LEVEL 2 GLOSSARY
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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.
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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.
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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.
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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!
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Security
Basically, any contract representing ownership, such as stocks, bonds, options, swaps, notes, and futures. It says, "I OWN THIS"
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Shares Outstanding
The total number of shares currently held by investors.
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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.
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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.
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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
What a Croc!
Among all the fantastic ideas out in the world, who would've thought rubber shoes would be so high up on the list?
Wait — rubber shoes? Really? Well, that's what the people behind Crocs (CROX) thought back in 2002, and it turns out a lot of regular people thought these rubber shoes were the next great thing.
So anyway, this company starts making rubber shoes with holes in them in all kinds of crazy colors — everything from black to hot pink. As they grew, they started to think they might need more cash, so they went public.
Things were great for a while: Everyone seemed to own at least one pair, and celebrities ranging from Steven Tyler to Morgan Freeman were spotted wearing them.
If you'd used the WeSeed method of looking for companies and you invested in a product that was getting some good buzz, you may have even bought some Crocs stock for around $11. If you did, well, you would have been very happy when the stock shot up to $70 in 2007.
But that's when the table turned, which means you could've made some serious money if you sold right then.
If you didn't...well, that's where things start to get a little ugly.
Websites started picking on the shoes for being ugly and passé. Even Stacey London from TLC's What Not to Wear criticized them for making people who wore them look heavy and short.
If you owned the stock, and you paid attention to the negative buzz the shoes were getting, you should've been concerned — especially since Crocs wasn't putting out any new versions of the shoe to replace the ones getting a bad rap.
Was Crocs' stock a good value? It was when they had all those customers clamoring for their product. But once that interest waned, so did the value.
Today, the stock price is around $2.
That's why it's important to listen to the news, see whether a company is adapting and innovating, and check out what other WeSeeders have to say.
If we all share our knowledge, we can warn each other when trends like these are starting to fall apart.
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