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Here is my ever growing list of terms. If you would like to suggest a new term for the list, feel free to email me at admin@prancingbull.com.

Accounting profit - it is simply described as the difference between the sales price of a good and the cost to produce that good. If it costs McDonald’s an average of $1.50 to produce a Big Mac and they can sell it for $2.50, then they have made a profit of $1.00 ($2.50 - $1.50 = $1.00) per Big Mac sold.

Dividends - earnings from the company that are paid out to shareholders via cash or additional shares. Dividends are typically declared at the end of each quarter.

Economic profit - This is measured slightly differently from accounting profit. Economic profit is the accounting profit of a good, plus the opportunity cost of creating that good. For example: the opportunity cost of producing one Big Mac could be that Mc Donalds would have had the opportunity to use that hamburger patty on a more profitable burger. Say for example a double quarter pounder with cheese has an accounting profit of $1.50. If Mc Donalds uses two quarter pound patties to create one Big Mac, they are leaving an extra $.50 on the table, because now they can make one fewer double quarter pounder with cheese. Based on this example, we can say that the economic profit of the Big Mac is (sales price - production cost - opportunity cost = economic profit). Plugging in the numbers, we can find that the economic profit for the Big Mac is ($2.50 - $1.50 - $.50 = $.50).

Hedging - This is a tool that investors can use in order to lock in their profits. Consider it an insurance policy on their unrealized gains. Puts and calls are some of the most common hedging tools.

Intangible Assets - Intangible assets are things that cannot be physically touched, yet provide some sort of value to a company that must be reported in their financial statements. Intangible assets generally include patents, trademarks, franchises or brands.

Market Capitalization - This is the dollar amount that the market values a company at. It can be found by multiplying the price per share by the number of shares outstanding.

Revenues - Revenues are the price of a good multiplied by the quantity sold. Example: Good A is sold for $10. The company sells 20 units of Good A for the day. Their revenues are ($10/unit x 20 units sold) = $200.

Short Sale - In a short sale, and investor uses a margin account to sell shares they don’t own of a company they feel will have a declining stock price over the near future. The investor must repurchase the shares at a later date and return them to the broker.

Volume - This describes the number or shares traded for a particular stock for a particular day.