Term of the Week

Week of 05/16: Key Performance Indicators (KPIs): Key performance indicators refer to a set of quantifiable values that are used to determine how effectively a company is achieving its business objectives as well as to estimate its prospective long-term performance. They serve as a way to measure a company’s success as compared to its industry peers or to its own goals. KPIs typically fall into one of two categories: financial indicators and those that are more anecdotal. Examples of financial indicators include a company’s net profit, revenue compared to certain expenses, liquidity, cash availability. Anecdotal KPIs, on the other hand, may refer to measurements such as employee retention, quality of customer experience, and the tendency for customers to come back again.

^{https://www.investopedia.com/terms/k/kpi.asp}

Week of 05/09: J-Curve: A J Curve is used to describe a curve that experiences a sharp drop followed by a steep rise above the starting point. As an economic theory, the J Curve states that a country’s trade deficit will experience an initial decrease following the depreciation of its currency. Before quantities can fully adjust, the heightened price of exports causes the trade deficit to worse. However, as quantities rectify themselves and therefore increase the number of imports while keeping the number of exports the same, the trade deficit reverses into a surplus.

^{https://www.investopedia.com/terms/j/j-curve-effect.asp}

Week of 05/02: Initial Public Offerings (IPOs): An initial public offering (IPO) refers to the process by which a formerly private corporation first sells shares of its company to the general public. An IPO gives a company the opportunity to raise capital that can then be used to expand the business, fund research and development, or pay off debt, consequently strengthening its public profile. An IPO is also a chance for millions of investors to buy stock in a company. If that company performs well, the stock price will rise and make a profit for the shareholders.

^{https://www.investopedia.com/terms/i/ipo.asp}

Week of 04/25: Hedge Fund: A hedge fund refers to an alternative investment that looks to maximize returns to its investors while minimizing the risk (defined as the degree of uncertainty of an investment’s returns or the potential financial loss that an investor could acquire). Hedge funds use pooled funds (funds from many individual investors) and actively invest them, often using non-traditional investment strategies and asset classes with the goal of providing high returns during both up and down markets. Hedge funds are typically more expensive compared to conventional investment funds and therefore often restrict investment to high net-worth individuals or “accredited” investors. The number of hedge funds in the United States has increased exponentially in the past 30 years, growing from 880 in 1992 to over 3,600 in 2020. 

^{https://www.investopedia.com/terms/h/hedgefund.asp}

Week of 04/18: Gross Profit: Gross profit, sometimes referred to as gross income, refers to the profit that a company makes after deducting the costs associated with either producing and selling its products or providing its services. This value can be calculated with information found on a company’s income statement using the equation: Revenue (sales) – Cost of Goods Sold (COGS). It is also important to note that the calculation of gross profit does not include fixed costs (costs that are paid for at the same amount regardless of production such as rent, insurance, advertising, etc.)Gross profit can be an important measure of how efficient a company is at generating revenue using its labor and supplies. 

^{https://www.investopedia.com/terms/g/grossprofit.asp}

Week of 04/11: Five C’s of Credit: The five C’s of credit is a system commonly used by lenders (ex. Banks) to determine the “creditworthiness” of potential borrowers. By using this system, lenders are hoping to minimize the risk of financial loss that would arise from the borrower’s inability to pay back the loan. The five C’s of credit are:

1. Character: gauged by the prospective borrower’s credit history (what is their credit score?)
2. Capacity: the applicant’s debt-to-income ratio (is the money they are currently making enough to sustain the payments required after taking out a loan?)
3. Capital: the amount of money an applicant has 
4. Collateral: an asset that is able to serve as a security for the loan in the case that the applicant is unable to pay it back
5. Conditions: the purpose of the loan, the amount of the loan, and the interest rates at which the loan will be paid back 

The five C’s of credit provide an important insight into the criteria that is used by loaners when deciding whether to accept a loan applicant. By understanding what factors a loaner is looking for, prospective borrowers can make sure to prepare themselves in a way that meets the standards.

^{https://www.investopedia.com/terms/f/five-c-credit.asp}

Week of 04/04: Equity: Equity represents the shareholders’ stake in the company. If a company’s assets were to all be liquidated and all their debt was paid off, the amount of remaining money that would be returned to its shareholders is equal to that company’s equity. Therefore, the formula to find the value of a company’s equity is Total Assets – Total Liabilities.

^{https://www.investopedia.com/terms/e/equity.asp}

Week of 03/14: Dividend: A dividend is a payment distributed by a public company to its investors as a form of compensation. The company’s board of directors determines how much of the company’s earnings that year are distributed and if they are going to be paid in cash or in the form of additional stock. 

^{https://www.investopedia.com/terms/d/dividend.asp}

Week of 03/07: Common stock: Common stock is a security that, when held, indicates some degree of ownership in a corporation. Individuals who buy common stock are buying equity in a company and receive varying payment depending on the performance of said corporation’s stock price. 

^{https://www.investopedia.com/terms/c/commonstock.asp}

Week of 02/28: Bull Market: A bull market is used to describe a financial market in which prices of assets or securities are rising or are expected to rise in the near future. Bull markets are defined as the time during which a stock price rises by 20%, typically in between two 20% declines. While bull markets are difficult to predict, there are strategies that investors use to take advantage of this market condition. If investors see rising stock prices and sense the potential for a bull market, they will buy early, selling when they believe the prices to have reached their peak value.  

^{https://www.investopedia.com/terms/b/bullmarket.asp}

Week of 02/21: Annual Report: An annual report is a corporate document that all public companies must publish to their shareholders. The report covers the corporation’s operations over the previous year as well as its current financial standing. 

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