Return on Equity (ROE)
Key indicator of profitability. A percentage determined by dividing net income for the past 12 months by common shareholders' equity, or dividing earnings per share by book value per share. May be decomposed into return on assets multiplied by financial leverage or total assets divided by total equity. Investors use return on equity as a measure of how efficiently a company is using its money. (SSG Section 2B)
See Sales.
The degree of uncertainty of return on an asset. There are many types of risk. For example, market risk refers to the volatility in stock prices; currency risk refers to the impact a rising or falling currency might have on an investment; and interest rate risk is the risk associated with the rise or fall in interest rates.
S&P 500 Composite Index
Index of 500 widely held common stocks that measures the general performance of the market. This index is the benchmark against which many investment managers are judged. The mix of companies changes over time to reflect dominance of certain industries. Unlike the Dow Jones industrial average, the S&P 500 is a capitalization-weighted index, which means that as stocks rise in value they carry a heavier weighting in the index. As they fall, they hold less sway over the entire index.
Income received by a company in exchange for goods and services recorded for a given accounting period. (Shown visually in SSG Section 1) Securities and Exchange Commission (SEC) - The federal agency that regulates the U.S. financial markets. The SEC also oversees the securities industry and promotes full disclosure to protect the investing public against malpractice in the securities markets.
Acronym for Stock Comparison Guide
Selling, General and Administrative (SG&A) Expenses
Expenses such as salespersons' salaries and commissions, advertising and promotion, travel and entertainment, office payroll and expenses, and executives' salaries. These costs fall immediately below the cost of goods sold on the income statement.
Shareholders' Equity
This is a company's total assets minus total liabilities, or its net worth.
A stock with a small capitalization, typically less than $1 billion in market value. NAIC guideline: Under $500 million in revenues.
Acronym for 'Stock Selection Guide'