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. 

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