ASSETS - any resource with value that is held by a company

Asset is used:• To refer to items on the balance sheet of a company which add value• Items traded in financial markets

Assets can be defined as:

1. Current assets (held less than 1 year)

2. Long Term (held for more than 1 year)

3. Intangible assets

Assets traded in the financial markets are also known to as securities and include instruments such as shares, bonds, derivatives, ETFs !!!

EQUITY- has two main meanings:A share or any other security which represents partial

ownership of a firmThe value of a firm which has been contributed by the

shareholders

In share terms, whenever you buy a share in a company you hold equity in that company. 

Venture Capital firms frequently purchase large amounts of equity, (take ownership of a percentage of the company).

The CASH FLOW STATEMENT (CFS) - is one of the three financial statements that are used to value a company and it shows actual inflows and outflows of cash. the CFS is constructed using the Balance Sheet and Income

Statement and other relevant data. the process of creating the Cash Flow Statement is to go through

every entry in the Balance Sheet and Income Statement and adjust for anything that is recorded as having value, but has a different effect on cash.

The Cash Flow Statement is split into 3 sections: Operating Activities – refers to general costs of running the business such as

Inventory, Accrued Expenses, Research & Development. Investing Activities – refers to the purchase, sale and maturity of investments as

well as any Capital Expenditures. Essentially this includes anything that is used to enhance the business without being directly related to product sales.

Financing Activities – refers to raising and paying off of debt as well as share actions (dividends, share buy-backs etc).

BALANCE SHEET (BS) - is one of the three financial statements that are used to value a company and to show what it owns or owes.

The Balance Sheet is split into three sections:

1. Assets - what the company owns or is owed

2. Liabilities - any money the company may owe

3. Shareholder's Equity - what the shareholders own

One of the most fundamental rules of accounting and finance is that a balance sheet MUST balance (hence the name). Assets will always be equal to Liabilities + Shareholder's Equity.

INCOME STATEMENT (IS) - is one of the three financial statements that are used to value a company and to show inflows and outflows of value. The Income Statement lists all operational costs of the business as well as any income. It is always for a period of time (1 YEAR).

Some examples of items included on the income statement are: Revenue Cost of Goods Sold Research & Development Depreciation & Amortization Earnings Per Share

PROFIT & LOSS -  is a common term used in trading and is extremely self explanatory. It simply refers to the total profit or loss made by an individual or group over a certain time period. For example, an individual trader may have a daily P&L limit such as +/- $50,000 meaning the maximum amount he will aim to make s $50,000 and if he loses $50,000 he will stop trading for that day.

RETURN ON EQUITY (ROE)- is an indicator of the profitability of a firm relative to the shareholders equity of the firm.

The calculation for ROE is: Net Income / Shareholders Equity

Return on Equity is used to assess how efficiently the investment by shareholders is being used to produce profits, and it can be compared between similar companies to give an idea of the relative performance and efficiency of a firm. The higher the return on equity, the more efficiently it is using its money.

RETURN ON ASSETS (ROA) - is an indicator of the profitability of a firm relative to the assets of the firm.

The calculation for ROA is: Net Income / Total Assets

Return on Assets is used to assess how efficiently the assets of the firm are being used to produce profits, and it can be compared between similar companies to give an idea of the relative performance and efficiency of a firm. The higher the return on assets of a firm, the more efficiently it is using its assets.

RETURN OF INVESTMENT (ROI) - is an indicator of the profitability of an investment relative to the amount invested.

The calculation for ROI is:

( Final Value of Investment – Cost of Investment ) / Cost of Investment

Return on Investment is used to assess the profitability on an investment for different potential investments. If a project has a lower ROI than another project, then it should be disregarded in favor of the other.

EARNINGS BEFORE INTEREST, TAX, DEPRECIATION & AMORTIZATION (EBITDA) – is the most commonly used indicator for a firms profitability.

The EBITDA calculation is Operating Income + Depreciation + Amoritzation + Stock-Based Compensation.

EBITDA is a popular metric used for comparing companies, particularly with an LBO. The most common multiple using EBITDA is: Enterprise Value / EBITDA

The reason behind using EBITDA  is because it allows you to see both the profitability of a firm excluding taxes and also because it shows the ability of the firm to service debt  and that it is not affected by capital structure.

Equity trading is the buying and selling of company stock shares. Shares in large  publicly traded companies are bought and sold through one of the major stock exchanges, such as the New York Stock Exchange, London Stock Exchange or Bombay Stock Exchange, which serve as managed auctions for stock trades. Stock shares in smaller public companies are bought and sold in over-the-counter (OTC) markets.

In finance short selling (also known as shorting or going short) is the practice of selling securities or other financial instruments that are not currently owned, with the intention of subsequently repurchasing them ("covering") at a lower price. In the event of an interim price decline, the short seller will profit, since the cost of repurchase will be less than the proceeds received upon the initial (short) sale. Conversely, the short seller will incur a loss in the event that the price of a shorted instrument should rise prior to repurchase.