An interest coverage ratio (ICR) measures a company's ability to pay interest expense on its debt. An ICR ratio below 1.5x may signal weakness and possible cash flow issues.
A detailed financial report filed annually by publicly traded stocks with the Securities and Exchange Commission (SEC). Investors use the report to assess whether a company is well managed and profitable.
A financial report filed quarterly by publicly traded companies with the Securities and Exchange Commission (SEC). The 10-Q requires firms to disclose all relevant information regarding their financial position. Some areas of interest to investors include changes to working capital and/or accounts payable.
The 10-year treasury note is a debt obligation issued by the US government that is to be paid out after 10 years (or when the security matures). Treasury bond yields are closely tracked as an indicator of investor confidence. Treasury notes are backed by the US government and considered the safest investment
The Absolute advantage is when one producer of a good or service can make that product at a lower cost than the other. Absolute advantage also reflects the capability to produce more of a given product using less of a given resource than a competing entity.
The Abu Dhabi Securities Exchange (ADX) is a stock exchange located in Abu Dhabi.
An acquisition happens when a full business or part of a business is purchased. Acquisitions enable large companies to buy smaller firms that help them expand into new markets or create additional value.
After-hours trading is the period of time when an investor can buy and sell securities outside regular trading hours. Electronic communication networks make after-hours trading possible.
Alpha measures the additional return that an investment provides compared to a benchmark. A simple way to calculate alpha is to subtract your total return on an investment from a relevant market index. Positive alpha means that a stock or portfolio's return was above that of the benchmark.
American Depositary Receipt (ADR) is a certificate issued by a U.S. bank that represents shares in foreign stock. ADRs offer US investors a way to gain investment exposure to non-US stocks with less complication
An angel investor is an individual or entity who provides capital for an early-stage start-up in exchange for debt or equity. Angel investors typically fill the gap between a friends and family funding round and a venture capital funding round.
Annuities are contracts issued or sold by financial institutions, which invest funds from individuals. An annuity is an investment that promises to pay regular income to the investor. There are four kinds of annuities: fixed, variable, immediate payment and deferred income.
Artificial intelligence is the ability of machines to exhibit human-like intelligence and a degree of autonomous learning. Algorithms often play a very important part in the structure of artificial intelligence.
An asset is a resource owned by an individual, business or entity. Assets are reported on a company's balance sheet and increase a company's value. Examples of assets include stocks, inventory, equipment and real estate.
The asset turnover ratio measures a company's revenue compared to its assets. The asset turnover ratio can be used to determine how efficiently a company is using its assets to generate revenue.
Assets under management (AUM) is the total market value of investments that an entity manages. AUM calculations vary by company, but in general it includes bank deposits, mutual funds, and cash.
B2B, also known as business-to-business, involves a sales or service exchange between two businesses. B2B transactions are typically high-dollar amounts than selling to a consumer directly. For example, it can involve a tire manufacturer selling a bulk order of tires to a car manufacturer.
B2C, or business-to-consumer, is the process of a business selling goods or services directly to a consumer. Traditionally, B2C referred to shopping from a store or eating at a restaurant. It has developed over time and now also includes the online selling of goods and services
The balance sheet is a financial statement that companies use to report their assets, liabilities and shareholders' equity. The balance sheet provides a picture of what the company owns, what it owes and a snapshot of its equity.
When the market is a “bear” market, the market has negative momentum and is in a decline. During a bear market, investors begin to disengage their investments and sell positions because they start to see the value of the securities that they hold dropping, diluting the market with many shares and therefore leading to an overall decrease in share prices.
Beta compares the movement of a stock to a broader market index. Beta indicates how volatile or sensitive a stock or other traded investment may be compared to the overall market.
Bitcoin is a decentralized cryptocurrency based on blockchain technology. Bitcoin is created by mining, which requires high-powered computers to process extremely complex math problems to create new bitcoin.
Bitcoin mining is the process of creating new bitcoin by solving a complex computational puzzle. The primary reason for mining is the prospect of being rewarded with Bitcoin once it's completed.
Blockchain is a decentralized, distributed ledger of records, called blocks, that are linked using cryptography. Blockchain makes the history of any digital asset unalterable and transparent, therefore making it almost impossible to change, hack, or cheat the system.
Blue chip stocks are shares of reputable companies that are financially stable and well-established within their respective sector. These stocks typically have a market cap in the billions and often pay dividends.
A bond is a note issued by a government or company that allows them to borrow money. Similar to stock, bonds are tradable in financial markets. You can buy bonds from a bond broker, government agency or through a fund made up of bond investment.
A break-even point is the point that total revenue and total costs is equal. The break-even point is used in both accounting to determine a company's break-even and in investing to determine the break-even point of an investment.
Brexit refers to the withdrawal of the United Kingdom from the European Union. Economists forsee Brexit having a substantial negative impact on the UK's economy in the immediate and long-term future, as it is likely to reduce the UK's income and affect the country's growth. The deal was finalized at the end of 2020.
When the market is a “bull” market, the market has positive momentum and is on an incline. Bull markets happen when market conditions are favorable and investors begin to have more confidence in the market.
The business cycle is the natural rise and fall of economic growth that happens over time. There are four different stages in a business cycle – growth, peak, contraction, and through. Economists determine the start of each phase based on a number of different measures including GDP and the unemployment rate.
A call option is a contract that gives the option buyer the right to buy an asset (the underlying asset) at a specific price within a specific time frame. A call buyer profits when the underlying asset increases in price.
Commodities exchange is a legal entity that facilitates the trade in commodity contracts and related investment products. Commodities are assets such as oil, minerals, grain, gold and more.
The Dubai Financial Services Authority is the financial services regulator of the Financial Freezone the Dubai International Financial Centre (“DIFC”). Firms that are authorised by the DFSA to undertake regulated activity are carefully supervised by the watchdog and must demonstrate adherence to a corpus of financial services rules and regulations which includes customer protection, safeguarding customers’ assets, and the like.
Investment diversification is a risk management technique that involves increasing the variety of investments in your portfolio. By diversifying and investing in differing types of assets, many investment professionals agree that doing so is an important component to reducing investment portfolio risk.
Dividends are payments made by a company to shareholders as a way to redistribute earnings. A dividend is paid per share of stock you own on a quarterly basis, though sometimes it can be paid monthly or semi-annually. The company's board of directors must approve each dividend and announce when it will be paid. Dividend stocks provide investors with a predictable income as well as long-term growth potential.
A dividend is a payment that shareholders receive from a company when it earns a profit. When a company is profitable, its management and board can choose to either reinvest the profits back into the company or distribute profits to investors in the form of dividends. Dividends are essentially a company’s way of saying “thank you” to investors.
The dividend payout ratio is the ratio of the amount of dividends paid to shareholders compared to the net income of the company. A growth-oriented company that is reinvesting most of its earnings will most likely have a low ratio, whereas a more mature company may have a higher ratio.
Dollar cost average is an investment strategy in which an investor divides up the total investment amount across periodic purchases of assets to reduce the impact of volatility. This strategy can remove the effort to 'time the market' to make equity purchases at optimal prices.
The DFM – Dubai Financial Market – was established in 2000 and is a stock exchange located in Dubai, UAE, for investors to buy and sell securities.
Earnings per share (EPS) is calculated by dividing a company's profit by its outstanding shares. It can be used as an indicator of a company's profitability. The higher a company's EPS, the more investors will pay for its stock and the more profitable the company is considered to be.
EBITDA stands for earnings before interest, taxes, depreciation, and amortization and is shown on a company's financial statements. EBITDA is a measure of a company's overall financial performance.
An ETF – an Exchange Traded Fund – is an investment fund comprising a collection of assets that tracks an underlying asset or index. An ETF can hold a wide variety of different types of investments, ranging from stocks, bonds, commodities, and can be comprised of various indices, a collection of stocks based around a theme, and more, giving investors exposure to a wide variety of different assets with just one single investment.
An exchange rate is the value of one country's currency compared to another country's currency. Most exchange rates are free-floating, meaning the rate varies due to changes in the foreign exchange market.
FAANG is an acronym for five well-known and high-performing US technology companies: Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google). These five stocks are a play on some technology trends like cloud computing, streaming media, and artificial intelligence. The combined market value of FAANG exceeds $3 trillion.
The Financial Industry Regulatory Authority, is a government-authorised organisation that oversees US broker-dealers; its overarching mandate is to protect investors and ensure the market’s integrity.
Forex trading is the trading of currencies within the foreign exchange market.
A fractional share is a portion of a whole share. Fractional shares are created from stock splits, dividend reinvestment plans, mergers or acquisitions or other corporate actions.
Initial coin offering (ICO) refers to the cryptocurrency industry’s equivalent of an initial public offering (IPO). A company that is looking to raise money can launch an ICO as a way to raise funds from investors, who would receive cryptocurrency tokens in exchange.
An interest coverage ratio (ICR) measures a company's ability to pay interest expense on its debt. An ICR ratio below 1.5x may signal weakness and possible cash flow issues.
IRR is used to measure the potential profitability of an investment by assessing when you will break even or what the expected rate of profit will be. IRR is measured by setting the net present value of all future cash flows equal to zero.
Investment correlation measures how different assets move in relation to each other. A perfect correlation of +1 means both asset prices move in the same direction (go up together, and go down together). A correlation of -1 indicates they move in opposite directions.
An IPO – an Initial Public Offering – is when a company decides to issue stock for the first time to raise money from external investors on a public market. This is also referred to as when a company “goes public” and officially becomes a publicly traded company. A company may issue an initial public offering for several reasons – to raise money for growth, to scale or to allow early shareholders to liquidate their shares. IPOs also generate publicity and boost reputation.
Market volatility is the magnitude or range of the change in a market, compared to what is an average performance for the same market. If you're investing in stock markets, whether you are a short-term trader or long-term investor, you will likely see and experience volatility and uncertainty in the markets you are investing in.
OTC stands for over the counter and refers to the trading of assets via a broker-dealer network or decentralized market. Securities that don't meet the requirements to list on a regulated market exchange such as the Nasdaq can be traded over-the-counter.
P/E ratio stands for price-to-earnings ratio and is an indicator for valuing a company to determine the value of a company's shares in an apples-to-apples comparison. A high P/E ratio could mean that a company's stock is overvalued or that investors are expecting high growth for the company in the future.
A portfolio is a collection of financial assets like stocks, bonds, commodities, ETFs and cash. A portfolio can also contain a wide range of other assets including real estate and art.
Preferred stock is a form of stock (the other is common stock). Preferred stock allows shareholders to have priority to dividends, have limited voting rights and have priority when a company is liquidated.
Relative strength index (RSI) is an indicator used to chart current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. An RSI can be between 0 to 100 and can be used to evaluate overbought or oversold conditions. A higher number means that the stock is overbought and a lower number means that it is oversold.
The US Securities and Exchange Commission is the US government agency in charge of the nation’s securities industry. FINRA operates under the SEC, a federal agency. FINRA primarily regulates broker-dealers, while the SEC has broad authority over the securities market.
A sell-off is the rapid selling of a security or securities leading to a sharp decline in price. A sell-off may be caused by an event within a company, like lower than expected earnings. Or it can be triggered by a natural disaster or macroeconomic concern.
The ‘Securities Investor Protection Corporation’ protects the loss of cash and securities – such as stocks and bonds. The limit of SIPC protection is $500,000, which includes $250,000 for cash.
A special-purpose acquisition company, otherwise known as a SPAC, is a shell company with no operations other than the plans to go public to raise funds to acquire or merge with another company. Also known as “blank cheque companies,” SPACs are required to make an acquisition within two years of their initial public offering (IPO).
A stock is a type of security that gives stockholders a piece or a share of ownership in a company. Stocks also are called “equities,” and the words “stock” and “share” are usually used interchangeably, since a share is the metric for a unit of stock.
A stock exchange is a type of marketplace where securities are bought and sold. The types of securities traded on a stock exchange include shares of stock, bonds and cash. Other securities such as Exchange Traded Funds (ETFs) are also traded on stock exchanges.
With various cycles ranging anywhere from a couple of minutes to more than 10 years, stock market cycles have been helpful in stock market predictions as short- and long-term price patterns and are regularly used by traders to manage risk. There are four stages in a stock market cycle, including accumulation, markup, distribution and decline.
A stock market index tracks the financial performance of a specific market. It is the average performance of a group of companies. Many other countries have their own stock market indexes. For example, The ADX General Index is a stock market index which tracks the performance of stocks listed on the Abu Dhabi Securities Exchange.
Options are paid contracts that give investors the right, but not the obligation to buy or sell a stock at an agreed upon price and date. There are two different stock options. One is a put, a bet that a stock price will fall. The other is a call, a bet that a stock will rise.
A stock split is when a company divides its existing shares into multiple shares. There are many reasons a company might do this, including if its stock price is too high or if the company wants to see more stock liquidity.
The Saudi Stock Exchange Tadawul was officially formed in 2007 and is the sole entity authorized in Saudi Arabia to act as a stock exchange.
TTM stands for trailing 12 months and is used to describe the past 12 months of a company's performance.
Valuation refers to the estimated economic value of a business. There are various ways to calculate valuation of a business or startup, including tallying up the value of assets or comparing it to other similar businesses.