Category: Financial Terms

Earnings Power Value (EPV) Earnings Power Value (EPV) is a valuation method that estimates the value of a company based on the sustainability of its current earnings and its cost of capital, explicitly excluding assumptions about future growth. It was popularized by Bruce Greenwald as a way to reduce the subjectivity inherent in discounted cash…

Earnings Per Share (EPS) Key takeaways * EPS measures the profit attributable to each share of common stock: higher EPS generally indicates greater profitability. * Basic EPS = (Net Income − Preferred Dividends) ÷ Weighted Average Common Shares Outstanding. * Diluted EPS accounts for all potentially dilutive securities (options, convertible debt, warrants). * Adjusted EPS…

What Is an Earnings Multiplier? How It Works and Example Overview The earnings multiplier, commonly known as the price-to-earnings (P/E) ratio, relates a company’s current stock price to its earnings per share (EPS). It’s a simple valuation tool investors use to compare how expensive stocks are relative to their earnings. Formula and interpretation Formula: Earnings…

Earnings Estimate An earnings estimate is an analyst’s forecast of a public company’s future earnings per share (EPS) for a given quarter or year. These estimates are a central input for valuing firms, setting price targets, and guiding investment decisions. Investors and analysts use EPS estimates to compare expected performance against actual results and to…

Understanding the Earnings Credit Rate (ECR) The earnings credit rate (ECR) is an imputed interest rate banks apply to certain customer deposits—primarily institutional or commercial accounts—to offset banking service charges. Rather than paying cash interest on non-interest-bearing accounts, banks credit an earnings allowance based on the ECR and a customer’s collected balances. That allowance reduces…

Earnings Call Key takeaways An earnings call is a conference call where a public company’s management discusses recent financial results with analysts, investors, and the media. Calls typically follow the release of an earnings report and often reference the MD&A section of SEC filings (10-Q or 10-K). Analysts use both the quantitative disclosures and management’s…

Earnings Before Tax (EBT): Definition and How to Use It What is EBT? Earnings Before Tax (EBT), also called pretax income or income before income taxes, is a company’s profit after all operating and nonoperating expenses have been deducted from revenue but before tax expense is subtracted. Because it excludes taxes, EBT makes it easier…

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) What is EBITDA? EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It measures a company’s operating profitability by removing the effects of financing (interest), tax environments, and non-cash accounting charges (depreciation and amortization). EBITDA is a non‑GAAP metric commonly used to compare core performance across…

Earnings Before Interest, Depreciation and Amortization (EBIDA) EBIDA is a profitability metric that measures a company’s earnings after adding back interest, depreciation, and amortization to net income — but it retains tax expense. Because it does not add back taxes, EBIDA is a more conservative alternative to EBITDA. What EBIDA shows Focuses on operating performance…

Earnings Before Interest and Taxes (EBIT) Key takeaways EBIT measures a company’s operating profitability by excluding interest and income taxes. It enables fair comparisons between companies with different capital structures or tax situations. EBIT includes depreciation and amortization, unlike EBITDA, making it a more conservative measure of operating performance. EBIT does not reflect cash flow,…

Earnings Before Interest After Taxes (EBIAT) Key takeaways * EBIAT = EBIT × (1 − tax rate). It measures earnings after taxes but before interest. * It neutralizes the tax benefit of debt (the interest tax shield) by applying taxes to EBIT. * EBIAT is a non‑GAAP metric useful for comparing underlying operating profitability, but…

Earnings Announcements: Definition and Market Impact What is an earnings announcement? An earnings announcement is a company’s official public statement of profitability for a reporting period, typically a quarter or a year. It reports results such as revenue, net income and earnings per share (EPS), and may include management guidance about future expectations. Earnings are…

Earnings: Definition, Measurements, and Why They Matter Key takeaways * Earnings are a company’s after-tax net income—its profit for a quarter or fiscal year. * Earnings strongly influence a public company’s share price because profits can be reinvested or distributed as dividends. * Common measures include EPS, P/E ratio, earnings yield, and adjusted figures like…

Earnest Money: What It Is and How It Works in Real Estate What is earnest money? Earnest money is a deposit a buyer gives when making an offer on a property to show serious intent. The deposit is typically held in an escrow or trust account and applied to the buyer’s down payment and closing…

Earned Premium: Definition and Why It Matters Earned premium is the portion of an insurance premium that an insurer has recognized as revenue for the coverage already provided during a policy period. Premiums paid in advance start as unearned because the insurer still has an obligation to provide future coverage. As time passes and coverage…

Earned Income Tax Credit (EITC) The Earned Income Tax Credit (EITC or EIC) is a refundable federal tax credit for low- and moderate-income working taxpayers. It reduces tax liability dollar for dollar and can produce a refund if the credit exceeds taxes owed. How the EITC works Refundable credit: lowers tax owed; if the credit…

What is earned income? Earned income is the money you receive as payment for work. It includes wages, salaries, bonuses, commissions, tips, and net earnings from self-employment. For tax purposes, certain other payments—such as long‑term disability paid before retirement age or union strike benefits—can also qualify as earned income. Income from investments, most government benefits,…

Earmarking Earmarking is the practice of designating money for a specific purpose. It appears in personal finance, legal contexts, and public budgeting. While it can clarify how funds are used, earmarking also raises controversies—especially in political appropriations. What earmarking means Literally, the term comes from marking livestock to show ownership. Financially, it means setting aside…

What Is Early Exercise? Early exercise is the act of exercising an options contract before its expiration date. It is only possible with American-style options (which can be exercised at any time up to expiration). European-style options can be exercised only at expiration, so early exercise is not available. Most traders do not exercise early…

Early Adopter: Definition, How It Works, Pros & Cons Key takeaways An early adopter is an individual or organization that starts using a new product, technology, or innovation before the majority of the market. Early adopters often pay a premium, accept higher risk and more defects, and can influence product development and broader adoption. The…

MSCI EAFE Index: Definition, How It Works, and Investment Considerations What is the MSCI EAFE Index? The MSCI EAFE (Europe, Australasia, Far East) Index is a market-capitalization-weighted benchmark that tracks large- and mid-cap stocks across developed markets outside North America. Launched by MSCI in 1986, it provides a widely used measure of international developed-market equity…

E-mini (E‑mini) Futures Key takeaways * E‑minis are electronically traded futures contracts that represent a fraction of a standard futures contract. * They make futures markets accessible to smaller traders and cover indexes, commodities, and currencies. * The E‑mini S&P 500 (ticker ES) is the most widely traded E‑mini; its multiplier is $50 per index…

Dynasty Trust — A concise guide What is a dynasty trust? A dynasty trust is a long-term irrevocable trust designed to preserve and transfer wealth across multiple generations while minimizing federal transfer taxes (gift tax, estate tax, and the generation‑skipping transfer tax, GSTT) for as long as assets remain in the trust. Its defining feature…

Dutch Tulip Bulb Market Bubble: an overview Tulipmania refers to a 17th-century period in the Dutch Republic when trade in tulip bulbs—especially rare “broken” varieties—sparked intense speculation. Prices for some bulbs rose to very high levels and then fell sharply. The episode is widely cited as the first recorded asset-price bubble and is used today…

Dutch Disease Dutch disease describes an economic paradox in which a boom in a country’s natural-resource sector leads to adverse effects on the broader economy—most notably a loss of competitiveness in manufacturing and other tradable sectors. How it works Two main channels explain the phenomenon: – Spending effect: Resource exports bring large foreign currency inflows,…

Dutch Auction: How It Works in Public Offerings Key takeaways * A Dutch auction (descending-price auction) sells securities at the lowest price needed to sell the full offering, allowing broad investor participation. * In IPOs, bidders specify quantity and price; all successful bidders pay the clearing price (the lowest accepted bid). * The U.S. Treasury…

Durbin–Watson Statistic What it is The Durbin–Watson (DW) statistic tests for autocorrelation (serial correlation) in the residuals of a regression model. Its value ranges from 0 to 4: – DW ≈ 2: no autocorrelation detected – DW < 2: positive autocorrelation (residuals tend to have the same sign in successive observations) – DW > 2:…

Duration: Definition and Use in Fixed‑Income Investing Duration measures a bond’s sensitivity to changes in interest rates and estimates how long, in years, it takes for an investor to be repaid a bond’s price through its cash flows. It is a central tool for assessing interest‑rate risk: higher duration means greater price sensitivity to interest‑rate…

Durable Goods Orders: Overview and Key Takeaways Durable goods orders measure new orders placed with U.S. manufacturers for long-lasting manufactured items (goods expected to last three years or more). The U.S. Census Bureau publishes the data in two releases each month: the advance report on durable goods and the manufacturers’ shipments, inventories, and orders report….

DuPont Analysis Overview DuPont analysis (also called the DuPont identity or DuPont model) decomposes return on equity (ROE) into the operational and financial drivers that produce it. It helps managers and investors identify whether changes in ROE come from profitability, asset use efficiency, or financial leverage. Key takeaways: * Breaks ROE into component ratios to…

Duopoly A duopoly is a market structure in which two firms together control all or nearly all of the supply of a particular good or service. It is the simplest form of an oligopoly (a market dominated by a small number of firms). Because only two firms hold most of the market power, their interactions…

Dun & Bradstreet (D&B) Key takeaways Dun & Bradstreet (D&B) is a global business-intelligence company that provides data, analytics, and software to support sales, finance, compliance, procurement, and marketing. Its signature offerings include the DUNS (Data Universal Numbering System) identifier, the Data Cloud, and credit- and risk-scoring products. Revenue is generated from subscriptions, reports, data…

Dumping in International Trade What is dumping? Dumping is the practice of exporting a product at a lower price in a foreign market than in the exporter’s domestic market. It is a form of price discrimination intended to gain a competitive advantage abroad. Because it can harm producers in the importing country, dumping is viewed…

Due Diligence: Types and How to Perform What is due diligence? Due diligence is the process of researching and verifying information before making a decision or committing to a transaction. It aims to identify risks, confirm facts, and help parties make informed choices—commonly used in investing, mergers and acquisitions (M&A), hiring, and major purchases. Key…

Due to Account: Definition, Example, and Importance Key takeaways * A “due to” account is a liability (often called accounts payable) that records amounts a company owes to other parties. * It appears in the general ledger and is used to track invoices and obligations until they are paid. * Proper tracking and reconciliation of…