09 - Security Analysis

  1. Fundamental Analysis
    The analysis of determinants of firm value (prospects for earnings and dividends).
  2. Exchange Rate
    The rate at which domestic currency can be converted into foreign currency.
  3. Gross Domestic Product (GDP)
    The market value of goods and services produced over a period of time.
  4. Unemployment Rate
    The ratio of the number of people classified as unemployed to the total labour force.
  5. Budget Deficit
    The amount by which government spending exceeds government revenues.
  6. Demand Shock
    An event that affects the demand for goods and services in the economy.
  7. Supply Shock
    An event that influences production capacity and costs in the economy.
  8. Fiscal Policy
    The use of government spending and taxation for the specific purpose of stabilising the economy.
  9. Monetary Policy
    Actions taken by the RBA to influence the money supply or interest rates.
  10. Business Cycles
    Peak - transition point between expansion and contraction.

    Trough - transition point between recession and recovery.
  11. Cyclical Industries
    Industries with above average sensitivity to the state of the economy.
  12. Defensive Industries
    Industries with below average sensitivity to the state of the economy.
  13. Leading Economic Factors
    Economic series that tend to rise or fall in advance of the rest of the economy.
  14. Global Industry Classification Standard (GICS Codes)
    Classification of firms using numerical codes to identify sectors and industries they belong to.
  15. Sector Rotation
    An investment strategy that entails shifting the portfolio into industry sectors that are expected to outperform others based on macroeconomic forecasts.
  16. Industry Life Cycle
    Stages through which firms typically pass as they mature.

    • Start-up (Rapid and increasing growth)
    • Consolidation (Stable growth)
    • Maturity (Slowing growth)
    • Relative Decline (Minimal or negative growth)
  17. Income Statement
    A financial statement showing a firm's revenues and expenses during a specified period.
  18. Balance Sheet
    An accounting statement of a firm's financial position at a specified time.
  19. Statement of Cash Flows
    A financial statement showing a firm;s cash receipts and cash payments during a specified period.
  20. Return on Equity (ROE)
    The ratio of net profits to common equity.
  21. Return on Assets (ROA)
    Earnings before interest and taxes divided by total assets.
  22. Dupont System
    Decomposition of profitability measures into component ratios.
  23. Profit Margin (Return on Sales)
    The ratio of operating profits per dollar of sales.

    (EBIT / sales)
  24. Total Asset Turnover (ATO)
    The annual sales generated by each dollar of assets.

    (sales / assets)
  25. Interest Coverage Ratio (Times Interest Earned)
    EBIT / Interest Expense
  26. Leverage Ratio
    Measure of debt to total capitalisation of a firm.

    1 + (debt / equity)
  27. Inventory Turnover
    Cost of goods sold / average inventory
  28. Average Collection Period (Days Receivables)
    Accounts receivables per dollar of daily sales.

    (average accounts receivables / sales) x 365
  29. Current Ratio
    Current assets / current liabilities
  30. Quick (Acid Test) Ratio
    (cash + marketable securities + receivables) / current liabilities
  31. Cash Ratio
    (cash + marketable securities) / current liabilities
  32. Market-to-book Value Ratio
    Market price of a share / book value per share
  33. Price Earnings (P/E) Ratio
    Market price / earnings
  34. Earnings Yield
    Earnings / Price
  35. Economic Value Added (Residual Income)
    A measure of the dollar value of a firm's return in excess of its opportunity cost.
  36. International Financing Reporting Standards
    A principles-based set of accounting rules adopted by around 100 countries (including European Union).
  37. Fair Value (Mark-to-market) Accounting
    Use of current market values rather than historic cost in the firm's financial statements.
  38. Quality of Earnings
    The realism and sustainability of reported earnings.
  39. Economic Earnings
    The real flow of cash that a firm could pay out without impairing its productive capacity.
  40. Accounting Earnings
    Earnings of a firm as reported on its income statement.
Card Set
09 - Security Analysis
221 - Analysis