A valuation is an estimate of something’s worth (in finance, it usually refers to a company’s worth). There are many ways to value a company or asset – Net Present Value, Price to Cash Flow, Price to Earnings, Price to Growth, etc. Valuations are typically performed by professionals (people who are specially trained and whom you can hire to perform specific valuations for you).
Archive for the ‘Level 1’ Category
A Valuation is…
Friday, August 21st, 2009A CD is…
Friday, August 21st, 2009A CD is a Certificate of Deposit, which is basically a savings account with a higher interest rate. In return for the higher rate, you aren’t allowed to touch your money for a set period of time. In general, shorter periods of time (like three months) have lower interest rates, while the longer time periods have much higher ones.
A Monopoly is…
Friday, August 21st, 2009A monopoly is a company that has control over all sales and distribution of a product – to the extent that no other company can compete with it. For example, if your cable or utility companies are the only sellers of their service and you can’t really choose another company to buy from, they hold a monopoly on that particular service. Remember the game Monopoly? The goal was to own EVERYTHING.
R&D is…
Friday, August 21st, 2009R&D is an abbreviation for “research and development.” This is the investment an organization makes to investigate and create new goods, services, or other techniques to gain an advantage over its competitors.
The S&P 500 is…
Friday, August 21st, 2009The S&P 500 (or Standard & Poor’s 500) is an index of 500 stocks that are used to measure the performance of the domestic stock market in the U.S. The S&P 500 was created to represent the major common stock of public American companies.
A Bailout is…
Friday, August 21st, 2009A bailout is major financial support from a government to a failing business so that it doesn’t collapse and cause even greater harm to the economy as a whole. Usually the business will be subject to tighter government regulation as a result of accepting the financial support.
A Sector is…
Friday, August 21st, 2009A sector is a specific portion of the economy or society. It can be really general, as in the public or the private sectors; slightly more specific, like manufacturing or commercial sectors; or quite specific, for example referring only to textiles or grain.
The Great Depression is…
Friday, August 21st, 2009The Great Depression is the severe, global, long-term economic downturn that began with a stock market crash in October 1929. In the United States, the stock market lost half of its value within a month of the crash’s start and unemployment remained as high as 17% in 1939, 10 years after the crash. The depression followed a decade of spectacular economic growth – the “roaring twenties” – and the U.S. economy didn’t really recover until the build-up to WWII in the 1940s.
A Profit Margin is…
Friday, August 21st, 2009A profit margin is the amount by which the income of a business exceed its costs – or, in other words, the percentage of an item’s price that the seller gets to keep. So if your business sells jeans for $100 a pair, but each pair takes only $89 to make, you get to keep the remaining $11, and your profit margin is 11%.
A Defined Benefit Plan is…
Friday, August 21st, 2009A defined benefit plan is a type of pension plan under which the plan’s sponsor agrees to pay all employees who are covered by that plan a specified amount of benefits when they retire. For example, and in contrast to a Defined Contribution Plan, a retiree is guaranteed health care rather than a certain dollar amount to use towards health care.