Sharpe Ratio

Sharpe Ratio: was invented by professor William Sharpe of the USA to find the true risk-adjusted return on investment.

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Reinvested Return on Equity

Reinvested Return on Equity: is a way to project the future value of a company based on ROE, dividend cover, the risk-free rate of return, and the internal rate of return. (more…)

Discounted Cash Flow (DCF)

Discounted Cash Flow (DCF): is a way of valuing companies by forecasting flow for a period of years into the future and applying a discount factor to each year’s figure to reflect the expected time until it accrues. (more…)

Weighted Average Cost of Capital

Weighted Average Cost of Capital: (WACC), is usually compared with the actual return on capital earned by a company to determine how much value (if any) management is adding for shareholders (Economic Value Added-EVA). (more…)

Internal Rate of Return

Internal Rate of Return: (IRR) calculates the overall annual percentage rate of return on an investment, especially where several different variables are involved. In the case of bonds, the redemption yield is an internal rate of return. (more…)

Redemption Yield/Risk Free Rate of Return

Redemption Yield/Risk Free Rate of Return: is sometimes called “yield to maturity”. It is a concept most often applied to fixed income securities, like bonds, but also has applications to equity (stock) investing. (more…)

Premium/Discount to NAV

Premium/Discount to NAV: The premium/discount to NAV is the percentage difference between the share price and the per-share net asset value. (more…)

Burn Rate

Burn Rate: a popular financial ratio of the dot-com era, is used to determine the number of months before a loss-making company’s cash resource are extinguished. (more…)

Price/Cash Flow

Price/Cash Flow: compares the market value of a company with its cash and short-term investments. You use this to measure the degree to which liquid assets back up the share price. (more…)

Gearing

Gearing: is another name for Debt-equity Ratio. It is the net borrowings of a company divided by its tangible shareholders’ equity expressed as a percentage: (more…)