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Stock Terminology

These are some of the terms and concepts that credit professionals should know:

  • Price to earnings ratio = Average share prices at the end of the period  Divided By Earnings per share;
  • Dividend yield = Dividend per share x 100  Divided By  Average share price at the end of the period;
  • Dividend payout ratio = Dividends per share x 100  Divided By  Earnings per share;
  • Earnings Per Share = Profit or loss attributable to equity holders;
  • Over-the-counter (OTC) Stocks = Stocks not traded on a national securities exchange;
  • Bull market =  A market in which prices are rising;
  • Day trading = Purchasing and selling the same stock within one day's trading;
  • Bond yield = A measure of the income generated by a bond = The amount of interest paid on a bond divided by the price;
  • Dividend = A distribution of earnings to shareholders and paid typically in the form of money, stock or a combination of both;
  • Dividend Yield = A calculation made by dividing the annual dividend amount per share by the current market price per share;
  • Large Cap = Stocks with large capitalization.  Large cap stocks typically have outstanding stocks with a value of > $5 billion USD;
  • Mid Cap = A stock with a market capitalization [see below for definition of market capitalization] of $1 billion to $5 billion;
  • Market Capitalization = A term used to describe the value of the issued and outstanding common shares of a company's stock calculated by multiplying the market price by the number of issued and outstanding shares;
  • Materiality = A term used to describe information or an event that could have an important or large impact on a company's present or future stock price. Generally, material events must be disclosed [announced] by publicly traded companies.

© 2010 by Michael C. Dennis.  All Rights Reserved