TERMANOLOGIES OF INVESTMENT

Bull A prolonged period in which investment prices rise faster than their historical average. Bull markets can happen as result an economic recovery, an economic boom, or investor psychology. Bullish Believing that a particular security, a sector, or the overall market is about to rise. Opposite of bearish. Bear An investor who believes that a particular security or market is headed downward. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market. Bearish Believing that a particular security, a sector, or the overall market is about to fall. Opposite of bullish. Blue Chip A security from a well-established and financially-sound company that has demonstrated its ability to pay dividends in both good and bad times. Floor price A price specified in a market-price contract as the lowest purchase price of the uranium, even if the market price falls below the specified price. The floor price may be related to the seller's production costs. Dumping Selling items below cost, to eliminate surplus, hurt competitors or gain market share. Golden parachute Lucrative benefits given to top executives in the event that a company is taken over by another firm, resulting in the loss of their job. Benefits include items such as stock options, bonuses, severance pay, etc. Hedging Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract. Working Capital

Current assets minus current liabilities. Working capital measures how much in liquid assets a company has available to build its business. The number can be positive or negative, depending on how much debt the company is carrying. Arbitrage Attempting to profitably exploiting price differences of identical or similar financial instruments, on different markets or in different forms. The ideal version is risk less arbitrage. Event Risk The risk associated with a changing portfolio value due to large swings in market prices. Also referred to as "jump risk" or "fat-tails". Hot Money Money that moves from one currency to another or one asset class to another as investors (including speculators) seek the best possible yields. Pro rata: Latin, meaning "according to the rate." Pro rata refers to dividing something (costs, income, profits, assessments, proceeds from a liquidation, etc.) among participants according to a rate in which each participant's share is in proportion to the part of the whole owned or claimed by the participant. Junior Equity: Another name for common stock, called junior because it is subordinate to preferred stock. Junior Debt: Debt that is either unsecured or has a lower priority than that of another debt claim on the same asset or property. Also called subordinated debt. Panic Selling: Wide-scale selling of an investment, causing a sharp decline in price. In most instances of panic selling, investors just want to get out of the investment, with little regard for the price at which they sell. Panic buying: High volume buying brought about by sharp price increases. The main problem with panic buying is that investors are not evaluating fundamentals. Instead, they are blindly buying before prices rise even more. Circuit Breaker: Refers to any of the measures used by stock exchanges during large sell-offs to avert panic selling. Sometimes called a "collar." Bond Indenture: Blanket, unconditional contract between the bond issuer and the bond purchaser (bondholder) that specifies the terms of the bond. It states the interest rate (called coupon rate), the dates when the interest will be paid, maturity date(s), and other terms and conditions of the bond issue. Failure to meet the payment requirements calls for drastic penalties including liquidation of the issuer's assets. Also called bond resolution. Corporate Restructuring: A corporate restructuring strategy involves the
dismantling and rebuilding of areas within an organization that need special attention from the management and CEO.

Preemptive Right: The right of current shareholders to maintain their fractional ownership of a company by buying a proportional number of

shares of any future issue of common stock. Most states consider preemptive rights valid only if made explicit in a corporation's charter .Also called subscription privilege or subscription right. Operating Lease: A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Market Value: 1. The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. Also known as "market price". 2. The market capitalization plus the market value of debt. Sometimes referred to as "total market value". Liquidation Value: The estimated amount of money that an asset or company could quickly be sold for, such as if it were to go out of business. If the liquidation value per share for a company is greater than the current share price, then it usually means that the company should go out of business (or that the market is misvaluing the stock), although this is uncommon. Intrinsic Value: The actual value of a security, as opposed to its market price or book value. The intrinsic value includes other variables such as brand name ,trademarks, and copyrights that are often difficult to calculate and sometimes not accurately reflected in the market price. Correlation: In the world of finance, a statistical measure of how two securities moves in relation to each other. Correlations are used in advanced portfolio management. Capital Rationing: The act of placing restrictions on the amount of new investments or projects undertaken by a company. This is accomplished by imposing a higher cost of capital for investment consideration or by setting a ceiling on the specific sections of the budget. Stock Split: A corporate action in which a company's existing shares are divided into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because no real value has been added as a result of the split. Hybrid Debt: A security that combines two or more different financial instruments. Hybrid securities generally combine both debt and equity characteristics. The most common example is a convertible bond that has features of an ordinary bond, but is heavily influenced by the price movements of the stock into which it is convertible. Hurdle Rate: The required rate of return in a discounted cash flow analysis, above which an investment makes sense and below which it does not. Often, this is based on the firm's cost of capital or weighted average cost of capital ,plus or minus a risk premium to reflect the

project's specific risk characteristics .also called required rate of return. Treasury Stock: The portion of shares that a company keeps in their own treasury. Treasury stock may have come from a repurchase or buyback from shareholders; or it may have never been issued to the public in the first place. These shares don't pay dividends, have no voting rights, and should not be included in shares outstanding calculations. Stock Option: A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date. Capitalization Rate: A rate of return on a real estate investment property based on the expected income that the property will generate. Capitalization rate is used to estimate the investor's potential return on his or her investment. This is
done by Capitalization Rate = Yearly Income/Total Value

Poison Pill: A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make its stock less attractive to the acquirer. There are two types of poison pills: 1. A "flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount. Book Value: 1. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation. 2. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities. Break Even: The price at which an option's cost is equal to the proceeds acquired by exercising the option. For a call option, it is the strike price plus the premium paid. For a put option, it is the strike price minus the premium paid. Operating Leverage: The percentage of fixed costs in a company's cost structure. Generally, the higher the operating leverage, the more a company's income is affected by fluctuation in sales volume. The higher income vs. sales ratio results from a smaller portion of variable costs, which means the company does not have to pay as much additional money for each unit produced or sold. The more significant the volume of sales, the more beneficial the investment in fixed costs becomes. Financial Leverage: The degree to which an investor or business is utilizing borrowed money. Companies that are highly leveraged may beat risk of bankruptcy f they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Financial leverage is not always bad, however; it can increase the shareholders' return on their investment and often there is tax advantages associated with borrowing. Also called leverage. Pecking order Theory: It states that companies prioritize their sources of financing (from internal financing to equity) according to the Principle of least

effort, or of least resistance, preferring to raise equity as a financing means of last resort. Optimal Capital Structure: A "best" debt/equity ratio for a company. This is the debt/equity ratio that will minimize the cost of capital, i.e., the cost of financing the company's operations. Straight Bond: Bond which will payback the principal on its maturity date, will pay a specified amount of interest on specific dates, and does not carry a conversion privilege or other special features.
Going Concern Value: Value of a firm as an operating, normally functioning business to a buyer. It results from advantages such as a good reputation, trained workforce, established and successful procedures, tested systems, operational equipment, and necessary licenses and permits. This value is almost always more than the sum of the market (liquidation) value of the firm's assets. The excess value is recorded in accounting as the firm's goodwill.

Sale and Leaseback: Arrangement in which one party sells a property to a buyer and the buyer immediately leases the property back to the seller. This arrangement allows the initial buyer to make full use of the asset while not having capital tied up in the asset. Leasebacks sometimes provide tax benefits. Also called leaseback. Proxy War: A proxy war or proxy warfare is a war that results when opposing powers use third parties as substitutes for fighting each other directly. Merger: The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. Consolidation: In technical analysis, the movement of an asset's price within a well-defined pattern or barrier of trading levels. Consolidation is generally regarded as a period of indecision, which ends when the price of the asset breaks beyond the restrictive barriers. Periods of consolidation can be found in charts covering any time interval (i.e. hours, days, etc.), and these periods can last for minutes, days, months or even years. Lengthy periods of consolidation are often known as a base. Descriptive Statistics: A set of brief descriptive coefficients that summarizes a given data set, which can either be a representation of the entire population or a sample. The measures used to describe the data set are measures of central tendency and measures of variability or dispersion. Dual Stock; Dual stock issued for a single company with varying classes indicating the different voting rights and dividend payments.

DEGREE OF OPERATING LEVERAGE (DOL)

The degree of operating leverage (DOL), is defined as the percentage change in operating income (or EBIT) that results from a given percentage change in sales: .