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Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements ; health; and competitors and markets. It also considers the overall state of the economy and factors including interest rates, production, earnings, employment, GDP, housing, manufacturing and management. There are two basic approaches that can be used: bottom up analysis and top down analysis. These terms are used to distinguish such analysis from other types of investment analysis, such as quantitative and technical.
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business. The current year profit as well as the retained earnings of previous years are available for distribution; a corporation is usually prohibited from paying a dividend out of its capital. Distribution to shareholders may be in cash or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or by share repurchase. In some cases, the distribution may be of assets.
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
The Sarbanes–Oxley Act of 2002 is a United States federal law that mandates certain practices in financial record keeping and reporting for corporations.
A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public company can be listed on a stock exchange, which facilitates the trade of shares, or not. In some jurisdictions, public companies over a certain size must be listed on an exchange. In most cases, public companies are private enterprises in the private sector, and "public" emphasizes their reporting and trading on the public markets.
In finance, valuation is the process of determining the present value (PV) of an asset. In a business context, it is often the hypothetical price that a third party would pay for a given asset. Valuations can be done on assets or on liabilities. Valuations are needed for many reasons such as investment analysis, capital budgeting, merger and acquisition transactions, financial reporting, taxable events to determine the proper tax liability.
Biovail Corporation was a Canadian pharmaceutical company, operating internationally in all aspects of pharmaceutical products. Its major production facility was located in Steinbach, Manitoba. It merged with Valeant Pharmaceuticals International in 2010.
The dividend yield or dividend–price ratio of a share is the dividend per share, divided by the price per share. It is also a company's total annual dividend payments divided by its market capitalization, assuming the number of shares is constant. It is often expressed as a percentage.
In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit from price movement – stocks that are judged undervalued are bought, while stocks that are judged overvalued are sold, in the expectation that undervalued stocks will overall rise in value, while overvalued stocks will generally decrease in value.
Employee stock options (ESO) is a label that refers to compensation contracts between an employer and an employee that carries some characteristics of financial options.
A financial analyst is a professional, undertaking financial analysis for external or internal clients as a core feature of the job. The role may specifically be titled securities analyst, research analyst, equity analyst, investment analyst, or ratings analyst. The job title is a broad one: in banking, and industry more generally, various other analyst-roles cover financial management and (credit) risk management, as opposed to focusing on investments and valuation; these are also discussed in this article.
A golden handshake is a clause in an executive employment contract that provides the executive with a significant severance package in the case that the executive loses their job through firing, restructuring, or even scheduled retirement. This can be in the form of cash, equity, and other benefits, and is often accompanied by an accelerated vesting of stock options. According to Investopedia, a golden handshake is similar to, but more generous than a golden parachute because it not only provides monetary compensation and/or stock options at the termination of employment, but also includes the same severance packages executives would get at retirement.
Enterprise value (EV), total enterprise value (TEV), or firm value (FV) is an economic measure reflecting the market value of a business. It is a sum of claims by all claimants: creditors and shareholders. Enterprise value is one of the fundamental metrics used in business valuation, financial analysis, accounting, portfolio analysis, and risk analysis.
Whisper numbers are the "unofficial and unpublished earnings per share (EPS) forecasts that circulate among professionals on Wall Street... generally reserved for the favored (wealthy) clients of a brokerage." According to Per Afrell, a former analyst at UBS Warburg, buy and sell side research analysts generally maintain a 20 plus page spreadsheet to calculate their earnings per share estimates. When the estimate is first calculated by sell-side analysts, the number is submitted to companies such as First Call to be averaged with other analysts' estimates for the consensus earnings estimate. As new information is made available and plugged into the spreadsheet, the calculation may change several times leading up to a company's actual earnings release. However, the analyst is generally not going to issue a new report and revise his or her published estimate with each new calculation, resulting in the analyst's true expectations differing from his or her published number. Therefore, when someone within the firm, an institutional client, or even a retail client asks the analyst his or her expectation for the company, the response is often different from the published estimate. This number then gets passed among trading desks and professional traders as the whisper number.
An earnings call is a teleconference, or webcast, in which a public company discusses the financial results of a reporting period. The name comes from earnings per share (EPS), the bottom line number in the income statement divided by the number of shares outstanding. The US-based National Investor Relations Institute (NIRI) says that 92% of companies represented by their members conduct earnings calls and that virtually all of these are webcast. Transcripts of calls may be made available either by the company or a third party.
Sell side is a term used in the financial services industry. The three main markets for this selling are the stock, bond, and foreign exchange market. It is a general term that indicates a firm that sells investment services to asset management firms, typically referred to as the buy side, or corporate entities. The sell side and the buy side work hand in hand and each side could not exist without the other. These services encompass a broad range of activities, including broking/dealing, investment banking, advisory functions, and investment research.
Financial statement analysis is the process of reviewing and analyzing a company's financial statements to make better economic decisions to earn income in future. These statements include the income statement, balance sheet, statement of cash flows, notes to accounts and a statement of changes in equity. Financial statement analysis is a method or process involving specific techniques for evaluating risks, performance, financial health, and future prospects of an organization.
A financial forecast is an estimate of future financial outcomes for a company or project, usually applied in budgeting, capital budgeting and / or valuation; see Financial modeling § Accounting. Depending on context the term may also refer to listed company (quarterly) earnings guidance. For a country or economy, see Economic forecast.
Corporate finance is the area of finance that deals with the sources of funding, and the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources. The primary goal of corporate finance is to maximize or increase shareholder value.
An earnings surprise, or unexpected earnings, in accounting, is the difference between the reported earnings and the expected earnings of an entity. Measures of a firm's expected earnings, in turn, include analysts' forecasts of the firm's profit and mathematical models of expected earnings based on the earnings of previous accounting periods.
References
- ↑ Staff, Investopedia (2003-11-23). "Guidance". Investopedia. Retrieved 2018-11-29.
- 1 2 3 Adams, Kimberly (2 June 2019). "Is the end of quarterly forecasting in sight?". OZY. Retrieved 29 June 2019.
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