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Financial Acronyms Explained
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LTV
Loan to Value Ratio - a financial term used by lenders to express the ratio of a loan to the value of an asset purchased
DCF
Discounted Cash Flow - a valuation method used to estimate the value of an investment based on its future cash flows
REIT
Real Estate Investment Trust - a company that owns, operates, or finances income-generating real estate
PVC
Present Value Calculation - a financial formula used to determine the present value of a future amount of money or stream of cash flows given a specified rate of return
ROI
Return on Investment - a performance measure used to evaluate the efficiency or profitability of an investment
VC
Venture Capital - a type of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth
P/E
Price to Earnings Ratio - a valuation ratio of a company's current share price compared to its per-share earnings
LIFO
Last In, First Out - an inventory valuation method which presumes that the most recent products added to the inventory are sold first
IPO
Initial Public Offering - the first time that the stock of a private company is offered to the public
GDP
Gross Domestic Product - the total value of all goods and services produced over a specific time period within a country
FIFO
First In, First Out - an asset-management and valuation method in which assets produced or acquired first are sold, used, or disposed of first
TVOM
Time Value of Money - the concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization - an indicator of a company's financial performance which is calculated in the following manner: EBITDA = Revenues – Expenses (excluding tax, interest, depreciation and amortization)
GAAP
Generally Accepted Accounting Principles - a collection of commonly-followed accounting rules and standards for financial reporting
S&P
Standard & Poor's - a financial services company best known for providing market indices such as the S&P 500
AAA
Triple A - the highest possible rating that may be assigned to an issuer's bonds by credit rating agencies
VAT
Value Added Tax - a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale
PMI
Purchasing Managers' Index - an indicator of the economic health of the manufacturing sector based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment
ADR
American Depositary Receipt - a negotiable certificate issued by a U.S. bank representing a specified number of shares in a foreign stock traded on a U.S. exchange
NPV
Net Present Value - the difference between the present value of cash inflows and the present value of cash outflows over a period of time
MBS
Mortgage-Backed Security - a type of asset-backed security that is secured by a mortgage or collection of mortgages
P&L
Profit and Loss Statement (also known as Income Statement) - a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period
YTM
Yield to Maturity - the total return anticipated on a bond if the bond is held until it matures
PPI
Producer Price Index - an economic indicator that measures the average change over time in the selling prices received by domestic producers for their output
SME
Small and Medium-sized Enterprises - businesses whose personnel numbers fall below certain limits
WACC
Weighted Average Cost of Capital - a calculation of a firm's cost of capital in which each category of capital is proportionately weighted; calculated using the following formula: WACC = E/V * Re + D/V * Rd * (1-Tc)
ETF
Exchange-Traded Fund - a type of investment fund and exchange-traded product; the shares are traded on stock exchanges
SWOT
Strengths, Weaknesses, Opportunities, and Threats - a strategic planning technique used to help a person or organization identify competitive advantages and disadvantages
MoM
Month over Month - a method of expressing the changes in the value of a variable over a monthly period
CAGR
Compound Annual Growth Rate - used to describe the geometric progression ratio that provides a constant rate of return over a time period
EBIT
Earnings Before Interest and Taxes - an indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest
CAPEX
Capital Expenditures - funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment
FCF
Free Cash Flow - a measure of financial performance calculated as operating cash flow minus capital expenditures
IRR
Internal Rate of Return - a metric used in capital budgeting to estimate the profitability of potential investments
T-Bill
Treasury Bill - a short-term government security with a maturity of less than one year, sold at a discount to par value
EPS
Earnings Per Share - the portion of a company's profit allocated to each outstanding share of common stock
NAV
Net Asset Value - the value per share of a mutual fund or an ETF
SEC
Securities and Exchange Commission - a U.S. government oversight agency responsible for regulating the securities markets and protecting investors
SOX
Sarbanes-Oxley Act - a law passed by U.S. Congress to protect investors from the possibility of fraudulent accounting activities by corporations
LIBOR
London Interbank Offered Rate - an interest rate average calculated from estimates submitted by the leading banks in London
R&D
Research and Development - refers to the investigative activities a business conducts to improve existing products and procedures or to lead to the development of new products and procedures
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