Glossary

Learn & be a stock guru...

The financial world has developed a special investment-oriented language to help describe the stock market, investments, securities for the stock market, stock market analysis, and its conditions. At times you may be confronted with a term which is totally alien or has a completely different meaning from what you thought. Misunderstanding these terms can sometimes lead to the wrong conclusion, and that can cost you money!

What you don't know can hurt you.

Target Price

The price that one hopes a given security will reach.

Tax Rate

The percentage of net income the company pays in income taxes.

Technical Analysis

The practice of trying to define stock prices by examining trading patterns and comparing the shape of current charts to those from the past. Technical analysts use a variety of complex charting techniques, but some of the most basic involve plotting price movements in a stock over time on a fever chart. The shape of the chart is supposed to reveal something about whether the stock is headed up or down. A head and shoulders pattern, for instance, could imply a stock has topped out. Technicians look for stocks that have broken through their resistance level (on the upside). A stock that has broken through its support level (on the downside) is considered poised for further losses. Critics deride technical analysis as only so much hocus-pocus, not far removed from tea-leaf reading. Advocates insist that the stock market clearly moves in broad patterns, and that these can be recognized by careful charting and a knowledge of history. Whether or not technical analysis has any validity, it has a good many adherents, and on that basis alone influences stock prices.

Technical Analyst

Technical analysts try to forecast price movements by examining and charting the patterns formed by price history, trading volume, the ratio of advancing stocks to declining stocks, and other technical data. Because technical analysts rely heavily on charts and graphs, they are often called chartists. Most brokerage firms employ at least one technical analyst.

Tender Offer

An offer from a company to shareholders to buy their shares of stock. Companies sometimes make tender offers to buy back their own stock to reduce the number of outstanding shares. But often, a tender offer is a key element in one company's attempt to take over another. To entice you to sell, the company making the tender offer may be willing to pay an above-market price for your shares.

Ticker

A unique, market-approved code that identifies a particular security on an exchange. The ticker symbol generally reflects the name of the security. For example, the symbol for Pakistan International Airlines stock is PIAA.

Time Value

The portion of an option premium that is attributed to the amount of time remaining until the option contract expires. Time value is whatever value the option has in addition to its intrinsic value.

Title insurance

Insurance policies that protect lenders in cases where the title of a property is challenged for reasons such as fraud.

Total Annualized Return

An investment return projected over a one-year period, compounded daily. For example, if an investment returned 1% over one month, it would have an annualized return of approximately 12%. Total annualized return can be useful in assessing the performance of an investment held for a brief period.

Total Assets

Current assets plus non-current assets.

Total Current Assets

The sum of cash and equivalents, receivables, inventories, and other current assets. Total current assets are all the assets convertible into cash within a relatively short period of time, usually a year. This number ought to be substantially greater than total current liabilities.

Total Current Liabilities

The sum of accounts payable, short-term debt, and other current liabilities. This number ought to be smaller than total current assets.

Total Equity

The sum of preferred stock equity and common stock equity.

Total Income Available for Interest Expense

Earnings before interest and taxes (EBIT) adjusted for other income, net.

Total Liabilities

The sum of total current liabilities and total non-current liabilities.

Total Liabilities and Stock Equity

The sum of the total liabilities and the shareholders' equity.

Total Net Income

The sum of income from continuing and discontinued operations plus all other adjustments for extraordinary items, other gains/losses, accounting changes, tax loss carryforward, and special items.

Total Non-Current Assets

The sum of intangibles and other non-current assets.

Total Non-Current Liabilities

The sum of long-term debt, deferred income taxes, other non-current liabilities, and minority interest.

Total Return

Gain or loss over a specified time period, including capital gains as well as dividends. For mutual funds, total return assumes reinvestment of all income and capital-gains distributions during the period. Total return is calculated by figuring the change in net asset value over time and then dividing by the NAV at the start of the period. Total return does not take account of sales charges or for redemption fees but the figure does take account of management, administrative, and other costs automatically deducted from fund assets.

Total Stocks

The number of stocks held by a given mutual fund. An indication of the portfolio's diversification.

Transaction

A transaction may be a purchase, sale, or exchange of one or more securities.

Treasury Bill

A Treasury security of one year or less in duration. T-bills are sold in minimum denominations of Rs. 100,000

Treasury Bond

Technically, a Treasury security of 30 years duration, but T-bonds of shorter duration are available in the secondary market.

Treasury Budget

A government report that presents the monthly Federal Budget Deficit data. The Treasury budget data follow strong seasonal patterns, which produce huge month-to-month fluctuations in the deficit. These fluctuations tell us little about long term budget trends. To the extent that the market analyzes the monthly Treasury data, the focus is on year/year changes in receipts and outlays, since the data are not seasonally adjusted. Only in April, the most important month for tax inflows to the Treasury, does the market pay any attention to this report. The data can be predicted with reasonable accuracy by using daily data in the Daily Treasury Statement.

Treasury Note

A Treasury security of two to 10 years in duration. The minimum denomination varies based on duration.

Treasury Shares

Stock that was once outstanding but has since been repurchased by the company. Treasury stock is generally carried at cost and doesn't count when it comes to figuring dividends or earnings per share.

Trust

A legally recognized arrangement where one or more persons (trustees) take title to property to hold it for the benefit of another person (beneficiary). One person may be trustee and beneficiary, which is usually the case during the life of someone who has established a revocable living trust.

Trust deed

A trust deed is a legal document that specifies among other things the collateral for a loan, and it gives a lender the right to seize and sell the collateral if the borrower fails to repay. For a home loan, the collateral is the home itself.

Turnover Ratio

A measure of a fund's trading activity, computed by dividing the lesser of purchases or sales (excluding all securities with maturities of less than one year) by average monthly assets. A turnover ratio of 100% or more does not necessarily suggest that all securities in the portfolio have been traded. In practical terms, the resulting percentage loosely represents the percentage of the portfolio's holdings that have changed over the past year.

Type

The kind of security in question (stock, mutual fund, etc.).