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Glossary of Financial Terms: Q-R




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This article is from the Glossary of Financial Terms.

Glossary of Financial Terms: Q-R

  • Quick ratio
    Indicator of a company's financial strength (or weakness). Calculated by taking current assets less inventories, divided by current liabilities. Also called Acid Test.

  • Range
    The difference between the high and low price during a given period.

  • Return
    The percentage gain or loss for a mutual fund in a specific time period. This number assumes that all distributions are reinvested.

  • Record date
    Date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov 1, payable Dec 1 to holders of record Nov 15. Once a trade is executed an investor becomes the "owner of record" on settlement, which currently takes 5 business days for securities, and one business day for mutual funds. Stocks trade ex-dividend the fourth day before the record date, since the seller will still be the owner of record and is thus entitled to the dividend.

  • Redemption charge
    The commission charged by a mutual fund when redeeming shares. For example, a 2 % redemption charge (also called a "back end load") on the sale of shares valued at $1000 will result in payment of $980 (or 98 % of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods.

  • Relative strength
    A stock's price movement over the past year as compared to a market index (the S&P 500). Value below 1.0 means the stock shows relative weakness in price movement (underperformed the market); a value above 1.0 means the stock shows relative strength over the 1-year period. Equation for Relative Strength: [current stock price/year-ago stock price] [current S&P 500/year-ago S&P 500]

  • Retracement
    A price movement in the opposite direction of the previous trend.

  • Return on assets (ROA)
    Indicator of profitability. Determined by dividing net income for the past 12 months by total assets. Result is shown as a percentage.

  • Return on equity (ROE)
    Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholders' equity (adjusted for stock splits). Result is shown as a percentage.

  • Reverse stock split
    A proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. A firm generally institutes a reverse split to boost its stock's market price and attract investors.

  • Rights offering
    Issuance of "rights" to current shareholders allowing them to purchase additional shares, usually at a discount to market price. Shareholders who do not exercise these rights are usually diluted by the offering. Rights are often transferrable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed end funds, which cannot otherwise issue additional common stock.

 

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