finances_lecture 3: "'Valuing stocks"
Primary Market
A market for the sale of new securities by corporations
Secondary Market
A market in which previously issued securities are traded among investors
Electronic Communication Networks ( ECNs)
A number of computer networks that connect traders with each other
Dividend Discount Model
Computation of today's stock price which states that share value equals the present value of all expected future dividends
From what can be derived Dividend Growth Rate?
Dividend Growth Rate can also be derived from applying the return on equity to the percentage of earnings plowed back into operations.
SPDRs (Standard & Poor's Depository Receipts or "spiders")
ETFs, which are portfolios tracking several Standard & Poor's stock market indexes
Market Value Balance Sheet
Financial statement that uses market value of assets and liabilities
Payout Ratio
Fraction of earnings paid out as dividends
Plowback Ratio
Fraction of earnings retained by the firm
Present Value of Growth Opportunities (PVGO)
Net present value of a firm's future investments.
Book Value
Net worth of the firm according to the balance sheet
Common Stock
Ownership shares in a publicly held corporation
Dividend
Periodic cash distribution from the firm to the shareholders
Exchange-Traded Funds (ETFs)
Portfolios of stocks that can be bought or sold in a single trade
P/E Ratio
Price per share divided by earnings per share
Describe ROE
Return on equity
Sustainable Growth Rate
Steady rate at which a firm can grow: plowback ratio X return on equity.
Expected Return
The expected return on a stock investment plus the expected growth in the dividends. Similar to the capitalization rate.
Expected Return
The percentage yield that an investor forecasts from a specific investment over a set period of time. Sometimes called the market capitalization rate.
