Investing 101
By Eddie Keenan
August 27, 1998
Stocks
Earnings
Per Share (EPS) - dividing the net income
available to shareholders
by the average number of common shares outstanding.
Price-to-Earnings Ratio: Price of a Stock or
Index/Earnings Per Share
PE Ratio: dividing the current stock price by
the latest 12 months' earnings
per share.
Price-to-Book Ratio: Price of a Stock or
Index/Book Value Per Share
Dividend Yield: A stock dividend yield is
calculated by dividing the indicated
dividend rate for the next 12-months by the stock's
current price.
50-Day Moving Average: Collect the closing
prices of the stock over a fixed
period of time and then calculating the arithmetic mean
of those prices. If
the moving average line is going higer, and if the stock
is trading above it
then it is bullish. If the moving average line is going
lower, and if the
stock is below it then its bearish.
Return on Equity: By dividing the company's
annual income (before accounting
adjustments and other such things) by the average of the
latest fiscal year
and the prior year's stockholders' equity. It is a
measure of the efficency
with which the company employs owner's capital. By
dividing the net-income
(before accounting and operation fees) by the average of
shareholders' equity
at the beginning and end of the latest fiscal year.
Stockholders' Equity: also known as owners'
equity, shareholders' equity, net
worth, or simple equity. It is the difference between
what the company owns
and what it owes.
The 5 If's
#1) A stock rising on heavy volume is
significantly bullish, but when the volume
begins to taper off, the stock may be telling you that
serious buying is
nearing an end.
#2) If the stock's price is moving
sideways it is telling you the buyers and
sellers are evenly matched. If the volume is heavy it is
also telling you that
there is a battle among shareholders.
#3) If the stock price is moving lower
then the stock is telling you its under
distribution. The heavier the volume the wierder the
pattern. A stock falling
on lighter that normal volume has less to worry about.
#4) If certain prices and volume
patterns that happen before bullish moves, then
these patterns are referred to as bases, where buyers and
sellers have been
evenly matched.
#5) If a stock moves up out of its bases
especially if its on higher volume, its
telling you buyers are out pacing sellers, and that they
are becoming more
numerous.
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