LEVEL 2 GLOSSARY
-
Balance Sheet
This financial statement tells you if the company is in the black (good) or red (bad). The statement details the good, the bad, and the ugly of the company's liabilities, assets and shareholders??? equity. One rule to remember here is a company's assets = liabilities + shareholders' equity.
-
Book value
Theoretically, it’s what a shareholder would receive if the company were liquidated or sold for cash today. As we all know, the books don't always reflect the reality.
-
Income Statement
One of the three common financial statements that is basically the company's quarterly budget. This is how much the company made and how much it spent, the bottom line (literally) being the profits left over.
-
Market maker
A brokerage firm that is willing to sell you a stock (at the bid price) or buy one back from you (the ask price). They play both sides and make money off of each. Brilliant!
-
Security
Basically, any contract representing ownership, such as stocks, bonds, options, swaps, notes, and futures. It says, "I OWN THIS"
-
Shares Outstanding
The total number of shares currently held by investors.
-
Statement of Cash Flows
Do you balance your check book? So do companies, and this is what it looks like. This is one of the three common financial statements compiled by a company. It shows how the company generated cash and where it spent it.
-
Value Investing
An investment strategy that relies on picking stocks that are undervalued by the market and hoping that the market catches up at some point.
-
Annual report
This report airs the company's dirty laundry with the freshest spin possible. They tell you what happened last year and what the financials look like all in one place, they can usually be found filed with the SEC or on the company website. Companies are required by law to put these out, but don't get fooled by the pretty pictures???the bad stuff is in there too.
See full glossary
In Level 2, we'll take you a little deeper into the trading world. Like in Level 1, there are a series of concepts that you should master before taking the Level 2 quiz. Remember to click the "Mastered this concept?" link at the bottom of the page to keep track of your progress in your Report Card.
- Invest in what you know
- Working at the stock market
- Price of stock
- What affects share price?
- Judging a stock
- The Fair-Price Rating
- Shares outstanding
- Where to learn about a company
- Growth investing
- Value investing
- Invest like Buffett
- The government's role
- LEVEL 2 QUIZ
Judging a stock
What we'll learn:
1) Do good ideas still matter?
2) What is the Fair-Price Rating tool?
3) When to buy a stock
When you really get down to it, the real purpose of the stock market is to give money to good ideas. That's it — end of story.
So as you wander around WeSeed trying to decide whether a stock is "worth it," there are only a few questions you need to ask: Is it a good idea? Will other people take to it? Will it change the world?
OK, we know what you're thinking: "What about all the crazy numbers and ratios that show up in the paper and on TV? Don't I need to know that stuff?"
Well, the pros are busy crunching those numbers, so there's really nothing for you to add there. A six will always be a six, no matter how long you stare at it.
The pros will try a lot of things to scare you into thinking that staring at numbers and analyzing charts is necessary. We believe your time is better spent paying attention to the real world of ideas. But we decided to do all that number crunching for you with the Fair-Price Rating tool, which you can find on each company page.
We'll get more into it later, but the Fair-Price Rating tool basically lets you know whether a stock's price is reasonable, or if something is a little amiss.
So if you don't have to worry about the numbers (you're welcome!), then what should you be worried about when trying to decide the value of a stock?
Ask yourself this very basic question: Do you like the idea?
If you like to listen to music, you probably thought that buying music online and downloading it right away was a great idea when Apple (AAPL) and Amazon (AMZN) started doing it. And lo, look at their stocks over the last year or two.
Coincidence? We think not.
But when should you buy a stock? Well, that's a pretty big topic, and we'll cover it more later. But here's what you need to know for now: You want to buy great companies at a great price.
It's not easy to find these — it's kind of like shopping for wine. Every now and then you'll find a great bottle of wine at a fantastic price. And if you can get the best of both worlds, well then that's probably the best time to buy it.
Three Facts to Wow Your Friends at a Party
1) The idea for FedEx (FDX) got a C when Fred Smith wrote an economics paper at Yale University outlining the idea of an overnight-delivery service.
2) Betamax was a good idea that was buried by an even better idea: VHS. That's how it goes sometimes.
3) Napster, one of the earliest ways of sharing music online, was deemed illegal when it came out. Now record companies are using the concept to make music easier to share.
- Bookmark this page:
-
-
-
-
-
-
-
