Investing Terms

TTM (Trailing Twelve Months)

Refers to the most recent 12-month period of a company's financial performance, used for analyzing financial data such as revenues, earnings, or other metrics. It's often used to provide a more recent picture than annual reports.

MRQ (Most Recent Quarter)

Similar to TTM, MRQ refers to data from the company's most recent fiscal quarter. This can be used to analyze trends or performance without waiting for annual data.

TAM (Total Addressable Market)

The total market demand for a product or service. It represents the maximum revenue opportunity available for a product or service, assuming 100% market share.

ARR (Annual Recurring Revenue)

A metric used in subscription-based models (like software as a service) that shows the predictable and recurring revenue components of the annual income.

WACC (Weighted Average Cost of Capital)

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. It's used in financial modeling to discount future cash flows.

CAGR (Compound Annual Growth Rate)

A measure of the mean annual growth rate of an investment over a specified time period longer than one year. It represents one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.

DCF (Discounted Cash Flow)

A valuation method used to estimate the value of an investment based on its expected future cash flows. The method involves discounting future cash flows back to their present value.

GDP (Gross Domestic Product)

The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. It functions as a comprehensive scorecard of a country’s economic health.

LBO (Leveraged Buyout)

A financial transaction in which a company is purchased with a significant amount of borrowed money, with the assets of the company being used as collateral for the loans.

M&A (Mergers and Acquisitions)

The process of consolidating companies or assets, with 'Mergers' being the combination of two companies to form one, and 'Acquisitions' being the purchase of one company by another.

NAV (Net Asset Value)

The value per share of a mutual fund or an exchange-traded fund (ETF). It's calculated by dividing the total value of all the securities in the fund's portfolio, minus any liabilities, by the number of shares outstanding.

Payback Period

The length of time required to recover the cost of an investment. It's a simple way to evaluate the risk associated with a proposed project.

ROI (Return on Investment)

A measure used to evaluate the efficiency of an investment or compare the efficiencies of several different investments. It’s calculated as the net profit divided by the cost of the investment.

ROE (Return on Equity)

A measure of financial performance calculated by dividing net income by shareholders' equity. It's considered a measure of how effectively management is using a company’s assets to create profits.

ROA (Return on Assets)

An indicator of how profitable a company is relative to its total assets. It gives an idea as to how efficient management is at using its assets to generate earnings.

Fed (Federal Reserve System)

The central banking system of the United States, responsible for setting monetary policy, regulating banks, maintaining the stability of the financial system, and providing financial services.

CEO (Chief Executive Officer)

The highest-ranking executive in a company, responsible for making major corporate decisions, managing the overall operations and resources, and acting as the main point of communication between the board of directors and corporate operations.

CFO (Chief Financial Officer)

A senior executive responsible for managing the financial actions of a company. The CFO's duties include tracking cash flow and financial planning as well as analyzing the company's financial strengths and weaknesses and proposing corrective actions.

COO (Chief Operating Officer)

An executive responsible for the daily operation of the company, and usually the second-highest-ranking executive in a company. The COO reports to the CEO and is usually tasked with executing the company's business plans.

CTO (Chief Technology Officer)

An executive responsible for the management of an organization's technological needs as well as its research and development (R&D).

CIO (Chief Information Officer)

An executive with responsibility for the information technology and computer systems that support enterprise goals. Typically, the CIO focuses on internal IT systems and technology.

LLC (Limited Liability Company)

A business structure in the United States whereby the owners are not personally liable for the company's debts or liabilities. Combines the characteristics of a corporation with those of a partnership or sole proprietorship.

SaaS (Software as a Service)

A software distribution model in which a third-party provider hosts applications and makes them available to customers over the Internet. This eliminates the need for organizations to install and run applications on their own computers or in their own data centers.

FFO (Funds From Operations)

A measure of cash generated by real estate investment trusts (REITs). It's calculated by adding depreciation and amortization to earnings, subtracting any gains on sales.

FIFO (First-In, First-Out)

An asset-management and valuation method in which assets produced or acquired first are sold, used, or disposed of first. It's commonly used in inventory management.

LIFO (Last-In, First-Out)

Another method used in managing inventory and financial matters, where the most recently produced items are recorded as sold first.

ROIC (Return on Invested Capital)

A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. It gives an idea of how well a company is using its money to generate returns.

FCF (Free Cash Flow)

A measure of a company's financial performance that shows how much cash a company generates after accounting for capital expenditures like buildings or machinery. It's an important measurement since it allows a company to pursue opportunities that enhance shareholder value.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

A measure of a company's overall financial performance and is used as an alternative to simple earnings or net income in some circumstances.

EV (Enterprise Value)

A measure of a company's total value, often used as a more comprehensive alternative to equity market capitalization. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company's balance sheet.

PE (Price-to-Earnings Ratio)

A valuation ratio of a company's current share price compared to its per-share earnings. It's used by investors and analysts to determine the relative value of a company's shares in an apples-to-apples comparison. A higher PE ratio means investors are paying more for each dollar of net income, so the stock is more expensive compared to one with a lower PE ratio.

PEG (Price/Earnings to Growth Ratio)

A stock's price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a specified time period. The PEG ratio is used to determine a stock's value while also factoring in the company's expected earnings growth, and is thought to provide a more complete picture than the P/E ratio alone.

CAC (Customer Acquisition Cost)

A metric used by businesses to determine the total average cost they spend to acquire a new customer. This includes all the costs of sales and marketing efforts that are required to attract a customer, divided by the number of new customers acquired.

DCF (Discounted Cash Flow)

This is a valuation method used to estimate the value of an investment based on its expected future cash flows. The method involves discounting future cash flows back to their present value, using a discount rate that reflects the riskiness of the investment.

Basis Point

A unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. It is commonly used for calculating changes in interest rates, equity indices, and the yield of a fixed-income security.

Market Order

This is an order to buy or sell a stock at the best available current price. It is executed almost immediately under normal market conditions. Market orders do not guarantee a price, but do guarantee immediate execution.

Limit Order

A limit order is an order to buy or sell a stock at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can be executed at the limit price or higher. This gives the trader control over the price at which the trade is executed, but does not guarantee that the trade will be executed.

Stop Order (or Stop-Loss Order)

An order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the stop price is reached, a stop order becomes a market order. A buy-stop order is executed at a price above the current market price, and a sell-stop order is executed at a price below the current market price.

Stop-Limit Order

A stop-limit order combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy or sell at the limit price or better.

Day Order

A day order is a trading order that is valid from the time the order is placed until the end of the trading day. If not executed, the order will expire at the end of the trading session.

Good-Til-Cancelled (GTC) Order

This type of order stays active until it is filled or until the investor cancels it. Brokerages will typically limit the maximum time you can keep a GTC order open (often 60-90 days).

Trailing Stop Order

This is a type of stop order that moves relative to price fluctuations. For example, in a long position, as the price of the stock increases, the trailing stop rises by a specified percentage or dollar amount. If the stock price falls, the stop-loss price doesn't change, and a market order is triggered at the stop price.

Fill or Kill (FOK) Order

An order to buy or sell a stock that must be executed immediately in its entirety; otherwise, the entire order will be canceled (none of it will be executed).

All or None (AON) Order

An order to buy or sell a stock that must be executed in its entirety, or not executed at all. However, unlike a Fill or Kill order, an All or None order does not have to be executed immediately.

Market On Close (MOC) Order

An order to buy or sell a security at a price based on the closing price of that security for the day.

Limit on Close (LOC) Order

An order placed during the trading day to buy or sell at the market close at a limit price.