
Average number of days necessary to receive cash for the sale of
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
Average Propensity to Consume
ratio of consumption to disposable income. See also marginal propensity to consume.
Average Propensity to Save
ratio of saving to disposable income. See also marginal propensity to save.
Gives the lessee the option to purchase the asset at a price below fair market
BARRA's performance analysis (PERFAN)
A method developed by BARRA, a consulting firm in
basic earnings per share (EPS)
This important ratio equals the net
Basic Earnings Power Ratio
percentage of earnings relative to total assets; indication of how
price expressed in terms of yield to maturity or annual rate of return.
Benefit Ratio Method
The proportion of unemployment benefits paid to a company’s
Benefit Wage Ratio Method
The proportion of total taxable wages for laid off
Biased expectations theories
Related: pure expectations theory.
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
book value and book value per share
Generally speaking, these terms
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
Book Value per Share
The book value of a company divided by the number of shares
Buy on opening
To buy at the beginning of a trading session at a price within the opening range.
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
The price for which a bond can be repaid before maturity under a call provision.
Canada Pension Plan (CPP)
A plan that provides retirement and long term disability income benefits to residents of Canadian provinces (excluding Quebec).
Canadian Deposit Insurance Corporation
Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.
Amount used during a particular period to acquire or improve long-term assets such as
Refers to investments by a business in long-term
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's
Placing one or more limits on the amount of new investment undertaken by a firm, either
a condition that exists when there is an
Limit set on the amount of funds available for investment.
Also called financial leverage ratios, these ratios compare debt to total capitalization
Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against
Expenditures that are accounted for as assets to be amortized
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments,
cash flow from operating activities, or cash flow from profit
This equals the cash inflow from sales during the period minus the cash
Cash flow from operations
A firm's net cash inflow resulting directly from its regular operations
Cash flow per common share
Cash flow from operations minus preferred stock dividends, divided by the
Cash Flow Provided by Operating Activities
With some exceptions, the cash effects of transactions
Cash Flow–to–Income Ratio (CFI)
Adjusted cash flow provided by continuing operations
CASH FLOWS FROM OPERATIONS
A 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.
The proportion of a firm's assets held as cash.
ratio of cash and cash equivalents to liabilities; in the case of a bank, the ratio of cash to total deposit liabilities.
Cheapest to deliver issue
The acceptable Treasury security with the highest implied repo rate; the rate that a
Bond price excluding accrued interest.
Short-term unsecured promissory notes issued by a corporation. The maturity of
Short-term unsecured notes issued by firms.
Committee, AIMR Performance Presentation Standards Implementation Committee
The Association for Investment Management and Research (AIMR)'s performance Presentation Standards Implementation
Common stock ratios
ratios that are designed to measure the relative claims of stockholders to earnings
Related: Unsystematic risk
See asset-specific risk
An excess balance that is left in a bank to provide indirect compensation for loans
All forms of pay given to an employee in exchange for services rendered.
a company committee comprised mainly of members of the board of directors; is responsible
a foundation for the compensation plan that addresses the role compensation should play in the organization
Sufficient ability or fitness for ones needs. Possessing the necessary abilities to be qualified to
Intra- or intermarket rivalry between businesses trying to obtain a larger piece of the same
The strategies, skills, knowledge, resources or competencies that differentiate a business from its competitors.
A securities offering process in which securities firms submit competing bids to the
An offering of securities through competitive bidding.
The length of the time period (for example, a quarter in the case of quarterly
the time between each interest computation
A single centralized account into which funds collected at regional locations
System whereby customers make payments to a regional collection center which transfers funds to
Movement of cash from different lockbox locations into a single concentration
A review of all engineering documentation used as the basis
Verifying that a delivered product matches authorizing
Consumer Price Index (CPI)
The CPI, as it is called, measures the prices of consumer goods and services and is a
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