Investment Glossary

110 essential financial and investment terms with authoritative definitions and deep source links from SEC, CFA Institute, Federal Reserve, FASB, Investopedia, and Cornell Law.

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10-K (regulation)
An annual report filed by publicly traded companies with the SEC that provides a comprehensive summary of financial performance, including audited financial statements, management discussion and analysis (MD&A), and risk factors.
10-Q (regulation)
A quarterly report filed with the SEC that includes unaudited financial statements and provides a continuing view of a company's financial position during the year. Less detailed than the 10-K but filed three times per year.
20-F (regulation)
An annual report filing required by the SEC for foreign private issuers with equity shares listed on US exchanges. Equivalent to the 10-K for domestic filers, it must include financial statements reconciled to US GAAP or prepared under IFRS.
Accrual Accounting (accounting)
An accounting method that records revenues when earned and expenses when incurred, regardless of when cash is actually received or paid. Required under GAAP for publicly traded companies.
Amortization (accounting)
The gradual write-off of an intangible asset's cost over its useful life, or the reduction of a debt through periodic payments. In the context of annual reports, typically refers to the systematic allocation of the cost of intangible assets.
Asset Impairment (accounting)
A permanent reduction in the value of a company's asset when its carrying amount exceeds its recoverable amount. Companies must test goodwill and indefinite-lived intangibles for impairment at least annually under ASC 350.
Beta (valuation)
A measure of a stock's volatility relative to the overall market. A beta of 1 indicates the stock moves with the market; greater than 1 means more volatile; less than 1 means less volatile. Central to the Capital Asset Pricing Model (CAPM).
Book Value (valuation)
The net asset value of a company, calculated as total assets minus total liabilities. Book value per share divides this by outstanding shares. Often compared to market price via the Price-to-Book (P/B) ratio.
Capital Expenditure (CapEx) (corporate-finance)
Funds used by a company to acquire, upgrade, or maintain physical assets such as property, plants, or equipment. Reported in the cash flow statement under investing activities and capitalized on the balance sheet rather than expensed.
Cash Flow from Operations (CFO) (accounting)
The amount of cash generated by a company's regular business operations. It indicates whether a company can generate sufficient positive cash flow to maintain and grow its operations without external financing.
Cost of Goods Sold (COGS) (accounting)
The direct costs attributable to the production of goods sold by a company, including materials and direct labor. Subtracted from revenue to determine gross profit. Excludes indirect expenses such as distribution and sales force costs.
Current Ratio (accounting)
A liquidity ratio that measures a company's ability to pay short-term obligations due within one year. Calculated as current assets divided by current liabilities. A ratio above 1 indicates more assets than liabilities in the short term.
Debt-to-Equity Ratio (corporate-finance)
A financial leverage ratio comparing a company's total liabilities to shareholder equity. It indicates the proportion of equity and debt used to finance assets. Higher ratios suggest more aggressive financing through debt.
Depreciation (accounting)
The systematic allocation of the cost of a tangible fixed asset over its useful life. Methods include straight-line, declining balance, and units of production. Reduces taxable income without requiring cash outflow.
Diluted Earnings Per Share (accounting)
A performance metric that calculates earnings per share assuming all convertible securities (options, warrants, convertible bonds) are exercised. Provides a worst-case scenario for existing shareholders' claim on earnings.
Discounted Cash Flow (DCF) (valuation)
A valuation method that estimates the present value of an investment based on its expected future cash flows, discounted at an appropriate rate (typically WACC). The fundamental intrinsic valuation approach in corporate finance.
Dividend Yield (valuation)
The annual dividend payment divided by the stock's current market price, expressed as a percentage. Indicates the cash return on investment from dividends alone, excluding capital gains.
EBITDA (valuation)
Earnings Before Interest, Taxes, Depreciation, and Amortization. A widely used proxy for operating cash flow that removes the effects of financing and accounting decisions. Not a GAAP measure but commonly used in valuation multiples.
Enterprise Value (EV) (valuation)
The total value of a company, calculated as market capitalization plus total debt plus minority interest plus preferred shares minus cash and equivalents. Represents the theoretical takeover price of a firm.
Equity Risk Premium (valuation)
The excess return that investing in the stock market provides over a risk-free rate (typically government bonds). Represents the compensation investors demand for bearing the higher risk of equities.
Fair Value (accounting)
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Defined under ASC 820 with a three-level hierarchy.
Free Cash Flow (FCF) (corporate-finance)
Cash generated by operations minus capital expenditures. Represents the cash available to all capital providers (debt and equity holders) after maintaining or expanding the asset base. A key metric for intrinsic valuation.
GAAP (Generally Accepted Accounting Principles) (accounting)
The standard framework of guidelines for financial accounting used in the United States, established by the Financial Accounting Standards Board (FASB). All publicly traded US companies must prepare financial statements in accordance with GAAP.
Going Concern (accounting)
An accounting assumption that a company will continue to operate indefinitely and not be forced to liquidate. Auditors must evaluate and disclose substantial doubt about going concern status in their audit opinion.
Goodwill (accounting)
An intangible asset that arises when a buyer acquires an existing business for more than the fair value of its net identifiable assets. Represents brand reputation, customer relationships, and other non-separable value. Subject to annual impairment testing.
Gross Margin (accounting)
Revenue minus cost of goods sold, divided by revenue, expressed as a percentage. Indicates the portion of each dollar of revenue retained after accounting for direct production costs. A key measure of pricing power and production efficiency.
Hedge Fund (markets)
A pooled investment fund that employs various strategies (long/short equity, global macro, event-driven, quantitative) to earn active returns for investors. Typically structured as limited partnerships with high minimum investments and performance fees.
IFRS (International Financial Reporting Standards) (accounting)
A set of accounting standards issued by the International Accounting Standards Board (IASB) used in over 140 countries. Foreign private issuers filing 20-F reports with the SEC may use IFRS without reconciliation to US GAAP.
Insider Trading (regulation)
The buying or selling of a publicly traded company's securities by someone who has material, non-public information about the company. Illegal when based on material non-public information; legal insider transactions must be reported to the SEC on Forms 3, 4, and 5.
Interest Coverage Ratio (corporate-finance)
A debt and profitability ratio used to determine how easily a company can pay interest on its outstanding debt. Calculated as EBIT divided by interest expense. A ratio below 1.5 may signal financial distress.
Internal Controls (regulation)
Processes designed to provide reasonable assurance regarding the reliability of financial reporting, effectiveness of operations, and compliance with laws. SOX Section 404 requires management and auditors to assess internal controls over financial reporting.
Intrinsic Value (valuation)
The perceived or calculated true value of an asset based on fundamental analysis, independent of its current market price. The difference between intrinsic value and market price represents the margin of safety.
Leverage (corporate-finance)
The use of borrowed capital (debt) to increase the potential return on investment. Financial leverage amplifies both gains and losses. Measured by ratios such as debt-to-equity, debt-to-EBITDA, and interest coverage.
Liquidity (markets)
The ease with which an asset can be converted into cash without significantly affecting its market price. At the corporate level, refers to a company's ability to meet short-term obligations. At the market level, refers to trading volume and bid-ask spreads.
Management Discussion and Analysis (MD&A) (regulation)
A required section of a 10-K filing where management provides a narrative explanation of the financial statements, including discussion of results, liquidity, capital resources, and known trends or uncertainties.
Market Capitalization (markets)
The total market value of a company's outstanding shares of stock, calculated by multiplying the current share price by the total number of shares outstanding. Used to classify companies as large-cap, mid-cap, or small-cap.
Material Weakness (regulation)
A deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis.
Minority Interest (Non-Controlling Interest) (accounting)
The portion of a subsidiary's equity that is not owned by the parent company. Reported separately in the consolidated balance sheet and income statement to show the claim of outside shareholders on subsidiary earnings and assets.
Moat (Economic Moat) (valuation)
A sustainable competitive advantage that protects a company's market share and profitability from competitors. Types include network effects, switching costs, intangible assets (brands, patents), cost advantages, and efficient scale.
Net Income (accounting)
The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue. Also known as the 'bottom line.' The starting point for earnings per share calculations.
Operating Margin (accounting)
Operating income divided by revenue, expressed as a percentage. Measures how much profit a company makes on each dollar of sales after paying variable costs of production but before paying interest or taxes.
Options (Stock Options) (derivatives)
Contracts that give the holder the right, but not the obligation, to buy (call) or sell (put) an underlying asset at a specified price within a specified time period. Employee stock options are a form of equity compensation.
Price-to-Earnings Ratio (P/E) (valuation)
The ratio of a company's current share price to its earnings per share. The most widely used valuation multiple. Forward P/E uses estimated future earnings; trailing P/E uses the last 12 months of actual earnings.
Proxy Statement (DEF 14A) (regulation)
A document filed with the SEC that provides shareholders with information needed to make informed decisions at annual or special meetings, including executive compensation, board nominees, and shareholder proposals.
Return on Equity (ROE) (corporate-finance)
Net income divided by average shareholders' equity, expressed as a percentage. Measures how effectively management uses equity capital to generate profits. Can be decomposed via DuPont analysis into margin, turnover, and leverage components.
Return on Invested Capital (ROIC) (corporate-finance)
A measure of how well a company generates cash flow relative to the capital it has invested. Calculated as NOPAT divided by invested capital. A ROIC exceeding the cost of capital indicates value creation.
Revenue Recognition (accounting)
The accounting principle that determines when revenue is recorded. Under ASC 606, revenue is recognized when control of goods or services transfers to the customer, in an amount reflecting the consideration expected to be received.
Risk Factors (regulation)
A required section of SEC filings (Item 1A of Form 10-K) where companies disclose the most significant risks that could materially affect their business, financial condition, or results of operations.
Sarbanes-Oxley Act (SOX) (regulation)
A 2002 US federal law enacted in response to corporate scandals (Enron, WorldCom) that established enhanced financial disclosure requirements, internal control assessments, and criminal penalties for fraudulent financial activity.
Segment Reporting (accounting)
The disclosure of financial information by business segment or geographic area, as required by ASC 280. Allows investors to understand the different components of a diversified company's operations and their individual performance.

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