Investing for Beginners .EU, investing I made my money by selling too soon.
Bernard Baruch

Investment Dictionary

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Interest Coverage ratio
  Interest coverage ratio shows company’s ability to pay interests for its financial debts. Interest coverage ratio is a ratio between operating profit (EBIT to be more exact) and expenses for interests. The

Sortino ratio
  Sortino ratio is a financial ratio that is used to measure the performance of investment portfolio and is very similar to a Sharpe ratio. The main difference between Sortino ratio and Sharpe ratio is that Sharpe

Dividend Payout ratio
Payout ratio is a percentage that shows a portion of company’s income distributed as dividends.    Formula Dividend payout ratio = common shares dividends / net income   *For the sam

  A corporation is a legal business form that is dominating over capital world. Most of the biggest businesses in the world are working under corporation form. Capital raising, transferring of shares, mergers &

Publicly Owned Corporation
  A publicly owned corporation is a company, which has its shares listed on the stock exchange. A publicly owned companies normally are medium or large scale corporations owned by a large number of investors (both

Treynor ratio
  Treynor ratio is another popular ratio that is used to measure the performance of investment portfolio. This ratio compares the excess return (above risk free return) of a portfolio to beta of that portfolio. Whi

Sharpe ratio
  Sharpe ratio measures the above risk free performance of investment portfolio in relation to its risk. This ratio was developed by William F. Sharpe which introduced the ratio in 1966. Now Sharpe ratio is the mos

P/E ratio
  P/E ratio is the most popular valuation multiple that is used for stock analysis. This ratio shows the price of the stock compared to its earnings. The multiple is so popular because of its simplicity and im

PEG ratio
Price-to-Earnings to Growth Ratio   PEG ratio is quiet popular among retail investors, however professionals do not use it often because of this ratio subjectivity. PEG ratio shows how expensive is stock compared

P/B ratio
P/B (P/Bv or price-to-book) ratio shows how expensive stock is compared to its books value. Company’s book value (also called equity, capital, shareholders funds etc.) is equal to company’s total assets les

P/NAV ratio
Price to Net Asset Value    P/NAV ratio shows how expensive share is compared to its NAV (net asset value). This ratio is very similar to P/B ratio but in this case market values (not book values) are used. M

EV/S ratio
Enterprise Value to Sales Ratio   EV/S ratio shows how expensive firm is compared to its sales. This multiple is important when company is unprofitable or profits margins are very low and turnaround is expected in

P/S ratio
Price to Sales Ratio   P/S ratio shows the price of the stock compared to its sales. This ratio historically was quiet popular, but now EV/S ratio, which is more correct methodically, is used.

EBITDA Multiple   EV/EBITDA ratio shows how expensive firm is compared to its EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). EV to EBITDA multiple is mostly used by professionals because

EV/EBIT ratio
EBIT Multiple   EV/EBIT ratio is identical to EV/EBITDA ratio. The only difference is that EBIT instead of EBITDA is used.    EBITDA differs from EBIT at depreciation and amortization (DA). So EBITDA i

Inventory Turnover ratio
  Inventory turnover ratio shows how quickly company’s inventory is changing compared to its sales or cost of goods sold. This ratio shows how effectively inventory is managed in company’s production/di

EBITDA Coverage ratio
  EBITDA coverage ratio (also called EBITDA to Interest Coverage Ratio) shows company’s capability to deal with its financial leverage. If this ratio is too low, that may show company is in trouble and may ha

Total Assets Turnover ratio
  Total assets turnover ratio shows how much of sales company’s assets are generating. If the company has a lot invested in assets, but do not generate a lot of sales from those assets, it may show some ineff

Debt Coverage ratio
  Debt coverage ratio (debt service coverage ratio) is a ratio that measures solvency risk and mostly is applied for property projects. There are many debt coverage ratios that are used in financial practice on thi

Times Interest Earned ratio
  ‘Times interest earned ratio' compares ‘earnings before interest and taxes’ of the company to its interest expenses. Low ratio means that company may be in dangerous situation and its interest e

Turnover ratio
  (1) Turnover ratio of mutual fund shows how quickly assets of the fund are changing. Actively managed investment funds have higher turnover ratio than passively managed funds, and normally turnover ratio is measu

Cash Debt Coverage ratio
  ‘Cash debt coverage ratio’ (also known as ‘current cash debt coverage ratio’) measures company’s ability to repay its debts. Basically, it compares cash flow that is received from op

Cash Coverage ratio
  Cash coverage ratio measures company’s ability to repay its debts. It compares EBITDA (type of earnings) of the company and interest that is paid for company’s debts annually. EBITDA is not exactly eq

Cash Flow Coverage ratio
  Cash flow coverage ratio measures company’s ability to repay its debt. This ratio compares operating cash flow of the company to its debts.  If ratio is low (lower than 0.2), it may indicate potential

Asset Turnover ratio Formula
  There are many modifications of ‘asset turnover ratio’ formulas.    These are the most popular forms of this ratio formula:   (1) Asset turnover ratio = Sales revenue / Total averag

Asset Turnover ratio
  Asset turnover ratio compares company’s sales and assets in order to identify the efficiency of assets used in the business. In simple words, it shows show much of sales are generated by company’s ass

Price to Cash Flow ratio
  Price to cash flow ratio (P/CF) and EV/CF ratio are similar but there are some differences. The main difference is that EV/CF also includes the effect of company’s financial debt which says a different

Financial ratios
  Financial ratios are ratios that are used in financial analysis or in other words that are using financial data of a company. Such financial data usually is found in financial statements (income statement, balanc

Coverage ratios
  Coverage ratios are financial ratios that measure the ability of the company to repay its financial liabilities. Such ratios compare company’s operating income (or other type of income) or operating cash fl

Quick ratio
  Quick ratio (also called ‘acid test ratio’) is a financial ratio that measures company’s financial liquidity. This ratio compares company’s most liquid assets and short-term liabilities. I

Current ratio
  Current ratio is a financial ratio that measures company’s financial liquidity in short term. In simple words, this ratio compares company’s short-term assets to its short term liabilities. If short-t

Cash ratio
  Cash ratio is a financial ratio that measures company’s financial liquidity over short term. It compares company’s cash reserves to short-term liabilities. If ‘cash ratio’ is high, it may

Equity ratio
  Equity ratio is a financial ratio that compares company’s equity to assets. Basically, it shows what part equity capital makes in total capital of a company. If ‘equity ratio’ is very high (clos

Capital Adequacy ratio
  Capital adequacy ratio is the main financial ratio for banks to measure whether the bank has enough of capital on which depends the riskiness of the bank. Banks are borrowing money from other depositors and it is

Cost/Income ratio
  Cost/income ratio is very popular financial ratio in bank analysis. This ratio measures the relation of bank’s operating costs to operating income. Basically, lower ratio is better because means higher prof

Non-Performing Loan ratio
  Non-performing loan ratio measures the quality of the loan portfolio of the financial institution. This financial ratio compares non-performing loans to the total loan portfolio (loans are assets for the bank), a

Loan to Deposit ratio
Loan to deposit ratio is financial ratio used for banks or other financial institutions. This ratio compares bank’s loan portfolio to deposit portfolio and measures financial liquidity of the institution.  &n

Loans to Assets ratio
  ‘Loans to assets ratio’ is a financial ratio that usually is applied for banks (or credit unions) to measure the relation of the bank’s loan portfolio to the total assets.   Providing loa

Reserve ratio
  Reserve ratio (reserve requirement or cash reserve ratio) is a ratio that is used by central bank of an area to regulate the financial market. This financial ratio compares the cash of the bank to the deposits th

Cash Turnover ratio
  Cash turnover ratio compares company’s sales to its cash and measures how effectively company is using cash assets. However, this financial ratio now is a bit outworn and is not very meaningful for most of

Liquidity ratio
  Liquidity ratio is a ratio that measures company’s liquidity. At first, it is needed to mention that liquidity may have two meanings: financial liquidity of a company or market liquidity of some asset. Liqu

Equity to Asset ratio
  Equity to asset ratio measures company’s riskiness by comparing its equity to its assets. If this ratio is very low (lower than 0.3), it might mean that company may be at risk if conditions of the market wo

Asset to Equity ratio
  Asset to equity ratio compares company’s assets to the book value and measures the riskiness of the company. This ratio cannot be lower than 1.0, and if it is equal to 1, it means that assets are equal to e

Total Debt ratio
  Total debt ratio compares total liabilities to total assets. The higher ratio represents riskier situation. And if this ratio is equal to 1.0, it would mean that liabilities are equal to assets or in other words

Privately Held Corporation
  Privately held corporation or closely held corporation is a company, which doesn’t have its shares listed on the stock exchange. If a corporation is closely held it not necessary means that it is small busi

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