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Financial terms in "Fundamental Analysis"

1. declare

2. dividend frequency

3. ex-date

4. double taxation

5. current earnings per share (current EPS)

6. Interest

7. multistage dividend discount model

8. liquidity ratio

9. cash flow after taxes (CFAT)

10. non-cumulative preferred

11. cash flows from financing activities

12. Dilution

13. fully diluted earnings per share

14. high

15. dividend notification

16. original issue stock

17. employee stock purchase plan

18. capitalized interest

19. short interest ratio

20. noncumulative

21. equity research

22. Return on equity

23. earnings season

24. dividends-received deduction

25. dual presentation

26. dividend tax credit

27. EBIDA

28. super DRIP

29. annual dividend

30. participating preferred

31. relative P/E ratio

32. cash-and-stock dividend

33. Net Operating Income

34. dividend equivalent right

35. payout

36. debenture stock

37. Current Assets

38. forward P/E

39. divestiture

40. Institutional Brokers' Investment System

41. Dividend yield

42. holder of record

43. EDGAR

44. Employee Stock Ownership Plan

45. bond equity earnings yield ratio (BEER)

46. dividend requirement

47. Tender Offer

48. callable stock

49. earnings multiple

50. Securities and Exchange Commission

51. automatic reinvestment plan

52. closed corporation

53. Electronic Data Gathering, Analysis, and Retrieval

54. preferred dividend coverage ratio

55. ROIC

56. top line

57. look-ahead bias

58. working capital requirement

59. profit warning

60. Net worth

61. stock option plan

62. Write-Off

63. Retained Earnings

64. date of payment

65. net sales

66. shares authorized

67. provision for income taxes

68. look through

69. shares outstanding

70. Record Date

71. Fortune 500

72. Blue Chip

73. liquid

74. Multiple

75. dividend discount model

76. modified internal rate of return (MIRR)

77. capital structure

78. Current Ratio

79. distribution stock

80. due bill period

81. synthetic dividend

82. Goodwill

83. earnings report

84. option

85. net capital requirement

86. nonvoting stock

87. cash flow statement

88. New York Stock Exchange

89. net capital

90. Gordon Growth Model

91. EBITDA / sales ratio

92. performance

93. Forbes 500

94. Operating Cash Flow

95. optionable stock

96. NYSE

97. share repurchase plan

98. Funds From Operations

99. idle

100. NOPAT

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Featured term of the day

Definition / Meaning of

Tracking Stock

Categories: Investing and Trading, Stocks,

Best defined with an example. Suppose Company A purchases a business from Company B and pays B with 1 million shares of A's stock. The agreement provides that B cannot sell the 1 million shares for 60 days, and also prohibits B from hedging by purchasing put options on A's shares or short-selling A's shares. B is worried that the market may fall in the next 60 days. B could hedge by purchasing put options or selling the futures on the s&p 500. However, it is possible that A's business is much more cyclical than the s&p 500. One solution to this problem is to find a tracking stock. This is a stock that has high correlation with A. Let us call it Company C. The solution is to sell short or buy protective put options on this tracking stock C. This protects B from fluctuations in the price of A's stock over the next 60 days. Because the degree of the protection is related to the correlation of A and C's stock, it is extremely unlikely that the protection is perfect. Multidivisional firms have used a form of restructuring called tracking stock since 1984 to segment the performance of a particular division -- similar to a spin-off or carve-out, except that the parent firm does not relinquish control of the tracked division. Previously, this was known as alphabet stock, but the technically correct name is tracking stock (e.g., EDS traded for years as a tracking stock of GM). This is a way to reward managers for good divisional performance with an equity that is tied to their division-rather than potentially penalizing them compensation for bad performance in a division they have no control over.

Most popular terms

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6. Gross Margin
7. Audit Committee
8. Employee Retirement Income Security Act Stock Drop Litigation
9. Covenant Not To Sue
10. FACT Act (Fair And Accurate Credit Transactions Act)

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