Financial Dictionary

abcdefghijklmnopqrstuvwxyz

Each Way

A slang term that refers to a broker who manages to earn commissions from both the seller and the purchaser of a stock, derivative, or bond. By matching the clients together, brokers could earn twice the commission on the single transaction.

EAFE Index

A market value weighted index of 21 most developed markets in Europe, Asia and Far East countries. It is developed and maintained by Morgan Stanley Capital International (MSCI) back in 1969 in order to compute overall condition of EAFE markets.

Early Withdrawal

Prematurely withdrawn money from a fixed-term investment. Removing of funds before the maturity date usually causes an Early Withdrawal Fee.

Earnings Growth

It is an average growth of earnings over the period of time. For example, if a company earns $10,000 in the second quarter of year 1 and $12,000 in the second quarter of year 2, earnings growth was 20 percent. Beware of the earnings growth in a new, start-up company. This can easily be misleading […]

Earnings Recast

The act of recalculating and re-releasing earnings report, in order to eliminate impact of certain expenses that are non-representative for normal business practice. Earnings recast can be useful for investors, because of new calculation capability for research and analysis. Also called earnings restatement, such a recalculating gesture should be stated in the footnote of every […]

Earnings Report

A corporate financial statement that reports and nets out all earning and expenses to a profit or loss. It is therefore sometimes referred to as the profit and loss (P&L) statement.

Earnout

In business selling, it should eliminate uncertainty of the buyer of the business. It is a provision obligating the buyer of the business to pay an additional amount of money in accordance to future business achievement. Buyers would rather accept a lower price for the business plus Earnout, than a higher price without an Earnout […]

Eating Stock

A slang term commonly used when underwriters are unable to sell the entire Initial Public Offering (IPO), and therefore are forced to purchase the shares that could not be sold to investors.

Economic Stimulus

Attempts by governments or government agencies to financially stimulate an economy. An economic stimulus is the use of monetary or fiscal policy changes to kick start a lagging or struggling economy. Governments can use tactics such as lowering interest rates, increasing government spending and quantitative easing, to name a few, to accomplish this.

Economics

A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics can generally be broken down into: macroeconomics, which concentrates on the behavior of the aggregate economy; and microeconomics, which focuses on individual consumers.

Economy of Scale

Cost per unit reduction, due to increased production. Because of increased production, costs of producing each additional product are going low. Economy of Scale is also called “Increasing returns to scale.”

EDGAR

Short for Electronic Data Gathering, Analysis and Retrieval, which is an electronic system created by the SEC. EDGAR provides increased accessibility to corporate fillings in order to ease submission of required documents to the SEC, such as quarterly and annual statements, information regarding institutional owners and other important documents. EDGAR has one drawback among the […]

Edge Act

A legislation of U.S. Federal Reserve allowing national banks to perform international lending operations and other forms of business through federally chartered subsidiaries. The idea of Edge Act is to give an easement to U.S. companies in order to compete with foreign firms.

Edge Act Corporation

A corporation with a special charter from the US Federal Reserves, called Edge Act, to utilize in international banking transactions. Because of mass internationalization of all kinds of companies, Edge Act is working loose today, giving international firms like airlines and trading companies permission to provide banking services.

EDGX

A high-volume trading platform owned by Direct Edge ECN LLC, the third largest market center worldwide. EDGX is a type of electronic communication network (ECN) that allows traders to trade with one another directly on an exchange instead of having to go through a middleman. NYSE Arca, Nasdaq, and BATS are examples of other high-volume […]

EE Savings Bond

A zero coupon bond issued directly by the Treasury in par values ranging from $5 to $10,000. Purchased at half of par, EE savings bonds mature in 12 years and are eligible for extended maturity.

Effective Date

The first date after the cooling-off period of a new issue that the security can be offered.

Efficiency Ratio

A ratio used to calculate company’s efficiency, or, how much money did company spend to make profit. The formula to calculate is as follows: Efficiency Ratio = Expenses / Income A lower percentage of Efficiency Ratio means that company made less expenses to generate same revenue, or, equivalently, made same amount of expenses by generating […]

Either-Or-Order

It is actually two orders, given to a broker which will execute only one of them, depending on the market situation. The most common example is giving the broker buy limit and buy stop orders. The broker will execute the buy limit order if the market price is under specified price for that order, or […]

Electricity

Electricity is a relatively straightforward investment, though most investors do not think of this intangible asset as a commodity. As an investment, electricity has a relatively solid base; it is almost entirely inelastic as a large portion of the world relies on it to get through their every day lives. Recessions and market pullbacks will […]

Elephant

A slang term for large institutions like mutual funds, insurance companies or pension plans that have enormous amounts of money to invest. An investment of such a company can seriously affect market prices. The term “elephant” can also be used to describe a very wealth investor.

Elevator Pitch

A slang term for a brief speech describing the essentials of the business, an idea. It is a one minute explanation of business basics, which got its name from individuals attempting to persuade potential venture capitalists to invest in their businesses all in the course of an elevator ride.

Eligible Account

An account receivable that satisfies lender’s criteria specified in loan agreement. Eligible Account is often called “prime account.”

Elliot Wave Theory

A theory by Ralph Nelson Elliot, who conceived that the stock market could be forecasted by monitoring a repetitive wave pattern. His theory is based on a nature rhythm, which follows the 5 waves up – 3 waves down periods on a bullish market and 3 waves up – 5 waves down on a bearish […]