110 terms

Fundamentals — 110 terms defined

Every fundamentals term in the StockTools glossary, in plain language with a worked example — and connected to the free calculator that puts it to work.

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Accounts PayableAccounts payable is the mirror image of receivables: money the company owes its suppliers for goods and services it has received but not yet paid for. It sits in current liabilities and functions as an interest-free loan from vendors.Fundamentals Accounts ReceivableAccounts receivable is the money customers owe a company for goods or services already delivered but not yet paid for. It sits on the balance sheet as a current asset, because those invoices are supposed to convert to cash within the payment terms, typically 30 to 90 days.Fundamentals AlphaAlpha is the excess return an investment or portfolio generates relative to its benchmark, after adjusting for the risk taken (typically measured by beta) to get there. A positive alpha means a manager or strategy beat what you would have expected given the amount of market risk involved; a negative alpha means it fell short.Fundamentals Altman Z-ScoreThe Altman Z-Score is a bankruptcy-prediction model that combines five financial ratios into a single distress gauge. Edward Altman published it in 1968, and the original formula for public manufacturers is: Z = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E, where A = working capital / total assets, B = retained earnings / total assets, C = EBIT / total assets, D = market value of equity / total liabilities, and E = sales / total assets.Fundamentals Analyst RatingAn analyst rating is a sell-side research firm's summary opinion on a stock, usually on a buy/hold/sell scale or a house variant like overweight/equal-weight/underweight or outperform/neutral/underperform. Each rating ships with a price target and an estimate model behind it.Fundamentals Annual ReportAn annual report is a company's yearly summary of its financial performance and operations, sent to shareholders, typically including a letter from the CEO, financial statements, and a discussion of the business's results and outlook. Publicly traded companies are required to produce one.Fundamentals Authorized SharesAuthorized shares are the maximum number of shares a company's corporate charter permits it to issue, set by the board and shareholders and only changeable by amending that charter. It is a ceiling, not a current count; a company can have far more authorized shares than it has actually issued.Fundamentals Balance SheetThe balance sheet is the financial statement showing what a company owns (assets), what it owes (liabilities), and the difference (shareholders' equity) at a single point in time. It always balances by construction: assets = liabilities + equity.Fundamentals Basis Point (bps)A basis point is one one-hundredth of a percentage point (0.01%), used throughout finance to describe small changes in interest rates, yields, and fees without the ambiguity that can come from saying "percent of a percent." 100 basis points equal 1 percentage point.Fundamentals Beneish M-ScoreThe Beneish M-Score estimates the probability that a company is manipulating its reported earnings, using eight year-over-year ratios that tend to distort when the books are being stretched. Professor Messod Beneish published the model in 1999; a score above -1.78 flags a likely manipulator, and more negative scores are cleaner.Fundamentals Book ValueBook value is a company's total assets minus total liabilities — the accounting net worth that belongs to shareholders, identical to shareholders' equity on the balance sheet. Divide by shares outstanding to get book value per share.Fundamentals Buyback YieldBuyback yield is the percentage of a company's market cap it spent on net share repurchases over the past year — the buyback counterpart to dividend yield. Net is the operative word: repurchases minus new shares issued, because a company that buys back $2B while issuing $2B of stock compensation has returned nothing.Fundamentals BuyoutA buyout is the purchase of a controlling interest in a company, often taking it entirely private in the process. Buyouts can be financed with cash, debt, or a combination, and can be initiated by the company's own management (a management buyout) or by an outside private equity firm.Fundamentals Capital Expenditures (CapEx)Capital expenditures are the cash a company spends buying or upgrading long-lived assets: factories, stores, servers, drilling rigs. Unlike ordinary expenses, capex does not hit the income statement when the cash goes out — the asset lands on the balance sheet and gets expensed gradually as depreciation over its useful life.Fundamentals Cash Conversion CycleThe cash conversion cycle measures how many days a dollar spends trapped in operations between paying suppliers and collecting from customers: CCC = DIO + DSO - DPO. Inventory days plus collection days, minus the days the company itself takes to pay its bills.Fundamentals Cash Flow StatementThe cash flow statement tracks the actual cash moving in and out of a company over a period, sorted into three sections: operating, investing, and financing activities. It reconciles the accrual-based income statement with what happened in the bank account.Fundamentals Cash RatioThe cash ratio is the strictest liquidity test on the balance sheet: cash and cash equivalents divided by current liabilities, ignoring receivables and inventory entirely. It measures whether the company could pay everything due this year with money it holds right now.Fundamentals Cost of Goods Sold (COGS)Cost of goods sold is the direct cost of producing whatever the company sells: raw materials, factory labor, freight in, manufacturing overhead. It excludes the cost of running the company around the product — sales teams, R&D, and head office land in operating expenses instead.Fundamentals Current RatioDivide current assets by current liabilities and you get the current ratio, the standard test of whether a company can cover the obligations due within the next year. Above 1.0, short-term assets exceed short-term bills; below 1.0, the company needs new cash coming in to pay what it already owes.Fundamentals Cyclical StockA cyclical stock belongs to a company whose earnings rise and fall closely with the broader economic cycle, common in industries like autos, homebuilding, airlines, and industrials. Demand for these products and services expands when consumers and businesses feel confident and contracts sharply when they pull back.Fundamentals Days Inventory Outstanding (DIO)Days inventory outstanding answers one question: how long does product sit before it sells? DIO = (inventory / cost of goods sold) x 365, the average shelf time in days.Fundamentals Days Payable Outstanding (DPO)Days payable outstanding is the flip side of DSO: the average number of days a company takes to pay its own suppliers. DPO = (accounts payable / cost of goods sold) x 365.Fundamentals Days Sales Outstanding (DSO)Days sales outstanding is the average number of days a company waits to collect payment after making a sale: DSO = (accounts receivable / revenue) x 365. Lower means faster cash.Fundamentals Debt-to-EBITDADebt-to-EBITDA states leverage in years: how many years of pre-interest, pre-tax, pre-depreciation earnings it would take to pay off the debt load. Lenders live on this ratio — most credit agreements carry a covenant that trips if it crosses a set line, commonly somewhere in the 3.0-4.5x range.Fundamentals Debt-to-Equity RatioA debt-to-equity ratio of 1.0 means a company finances itself with exactly as much borrowed money as owner money: total debt divided by shareholders' equity, both straight off the balance sheet. At 0.3 the balance sheet is conservative; at 2.5 the lenders own most of the risk.Fundamentals Defensive StockA defensive stock belongs to a company whose products or services see relatively stable demand regardless of the economic cycle, common in sectors like utilities, consumer staples, and healthcare. People keep buying groceries, electricity, and medicine in a recession even as they cut back on cars and vacations.Fundamentals Deferred RevenueDeferred revenue is cash a company has collected for products or services it has not yet delivered. It sits on the balance sheet as a liability — the company owes the customer performance, not money — and it converts into recognized revenue only as the goods or service are actually provided.Fundamentals Depreciation & Amortization (D&A)Depreciation and amortization spread the cost of a long-lived asset across the years it gets used, instead of expensing it all at purchase. Depreciation applies to physical assets (machines, buildings, vehicles); amortization applies to intangible ones (acquired patents, customer lists, software).Fundamentals DilutionDilution is the reduction in each existing shareholder's ownership percentage — and claim on earnings — when a company issues new shares. Same company, more slices, each slice smaller.Fundamentals Discounted Cash Flow (DCF)A discounted cash flow valuation prices a business as the sum of all the cash it will ever generate, with each future dollar shrunk back to present value at a discount rate. A dollar arriving in year three at a 10% discount rate is worth $1 / 1.10^3 = $0.75 today; a DCF just runs that arithmetic across every projected year plus a terminal value for everything beyond the forecast window.Fundamentals DividendA dividend is a cash payment a company makes to shareholders out of its profits, typically quarterly in the US and quoted per share. Own 500 shares of a stock paying $0.50 per quarter and $250 lands in your account every three months.Fundamentals Dividend YieldDividend yield is the annual dividend per share divided by the share price — the cash return you earn just for holding the stock, before any price change. A $50 stock paying $2.00 a year yields 4%.Fundamentals Earnings BeatAn earnings beat is a reported result that comes in above the consensus analyst estimate, most commonly measured on EPS. Beats are the norm, not the exception: in a typical quarter roughly 70-75% of S&P 500 companies beat the consensus EPS number, because companies guide low and analysts follow.Fundamentals Earnings MissAn earnings miss is a reported result below the consensus analyst estimate, on EPS, revenue, or both. Because roughly three quarters of large caps beat in a normal quarter, a miss is a rarer and louder event than a beat, and the market punishes it accordingly.Fundamentals Earnings Per Share (EPS)Earnings per share is net income divided by the number of shares outstanding — the slice of annual profit attached to each individual share. A company earning $250M with 100M shares out earns $2.50 per share.Fundamentals Earnings Power Value (EPV)Earnings power value prices a business on one deliberately brutal assumption: current earnings, properly normalized, continue forever with zero growth. Columbia professor Bruce Greenwald built it as EPV = adjusted after-tax operating earnings / cost of capital — a perpetuity with no forecast, no terminal-value guess, and no credit for a future that has not happened.Fundamentals Earnings SeasonEarnings season is the four-to-six-week stretch after each calendar quarter ends when most public companies report results, kicking off in mid-January, mid-April, mid-July, and mid-October. The big banks traditionally open it, megacap tech lands two to three weeks in, and small caps straggle through the tail.Fundamentals Earnings YieldEarnings yield flips the P/E ratio upside down: earnings per share divided by price, expressed as a percentage. A stock at a P/E of 20 has an earnings yield of 5% — the company earns five cents a year for every dollar of stock you own.Fundamentals EBITEBIT is earnings before interest and taxes: profit measured after all operating costs, including depreciation and amortization, but before the effects of debt and tax jurisdictions. In most companies it lands within rounding distance of operating income; technically EBIT starts from net income and adds back interest and taxes, so it also captures non-operating items that operating income excludes.Fundamentals EBITDAEBITDA is earnings before interest, taxes, depreciation, and amortization — operating profitability measured before financing costs, tax rates, and non-cash asset charges. You build it by starting from net income and adding those four items back.Fundamentals Effective Tax RateThe 21% U.S. statutory corporate rate is not what most companies actually pay — the effective tax rate is: income tax expense divided by pretax income, as reported. Foreign income taxed at lower rates, R&D credits, stock-compensation deductions, and loss carryforwards routinely pull large companies' effective rates into the mid-teens or lower.Fundamentals Enterprise Value (EV)Enterprise value is the theoretical takeover price of a whole business: market cap plus total debt minus cash and equivalents. A buyer acquiring the company inherits its debt and pockets its cash, so EV captures what the operation actually costs.Fundamentals EV/EBITDAEV/EBITDA compares enterprise value — market cap plus net debt — to earnings before interest, taxes, depreciation, and amortization, valuing the whole business rather than just its equity. Because both sides are capital-structure neutral, it lets you compare a debt-heavy company against a debt-free one, which P/E cannot do: interest expense distorts the E while debt is invisible in the P.Fundamentals Fiscal YearA fiscal year is the 12-month period a company uses for financial reporting and budgeting, which does not have to match the calendar year. Most US companies use a calendar fiscal year ending December 31, but many, especially retailers, use a fiscal year ending in January or another month that better fits their business cycle.Fundamentals Float (Public Float)A company's float is the number of shares actually available for public trading, calculated as total shares outstanding minus shares held by insiders, large strategic holders, and other restricted or closely-held stakes. Float, not total shares outstanding, is what determines how easily a stock can be bought or sold without moving the price.Fundamentals Form 10-KA Form 10-K is the audited annual report every US public company must file with the SEC, covering a full fiscal year of financial statements, risk factors, and management commentary. Filing deadlines run 60 days after fiscal year end for large accelerated filers, 75 for accelerated filers, and 90 for everyone else.Fundamentals Form 10-QA Form 10-Q is the quarterly version of the 10-K: financial statements and updated disclosures filed with the SEC for each of the first three fiscal quarters, due within 40 days of quarter end for large accelerated and accelerated filers and 45 days for smaller companies. The fourth quarter has no 10-Q; it folds into the annual 10-K.Fundamentals Form 13FA Form 13F is the quarterly SEC filing where institutional investment managers with at least $100 million in qualifying US securities disclose their long equity holdings, due within 45 days of quarter end. It is how the public sees what hedge funds and asset managers actually own.Fundamentals Form 4A Form 4 is the SEC filing corporate insiders must submit within two business days of buying or selling their company's stock. It covers Section 16 insiders: officers, directors, and holders of more than 10% of the shares.Fundamentals Form 8-KA Form 8-K is the SEC filing companies use to disclose material events between scheduled reports, generally due within four business days of the event. Earnings releases arrive as 8-Ks under Item 2.02, executive departures under Item 5.02, and major contracts under Item 1.01.Fundamentals Forward P/EForward P/E prices a stock against earnings that have not happened yet: current share price divided by consensus estimated EPS for the next twelve months or next fiscal year. A fast grower that looks expensive at 40x trailing earnings might show 25x forward, because the denominator already includes the growth everyone expects.Fundamentals Free Cash Flow (FCF)Free cash flow is the cash a business generates from operations minus capital expenditures — the money actually left over after running and maintaining the business. FCF = operating cash flow - capex, both pulled straight from the cash flow statement.Fundamentals Free Cash Flow YieldA 5% free cash flow yield means every $100 of market value is backed by $5 of annual free cash flow: FCF divided by market cap, the inverse of price-to-free-cash-flow. Some analysts run it against enterprise value instead, which is the stricter version for indebted companies — the equity-only version can make a levered business look deceptively cheap.Fundamentals Fundamental AnalysisFundamental analysis evaluates a security's intrinsic value by studying the underlying business: financial statements, revenue and earnings trends, competitive position, management quality, and the broader industry and economy it operates in. The goal is to estimate what a company is actually worth, independent of its current stock price.Fundamentals Funds From Operations (FFO)Funds from operations is the REIT industry's earnings measure: net income with real estate depreciation added back and gains or losses from property sales stripped out. It exists because GAAP net income is close to useless for REITs — accounting rules depreciate buildings toward zero over decades while well-maintained real estate often holds or gains value, so reported earnings systematically understate what a REIT actually generates.Fundamentals GAAP vs Non-GAAPGAAP earnings follow Generally Accepted Accounting Principles, the standardized US rulebook auditors sign off on; non-GAAP (or "adjusted") earnings are the company's own recut that excludes items management deems non-representative, most commonly stock-based compensation, restructuring charges, and amortization of acquired intangibles.Fundamentals GoodwillGoodwill is the premium an acquirer pays above the fair value of a target's identifiable net assets, parked on the balance sheet as an intangible asset. Buy a company for $500M whose nameable assets minus liabilities are worth $320M, and $180M of goodwill appears — the accounting residue of whatever justified the price: brand, synergies, or optimism.Fundamentals Gross MarginGross margin is gross profit as a percentage of revenue: (revenue - cost of goods sold) / revenue. It measures what the company keeps from each sale before overhead, marketing, R&D, interest, or taxes.Fundamentals Gross ProfitRevenue minus cost of goods sold equals gross profit: the dollars left after paying for the product itself, before any operating cost. Everything below it on the income statement — R&D, marketing, interest, taxes — gets paid out of this pool.Fundamentals GuidanceGuidance is management's own forecast for upcoming revenue, earnings, or margins, usually issued with quarterly results. The reported quarter is history; guidance is the number the stock actually trades on.Fundamentals Hostile TakeoverA hostile takeover is an acquisition attempt made directly to a target company's shareholders, over the objection of its board of directors, typically through a tender offer (a public offer to buy shares directly from shareholders) or a proxy fight (trying to replace the board with directors who will approve the deal).Fundamentals Income StatementThe income statement is the financial report showing a company's revenue, costs, and resulting profit over a period — a quarter or a year. It reads as a waterfall: revenue at the top, then successive subtractions down to net income at the bottom.Fundamentals Insider TradingInsider trading covers two very different things: the legal buying and selling of company stock by its own officers, directors, and large holders, disclosed on Form 4 within two business days, and the illegal act of trading on material nonpublic information (MNPI), whether by an insider or anyone they tip.Fundamentals Institutional OwnershipInstitutional ownership is the percentage of a company's shares held by institutions: mutual funds, hedge funds, pensions, banks, and insurers, tallied mostly from quarterly 13F filings. Large-cap US names typically run 70-90% institutional; microcaps can sit below 20%.Fundamentals Intangible AssetsIntangible assets are the non-physical assets on a balance sheet: patents, trademarks, licenses, customer relationships, acquired software, and goodwill. They mostly arrive through acquisitions — accounting rules force an acquirer to value what it bought, while the same assets built in-house (a brand, a codebase) usually never appear on the books at all.Fundamentals Interest Coverage RatioInterest coverage divides EBIT by interest expense to answer a blunt question: can the company pay the interest on its debt out of operating profit? A ratio of 4x means operating earnings cover the interest bill four times over; a ratio near 1x means nearly every operating dollar goes to lenders.Fundamentals Inventory TurnoverInventory turnover counts how many times a company sells through its entire stock in a year: cost of goods sold divided by average inventory. A turnover of 6 means the shelves clear out six times annually, roughly every 61 days.Fundamentals Leveraged Buyout (LBO)A leveraged buyout is an acquisition financed mostly with borrowed money, using the target company's own assets and future cash flows as collateral for the debt. A private equity firm might put up only 20-30% of the purchase price in cash, financing the rest with debt the acquired company itself will have to repay.Fundamentals Market CapMarket capitalization is the total market value of a company's equity: share price times shares outstanding. A company with 400M shares at $25 has a $10B market cap.Fundamentals Merger & Acquisition (M&A)A merger combines two companies into one new or surviving entity, typically between roughly equal parties; an acquisition is one company buying and absorbing another, typically a larger company purchasing a smaller one. In practice, the two terms are used together ("M&A") because the legal and economic mechanics overlap heavily.Fundamentals Minority InterestWhen a company owns more than 50% of a subsidiary but less than 100%, accounting rules force it to consolidate 100% of that subsidiary's revenue and profit into its own statements — minority interest, formally non-controlling interest (NCI), is the slice of those consolidated results that actually belongs to the subsidiary's outside shareholders.Fundamentals Net IncomeNet income is the profit left after every expense — cost of goods, operating costs, interest, and taxes — has been subtracted from revenue. It is the literal bottom line of the income statement and the number that feeds earnings per share.Fundamentals Net Interest Margin (NIM)Net interest margin is a bank's core profit spread: interest earned on loans and securities minus interest paid on deposits and borrowings, divided by average earning assets. A bank earning 5% on its loan book while paying 1.8% for funding runs a NIM around 3.2% — and for a traditional lender, that spread is the business.Fundamentals Net MarginNet margin is net income as a percentage of revenue — the share of every sales dollar that survives all the way to the bottom line after every cost, including interest and taxes. A company earning $30M on $200M of revenue runs a 15% net margin.Fundamentals Operating Cash FlowOperating cash flow is the cash a company's core business actually generated during the period, reported in the first section of the cash flow statement. It starts from net income and unwinds the accounting: non-cash charges like depreciation and stock-based compensation get added back, and changes in working capital get added or subtracted depending on whether they trapped or released cash.Fundamentals Operating IncomeOperating income is the profit a company earns from actually running its business: revenue minus COGS minus operating expenses, before interest and taxes. It ignores how the company is financed and where it is taxed, isolating the performance of the operations themselves.Fundamentals Operating LeverageOperating leverage is the multiplier that fixed costs place between revenue growth and profit growth. When a large share of costs — rent, salaries, data centers, factories — does not move with sales, each incremental revenue dollar arrives with little incremental cost attached, so profits swing much harder than the top line in both directions.Fundamentals Operating MarginOperating margin is operating income divided by revenue — the percentage of sales left after both cost of goods sold and operating expenses (R&D, sales and marketing, administration), but before interest and taxes. It measures how profitably the core business runs.Fundamentals Owner EarningsOwner earnings is Warren Buffett's definition of what a business truly earns for its owners: reported net income, plus depreciation, amortization, and other non-cash charges, minus the capital spending required to maintain the company's competitive position. He laid it out in his 1986 shareholder letter as the number that matters for valuation, calling reported earnings and cash flow both misleading on their own.Fundamentals P/E RatioThe price-to-earnings ratio is a stock's share price divided by its earnings per share — the number of dollars the market pays for each dollar of annual profit. A $60 stock earning $3.00 per share trades at a P/E of 20.Fundamentals Payout RatioThe payout ratio is the share of earnings a company pays out as dividends: dividends per share divided by earnings per share. A company earning $5.00 and paying $2.00 has a 40% payout ratio.Fundamentals PEG RatioThe PEG ratio divides a stock's P/E by its expected earnings growth rate, scaling the multiple to the growth that is supposed to justify it. A stock at a P/E of 30 growing earnings 25% a year has a PEG of 30 / 25 = 1.2.Fundamentals Piotroski F-ScoreThe Piotroski F-Score grades a company 0 to 9, awarding one point for each fundamental test it passes across profitability, leverage, and efficiency. Accounting professor Joseph Piotroski published it in 2000 as a way to separate the survivors from the value traps inside a cheap-stock universe.Fundamentals Poison PillA poison pill is a defensive tactic a company's board adopts to make a hostile takeover prohibitively expensive or dilutive, most commonly a shareholder rights plan that lets existing shareholders (other than the hostile acquirer) buy additional shares at a steep discount once someone crosses an ownership threshold, diluting the would-be acquirer's stake.Fundamentals Price TargetA price target is an analyst's projected price for a stock, usually on a 12-month horizon, published alongside a rating. Targets come out of valuation models: discounted cash flow, price-to-earnings multiples on forward estimates, or sum-of-the-parts for conglomerates.Fundamentals Price-to-Book Ratio (P/B)Price-to-book compares a stock's price to its book value per share — the accounting net worth on the balance sheet. Below 1.0, the market values the company at less than its assets minus its liabilities; above 1.0, it is paying a premium over the accounting value.Fundamentals Price-to-Free-Cash-FlowPrice-to-free-cash-flow divides market cap by annual free cash flow — the multiple paid for each dollar of cash the business actually throws off after capex. It is P/E's harder-nosed sibling: earnings are an accounting opinion, while free cash flow is what is available to fund dividends, buybacks, and debt paydown.Fundamentals Price-to-Sales Ratio (P/S)Price-to-sales is market cap divided by annual revenue — how many dollars of market value the company carries per dollar of sales. A $5B company doing $1B in revenue trades at 5x sales.Fundamentals Price-to-Tangible-BookBank analysts quote valuations in price-to-tangible-book: share price divided by tangible book value per share. Below 1.0x, the market prices the bank's equity at less than the marked value of its net assets; the premium above 1.0x is what the market pays for the franchise — the deposit base, the lending relationships, the earnings power.Fundamentals Proxy StatementA proxy statement (SEC form DEF 14A) is the document companies send shareholders before the annual meeting, laying out board nominees, executive pay, auditor ratification, and any shareholder proposals up for a vote. It exists so shareholders who will not attend the meeting can vote by proxy.Fundamentals Quick RatioThe quick ratio is the current ratio with inventory thrown out: (current assets - inventory) / current liabilities. Inventory gets excluded because it is the current asset most likely to disappoint — it can take months to sell, or require discounting to move at all.Fundamentals Receivables TurnoverRevenue divided by average accounts receivable gives receivables turnover: how many times per year a company converts its outstanding invoices into cash. A turnover of 10 means the receivables book collects and refills ten times a year.Fundamentals Retained EarningsEvery dollar of profit a company has ever earned and not paid out as a dividend accumulates in retained earnings. The account grows by net income and shrinks by dividends each period — a running total of everything earned and reinvested since inception, sitting inside shareholders' equity.Fundamentals Return on Assets (ROA)Return on assets is net income divided by total assets — profit generated per dollar of everything the company controls, regardless of whether it was funded by shareholders or lenders. Because assets always equal or exceed equity, ROA is always the same or lower than ROE.Fundamentals Return on Capital Employed (ROCE)Return on capital employed is ROIC's pre-tax cousin: EBIT divided by capital employed, where capital employed is total assets minus current liabilities. It answers the same question — how productively does the business use the capital locked inside it — but with two practical differences: the numerator is before tax, and the denominator comes straight off the balance sheet with no adjustments.Fundamentals Return on Equity (ROE)Return on equity is net income divided by shareholders' equity — the annual profit generated per dollar of the owners' capital in the business. A company earning $150M on $1B of equity runs a 15% ROE.Fundamentals Return on Invested Capital (ROIC)Return on invested capital measures the after-tax operating profit a company earns on every dollar tied up in the business: NOPAT (net operating profit after tax) divided by invested capital, meaning the sum of debt and equity actually deployed in operations. Unlike return on equity, it cannot be juiced with leverage — borrowing more grows both profit and the capital base it is measured against.Fundamentals RevenueRevenue is the total money a company brings in from selling its products or services before any costs are subtracted. It sits on the top line of the income statement, which is why traders call it "the top line" — everything else on the statement is carved out of it.Fundamentals Rights OfferingA rights offering gives existing shareholders the right to buy additional shares, usually at a discount to the current market price, in proportion to their existing ownership stake. Companies use rights offerings to raise capital while giving current shareholders first opportunity to maintain their percentage ownership.Fundamentals Shareholder YieldShareholder yield adds up every channel a company uses to return capital — dividends, net buybacks, and net debt paydown — and expresses the total as a percentage of market cap. The logic: a dollar of debt reduction is a transfer of enterprise value from creditors to shareholders just as surely as a dividend check, so counting only dividends understates what shareholders actually receive.Fundamentals Shares OutstandingShares outstanding is the total number of a company's shares currently held by all investors — insiders, institutions, and the public combined. It is the denominator in per-share math: EPS, book value per share, and market cap all depend on it.Fundamentals Sloan RatioThe Sloan ratio measures how much of a company's reported income is accruals — accounting entries — rather than actual cash, computed as (net income - operating cash flow - investing cash flow) / total assets. It grew out of Richard Sloan's 1996 research showing that earnings built on accruals are less persistent than earnings backed by cash, and that the market is slow to price the difference.Fundamentals Spin-offA spin-off is when a company separates part of its business into a new, independently traded public company, typically distributing shares of the new entity to existing shareholders of the parent. It is a way to unlock value from a division the market may be undervaluing when bundled inside a larger, more complex company.Fundamentals Stock-Based Compensation (SBC)Stock-based compensation is pay delivered in equity — options and restricted stock units — instead of cash. It is expensed on the income statement, then added back on the cash flow statement as a non-cash charge, which is exactly where the controversy starts.Fundamentals Tangible Book ValueTangible book value strips goodwill and intangible assets out of shareholders' equity, leaving the net worth backed by assets you could point at: cash, securities, receivables, inventory, property. The logic is conservative — goodwill is the premium paid in past acquisitions, and if those deals sour it gets written off, so tangible book asks what the equity is worth if the accounting optimism evaporates.Fundamentals Treasury StockShares a company has repurchased and holds on its own books — that is treasury stock. Treasury shares are issued but no longer outstanding: they collect no dividends, carry no votes, and drop out of the share count used for EPS and market cap.Fundamentals Upgrade / DowngradeAn upgrade or downgrade is an analyst changing a stock's rating, up (hold to buy) or down (buy to hold), typically with a price target change attached. Rating changes drop premarket and are among the most common causes of morning gaps in otherwise quiet stocks.Fundamentals WACC (Weighted Average Cost of Capital)WACC is the blended rate a company pays for its capital, weighting the cost of equity and the after-tax cost of debt by their share of the capital structure. The formula: WACC = (E/V) x cost of equity + (D/V) x cost of debt x (1 - tax rate), where E is equity value, D is debt, and V is E + D.Fundamentals WarrantA warrant gives the holder the right, but not the obligation, to buy a company's stock at a set strike price before a set expiration date, similar to a call option. The key difference is that a warrant is issued directly by the company itself, and exercising it creates new shares, diluting existing shareholders, rather than transferring existing shares between two traders the way an option does.Fundamentals Working CapitalWorking capital is current assets minus current liabilities — the cushion between what a company can turn into cash within a year and what it owes within a year. Positive working capital means near-term obligations are covered; negative means the company depends on incoming cash arriving on schedule.Fundamentals