Investing words, explained simply

Every word Relevant Investor uses, in plain English.

• Profit per share (EPS): A company’s profit for a year divided by its number of shares: one share’s slice of what the company earned.
• P/E ratio: The share price divided by a year of profit per share: how many dollars you pay for each $1 the company earns in a year.
• Book value per share: What would be left for owners if a company sold everything at the values on its books and paid every debt, divided by its shares.
• Free cash flow: Cash from running the business minus what the company spent on buildings and equipment: the cash actually left over.
• Capital spending (capex): Money spent on long-lasting things like buildings, factories, equipment and data centers.
• Dividend: Cash a company pays its owners out of its profits, usually every three months.
• Dividend yield: A year of dividends divided by the share price.
• Payout ratio: How much of each $1 of profit a company pays out as dividends.
• Share buyback: When a company buys its own shares and retires them.
• Dilution: When a company creates new shares, for example to raise money or pay employees.
• Revenue (sales): Everything customers paid the company in a period, before any costs.
• Profit margin: How many cents of each sales dollar end up as profit.
• Debt: Money a company has borrowed and must pay back, usually with interest.
• Market capitalization: Share price times the number of shares: what the whole company is worth at today’s price.
• 10-K and 10-Q reports: The reports US public companies file with the SEC: a 10-K once a year and a 10-Q for each of the other three quarters.
• Stock split: When each share is divided into several (say 1 into 4), each at a matching fraction of the price.