Stock Market Education: Definition of Terms

FISCAL YEAR: A fiscal year is the accounting year for a company. It may or may not correspond with a calendar year. Most companies operate on a calendar/fiscal year, but not all.

FUNDAMENTAL ANALYSIS: Fundamental analysis is a method for evaluating a stock on the basis of observing key ratios and understanding the underlying business.

GROWTH INVESTMENT STRATEGY: A growth investment strategy identifies companies with significant growth potential and is willing to ride out frequent price fluctuations that are common to growth stocks.

GROWTH STOCK: A growth stock is defined as a stock that usually pays no dividends, but puts profits back into the company to finance new growth. Investors buy growth stock for its potential price appreciation as the company grows.

INCOME INVESTMENT STRATEGY: An income investmnet strategy identifies sources of immediate income whether through income stocks or bonds.

INCOME STATEMENT: An income statement is a financial document listing income and expenses of a company that reveals how much was made or lost. It is part of the annual report and where you will find the proverbial "bottomline."

INFLATION: Inflation is too much money chasing too few goods. The result is a sharp rise in prices without any extra value added making money worth less. Inflation leads to rising interest rates and a cooling of the economy. If the economy slows down too quickly and too far, it may slip into a recession or even a depression.

INITIAL PUBLIC OFFERING: The first time a company issues stock for sale to the public is known as the initial public offering or IPO. The company is said to be “going public” when this happens. The offering is highly regulated and often surrounded by a lot of media attention.

LONG and SHORT: Somewhat the equivalent of “buy and sell,” however with an investing twists. If enter an order to “go long 100 shares of IBM,” it means you want to buy IBM. Likewise, to “short IBM” is to sell the stock. Long also describes your position in a stock. For example, your brokerage statement might show you were “long 100 IBM,” which means you own 100 shares of IBM. Your account could also show you were “short 100 IBM,” which means you sold 100 shares of IBM short.