Valuation Foundations
This financial statement provides a "snapshot" of a company’s financial position at a specific point in time, listing its assets, liabilities, and shareholders' equity.
What is a Balance Sheet?
This method involves looking at a business's financial statements, health, and market share to determine its value.
What is Fundamental Analysis?
These investment vehicles allow you to buy a "basket" of stocks or bonds that track a specific index.
What are ETFs (Exchange Traded Funds)?
This is the chance that an investment's actual return will be different than expected.
What is Risk?
This "Fixed Income" asset represents a loan made by an investor to a borrower (typically corporate or governmental) that pays a set interest rate.
What is a Bond?
This statement tracks the actual movement of money in and out of a business, categorized by operating, investing, and financing activities.
What is the Statement of Cash Flows?
This is the study of the specific economic and competitive factors affecting a particular business sector.
What is Industry Analysis?
This strategy involves dividing your money among different types of investments, like stocks, bonds, and cash.
What is Asset Allocation?
This model calculates the expected return of an asset based on its "Beta" and the market risk premium.
What is the CAPM (Capital Asset Pricing Model)?
These are raw materials or primary agricultural products that can be bought and sold, such as gold, oil, or wheat.
What are Commodities?
This valuation method involves forecasting future cash flows and "discounting" them back to their present value to determine an investment's current worth.
What is Discounted Cash Flow (DCF)?
This process uses specific criteria to filter a large universe of stocks down to a few that meet an investor's requirements.
What is Stock Screening?
This theory suggests that you can construct an "efficient frontier" of investments that maximize return for a given level of risk.
What is Modern Portfolio Theory?
In CAPM, this measure describes how much a specific stock moves in relation to the overall market.
What is Beta?
This is the market where different global "Currencies" are traded against one another, often referred to by this four-letter acronym.
What is Forex (or FX)?
In a DCF model, this specific percentage rate is used to convert future cash flows into today’s dollars, often reflecting the risk of the investment.
What is the Discount Rate?
This framework analyzes an industry’s attractiveness through five forces: Competition, New Entrants, Substitutes, and Buyer/Supplier Power.
What is Porter’s Five Forces?
This is the primary benefit of MPT, where you reduce risk by spreading your investments across various assets that don't move in sync.
What is Diversification?
This type of risk is inherent to the entire market (like a recession) and cannot be diversified away.
What is Systematic Risk?
These financial contracts "derive" their value from an underlying asset; common types used by investors include options and futures.
What are Derivatives?
This is the "final" value of a company at the end of a DCF projection period, assuming the business continues to grow at a steady rate forever.
What is Terminal Value?
In fundamental analysis, this financial document shows a company's revenues and expenses over a specific period.
What is an Income Statement?
In asset allocation techniques, this refers to the practice of buying and selling assets to return to your original desired percentages.
What is Rebalancing?
This specific "Rate" is the return on an investment with zero risk, often represented by a U.S. Treasury Bill.
What is the Risk-Free Rate?
In "Fixed Income" investing, this is the annual interest rate paid on a bond, expressed as a percentage of the face value.
What is the Coupon Rate?