Investments glossary terminology
The general business tax credit is the total value of all the individual credits to be applied against income on a tax return. This credit can be carried forward for a number of years in most cases and can also be carried back in some cases.
A degree of financial leverage (DFL) is a leverage ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. The degree of financial leverage (DFL) measures the percentage change in EPS for a unit change in operating income, also known as earnings before interest and taxes (EBIT).
Accounts receivable (AR) is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers. Accounts receivables are listed on the balance sheet as a current asset. AR is any amount of money owed by customers for purchases made on credit.
A portfolio manager is a person or group of people responsible for investing a mutual, exchange-traded or closed-end fund’s assets, implementing its investment strategy and managing day-to-day portfolio trading. A portfolio manager is one of the most important factors to consider when looking at fund investing. Portfolio management can be active or passive, and historical performance records indicate that only a minority of active fund managers consistently beat the market.
Jesse L. Livermore rose from a humble farming background to become a stock trader in Boston. Over the course of his career, he won and lost several fortunes in many arenas. A self-made man with no formal education or trading background, Livermore focused on making money from the overall market directions and not concentrating on individual stocks. His strategies were based on a combination of price patterns and volume analysis.
Warrants are a derivative that give the right, but not the obligation, to buy or sell a security—most commonly an equity—at a certain price before expiration. The price at which the underlying security can be bought or sold is referred to as the exercise price or strike price. An American warrant can be exercised at any time on or before the expiration date, while European warrants can only be exercised on the expiration date. Warrants that give the right to buy a security are known as call warrants; those that give the right to sell a security are known as put warrants.
Yield on Cost (YOC) is a measure of dividend yield calculated by dividing a stock’s current dividend by the price initially paid for that stock. For example, if an investor purchased a stock five years ago for $20, and its current dividend is $1.50 per share, then the YOC for that stock would be 7.5%.
The adjusted present value is the net present value (NPV) of a project or company if financed solely by equity plus the present value (PV) of any financing benefits, which are the additional effects of debt. By taking into account financing benefits, APV includes tax shields such as those provided by deductible interest.
The adjusted present value is the net present value (NPV) of a project or company if financed solely by equity plus the present value (PV) of any financing benefits, which are the additional effects of debt. By taking into account financing benefits, APV includes tax shields such as those provided by deductible interest.
A wash sale is a transaction in which an investor seeks to maximize tax benefits by selling a losing security at the end of a calendar year so they can claim a capital loss on taxes that year. The investor’s intent is likely to repurchase the security again after the start of the new year, if possible even lower than where they sold. Such wash sales are a method investors have historically considered to recognize a tax loss without limiting their exposure to opportunity they perceive in owning a particular security. The IRS uses the wash-sale rule to eliminate the incentive to arbitrarily sell and reacquire the same security around the end of the calendar years.