# Definition of __Signal__

## Signal

The process of conveying information through a firm's actions.

# Related Terms:

A **signal** that provides accurate information; a **signal** that can be distinguish among senders.

Approach to the determination of the optimal capital structure asserting that insiders in a

firm have information that the market does not have; therefore, the choice of capital structure by insiders can

**signal** information to outsiders and change the value of the firm. This theory is also called the asymmetric

information approach.

The argument that dividend changes are important **signal**s to investors

about changes in management's expectation about future earnings.

A situation in which market participation is a negative **signal**.

The **signal**-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard

deviation.

a group of lines and spaces arranged in a special

machine-readable pattern by which a scanner measures the

intensity of the light reflections of the white spaces between

the lines and converts the **signal** back into the original data

A **signal**ling device.

Refers to a capital investment analysis technique

that discounts, or scales down, the future cash returns from an

investment based on the cost-of-capital rate for the business. In essence,

each future return is downsized to take into account the cost of capital

from the start of the investment until the future point in time when the

return is received. Present value (PV) is the amount resulting from discounting

the future returns. Present value is subtracted from the entry

cost of the investment to determine net present value (NPV). The net

present value is positive if the present value is more than the entry cost,

which **signal**s that the investment would earn more than the cost-ofcapital

rate. If the entry cost is more than the present value, the net

present value is negative, which means that the investment would earn

less than the business’s cost-of-capital rate.

The rise in the stock price following the dividend **signal**.

An imitation that sends a false **signal**.

Equals the present value (PV) of a capital investment

minus the initial amount of capital that is invested, or the entry cost

of the investment. A positive NPV **signal**s an attractive capital investment

opportunity; a negative NPV means that the investment is substandard.

This key ratio equals the current market price

of a capital stock share divided by the earnings per share (EPS) for the

stock. The EPS used in this ratio may be the basic EPS for the stock or its

diluted EPS—you have to check to be sure about this. A low P/E may **signal**

an undervalued stock or may reflect a pessimistic forecast by

investors for the future earnings prospects of the business. A high P/E

may reveal an overvalued stock or reflect an optimistic forecast by

investors. The average P/E ratio for the stock market as a whole varies

considerably over time—from a low of about 8 to a high of about 30.

This is quite a range of variation, to say the least.

A relationship espoused by some technical analysts that **signal**s continuing rises

and falls in security prices based on accompanying changes in volume traded.

Trades based on **signal**s from computer programs, usually entered directly from the trader's

computer to the market's computer system and executed automatically.

**Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.**