Language of Investing



a) Terminology

Book Value
The current value of an asset on a company's balance sheet according to its accounting conventions. The shareholders' equity on a company's balance sheet is the book value for that entire company. Many times when investors refer to book value, they actually mean book value per share, which is the shareholder's equity (or book value) divided by the number of shares outstanding. As the book value is theoretically what a company could be sold for (liquidation value), this book value number is sometimes used as a rough guide as to whether or not the shares are undervalued.


Capital Appreciation
One of the two components of total return, capital appreciation is how much the underlying value of a security has increased. If you bought a stock at $10 and it has risen to $12, you have enjoyed a 20% return from the appreciation of the original capital you invested. Dividend yield is the other component of total return.


Dividend Yield
A ratio of a company's annual cash dividends divided by its current stock price expressed in the form of ...

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