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Glossary of Financial Terms: P


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Glossary of Financial Terms: P

  • Payment date
    Date on which a declared stock dividend or a bond interest payment is scheduled to be made.

  • Phone switching
    In mutual funds, the ability to transfer shares between funds in the same family by telephone request. There may be a charge associated with these transfers. Phone switching is also possible among different fund families if the funds are held in street name by a particpating broker/dealer.

  • Pivot
    Price level established as being significant by market's failure to penetrate or as being significant when a sudden increase in volume accompanies the move through the price level.

  • Point and figure chart
    A price-only chart that takes into account only whole integer changes in price, i.e., a 2-point change. Point and figure charting disregards the element of time and is solely used to record changes in price.

  • Preferred stock
    A security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most preferred stock pays a fixed dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights.

  • Premium
    The price of an option contract, determined on the exchange, which the buyer of the option pays to the option writer for the rights to the option contract.

  • Prices
    Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price.

  • Price/book ratio
    Compares a stock's market value to the value of total assets less total liabilities (book). Determined by dividing current price by common stockholders' equity per share (book value), adjusted for stock splits. Also called Market-to-Book.

  • Price/earnings ratio
    Shows the "multiple" of earnings at which a stock sells. Determined by dividing current price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher "multiple" means investors have higher expectations for future growth, and have bid up the stock's price.

  • P/E ratio equation
    Assume XYZ Co sells for $25.50 per share and has earned $2.55 per share this year
    $25.50 = 10 times $2.55
    XYZ stock sells for 10 times earnings.

  • Price/Sales Ratio
    Determined by dividing stock's current price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding.

  • Primary market
    The first buyer of a newly issued security buys that security in the primary market. All subsequent trading of those securities is done in the secondary market.

  • Profit margin
    Indicator of profitability. Determined by dividing net income by revenue for the same 12-month period. Result is shown as a percentage.

  • Program trading
    Trades based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically.

  • Prospectus
    Formal written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by Mutual Funds to describe the fund objectives, risks and other essential information.

  • Proxy
    Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares as specified in the proxy statement.

  • Put option
    An option contract that gives the holder the right to sell (or "put"), and places upon the writer the obligation to purchase, a specified number of shares of the underlying stock at the given strike price on or before the expiration date of the contract.


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