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
The Share up There
How does pizza connect to Goldman Sachs (GS)? It might not be very clear, at first: One is a meal of cheesy, tomato-y goodness, and one is a mega-billion dollar company.
But here's the deal: When you buy a share of stock in Goldman Sachs, what you're actually doing is buying a piece of the company. But you may be just one of many owners. So how many other owners are there?
Well, it depends on the amount of shares outstanding. And to understand that, picture Goldman Sachs as a pizza.
Right now, Goldman Sachs has around 476 million shares out in the world. In other words, there are 476 million slices of pizza out there.
But that doesn't necessarily mean that there are that many owners.
Take the company's CEO, Lloyd Blankfein — he owns over 1.5 million shares. Good luck getting as many slices as this guy.
But if you really like a company, and you want to become "more" of an owner than the next guy, buying more shares — i.e., slices of pizza — is how you get more ownership.
Just be careful: With all that privilege comes responsibility. If the company doesn't do well, you'll lose more money than a "lesser" owner with fewer shares.
OK, we're done here. Now go get some pizza.
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