Balance Sheet

Financial statements that detail the company’s assets, liabilities and shareholders’ equity at a given point in time.

Bear Market

Prolonged period of time in which asset prices fall consistently. In general, Bear Markets are "created" by economic deterioration or a recession.


Measure of comparison for investment returns, usually an index.


Debt certificate issued by a company that certifies that its holder extended a loan to the company.

Bull Market

Prolonged period of time in which asset prices rise consistently. In general, they are originated by economic improvements or a general speculative mood.

CAGR (Compounded Annual Growth Rate)

Average annual rate of return.


Money generated by the company’s operations.

Competitive Advantages

Business characteristics that allow a company to obtain a return higher that its cost of capital.


Process in which an investment appreciates through the reinvestment of gains, originating further gains.

Cost of Capital

Rate of return required by the providers of the capital that finances the company’s activity.


Interest paid by a bond.

Credit Risk

Risk the company fails to pay back its debt.


Financial instruments whose value derives from other underlying assets.

Discount Rate

Rate of return of an investment that makes the investor indifferent between consuming now or in the future.


Remuneration paid by the company to the shareholder (monthly, quarterly or annually).

Dividend Yield

Annual dividend paid divided by share price. Corresponds to the rate of return of the dividends in relation to the company’s market value.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

Measure of the operating profitability of the company.

Equity Risk Premium

Rate of return demanded by investors in excess of a risk-free investment return.

ETF (Exchange Traded Fund)

Investment funds, excluding closed-end funds, that trade in a financial market exchange. They typically have low costs and seek to mirror the performance of another asset, index, commodity, etc.

Expense Ratio

Total amount charged in fees in relation to total assets under management.

Free Cash Flow

Cash generated by the business after fixed and net working capital investments are deducted.

Fundamental Analysis

Analyzing a company based on the operational, financial and strategic characteristics of the business.

Income Statement

Financial statement of the revenues, costs and profit generated by the company throughout the last quarter/year.

Intrinsic Value

Value estimate of a company that relies on its ability to generate excess cash that can be distributed by its capital providers.


Acquiring an asset with the goal of obtaining a future return via the generation of free cash flow. According to Benjamin Graham, "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

Investment Portfolio

Group of investments made by an individual, institutional investor or an asset manager.


Using borrowed funds to invest with a view to obtain bigger profits.


Ability to buy or sell an asset easily e quickly, without affecting market price. Alternatively, designates the ability an investor has to convert his investments into cash.

Management Fee

Fee charged by the asset manager for the service of managing an investment portfolio. Typically corresponds to a fixed percentage of total assets under management.

Market Capitalization

Market value of shareholders’ equity, given by the number of shares outstanding multiplied buy their market price.

Opportunity Cost

Cost of investment opportunities not taken.

P/E (Price to Earnings) or PER (Price to Earnings Ratio)

Ratio that divides share price by earnings of the company per share outstanding. Used as a relative valuation method, comparable with the P/E ratio of other companies.

Performance Fee

Fee charged by the asset manager for the appreciation of capital. Typically corresponds to a fixed percentage of net total gains.

RoE (Return on Equity)

Measure of the return of the company. Compares the company’s net earnings to its shareholders’ capital.

RoIC (Return on Invested Capital)

Measure of the return of the company. Compares the company’s operational returns to its total invested capital. Crucial in identifying companies with competitive advantages.


Index that represents the evolution of price of 500 of the biggest companies in the USA.


Certificate that represents and entitles its owner to a fraction of a company’s shareholders’ equity.

Share Buyback

Process by which the company buys back its own shares. It is a fiscally more convenient way of remunerating shareholders.

Shareholders’ Equity

Net value of the balance sheet. Assets minus Liabilities.


Buying an asset with the sole expectation that someone will offer a higher price for it in the future.

Technical Analysis

Analyzing past movements in equity prices with the objective of predicting future movements.

Time Value of Money

Present value of money is higher today than the same amount in the future, due to the effects of inflation.

Time Weighted Return

Way of measuring the compounded return of an investment which eliminates distortions caused by additional commitments of capital or liquidation after the initial moment of the investment.

Total Returns

Return measure of an investment that encompasses both capital gains and dividends received.


Statistical measure of the dispertion of past values of a variable.

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