Asset
Anything of value owned by a company. Assets can include cash, product inventory and other current assets, as well as land, buildings, equipment, etc.

Balance Sheet
A financial statement showing the company's assets (what the company owns), its liabilities (what it owes), and the difference, called "net worth" or "stockholders' equity."

Blue Sky Laws
State laws designed to protect investors from "blue sky" (worthless) securities.

Book Value
The equity value of an outstanding share of stock. Book value is determined by dividing the amount of stockholders' equity to which each share is entitled by the number of shares outstanding.

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Cash Flow
Loosely defined as "net income plus depreciation." The term is frequently used to describe the amount of internally generated cash available for dividends and/or for the purchase of additional assets.

Current Assets
Assets that are expected to be converted to cash within 12 months.

Current Liabilities
Obligations that will be paid within 12 months.

Current Ratio
The ratio of current assets to current liabilities. The current ratio is calculated by dividing current assets by current liabilities. Current assets at least twice current liabilities (i.e., a current ratio of 2.0) is considered a healthy condition for most businesses.

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Debenture
An unsecured (without collateral) bond issued on the good word and general credit of the borrower.

Depreciation
The estimated decrease in value of property due to use, deterioration or obsolescence over a period of time. Although depreciation does not require a cash outlay, it is a cost of doing business.

Dividend
A payment to stockholders, usually in the form of a quarterly check. The dividend is declared by the board of directors and is normally determined by the level of the company's earnings.

Earnings
The amount of profit a company realizes after all costs, expenses and taxes have been paid. See also "net earnings."

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Earnings Per Share
Net earnings divided by average shares outstanding.

Float
The number of shares currently available for trading. The float is calculated by deducting from the shares outstanding, the number of shares closely held by individuals or institutions not likely to sell immediately if the stock price rises.

Fundamental Analyst
One who believes that stock prices are determined by the future course of earnings and dividends. The fundamentalist studies, among other things, economics, industry conditions and corporate financial statements.

Gross Profits
Profits earned from the basic manufacturing or service operation--before selling costs and other expenses are deducted and before taxes are paid.

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Income Statement
A financial statement that presents a company's business results over a specific period of time, usually quarterly or annually. It shows, in dollar terms, all revenues, costs and expenses, taxes and earnings.

Liability
Anything a company owes. Liabilities can include current liabilities as well as debt to be repaid in later years (e.g., bonds).

Long Term
The length of time a stock or bond must be held to qualify for a more favorable tax rate. "Long term" is a holding of one year or more.

Long-Term Debt
Liabilities that are expected to be repaid after 12 months.

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Net Earnings, Net Income or Net Profit
The profit a company realizes after all costs, expenses and taxes have been paid.

Net Profit Margin
The profitability of a company after taxes are paid. The net profit margin is calculated by dividing net earnings by total revenues (sales and other income).

Operating Profit
The profit a company earns from operations before interest income/expense and taxes are paid. It is the remainder after deducting all operating costs from sales.

Operating Profit Margin
The profitability of a company's operations before taxes are paid. The operating profit margin is calculated by dividing operating profits by sales.

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Over-The-Counter
The nationwide network of brokers/dealers engaged in buying and selling securities that, for the most part, are not listed on exchanges.

Payout Ratio
The proportionate amount of a company's earnings paid out to stockholders as a dividend. For example, a company that pays a $0.25 dividend out of every $1.00 of earnings has a payout ratio of 25%.

Pink Sheets
A daily list of over-the-counter stocks not traded on NASDAQ and the broker/dealers making markets in them. The pink sheets normally show the bid and ask prices of the prior day.

Preferred Stock
A stock that has prior claim on dividends (and/or assets in the cases of corporate dissolution) up to a certain amount before the common stockholders are entitled to anything.

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Pretax Margin
The profitability of a company before taxes are paid, it is the remainder after deducting all costs and expenses other than taxes from total revenues.

Price/Earnings Ratio
The relationship between the price of a stock and its earnings per or P/E Ratio share. The P/E ratio is calculated by dividing the stock price by the EPS figure. A stock selling at $45 with annual EPS of $3.00 has a price/earnings ratio of 15.

Profit Margin
The profitability of a company measured by relating profits to revenues. The three most common profit margin calculations are: operating profit margin, pretax profit margin and net profit margin.

Retained Earnings
Earnings that have been reinvested back into the business after dividends are paid to stockholders. Retained earnings are often an important component of a company's stockholders' equity. Another name for retained earnings is "earned surplus."

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Return on Equity
The rate of investment return a company earns on stockholders' equity. Return on equity is calculated by dividing net earnings by average stockholders' equity.

Revenues or Total Revenues
A term used loosely to describe the income sources of a corporation, i.e., sales and other income before any costs or expenses are deducted.

Shares Outstanding
The number of authorized shares that have been issued and are now in the hands of owners.

Short Term
The length of time a stock or bond is held before it becomes a long-term investment. A holding period of up to one year.

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Stockholders' Equity
The difference between a company's total assets and total liabilities. Stockholders' equity, sometimes called "net worth," is stockholders' ownership in a company.

Technical Analyst
One who studies all factors related to the actual supply and demand of stocks. The primary tools of a technical analyst are stock charts and various technical indicators.

Yield
The annual return on an investment (from dividends or interest) expressed as a percentage of either cost or current price.

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