Market Basics: key terms, formulas and examples
Stocks are small ownership shares traded on an exchange. Brokers execute orders, indexes track the market, and bull or bear markets describe the mood.
Example
A limit order buys only at the price you choose.
Takeaway
Understand why a price moves before you act on it.
Key terms
- Stock exchange
- A marketplace where shares are bought and sold.
- Bull market
- A period when prices rise and investors feel optimistic.
- Bear market
- A period when prices fall and investors feel pessimistic.
- Market capitalization
- Share price times number of shares: a company's market value.
- Ticker symbol
- A short code that identifies a company's stock on an exchange.
- ETF
- A fund holding many assets that trades like a single stock.
- Share price
- The current cost of buying one share.
- Broker
- Someone who buys and sells securities for clients.
- Bid-ask spread
- The gap between the buying and selling price.
- Earnings report
- A company's results published each quarter.
- Stock index
- A measure of how a group of shares is performing.
- Market order
- An order to buy or sell at the current price.
- Limit order
- An order set at a specific price.
- Penny stock
- A very low-priced, risky share.
- Stock market crash
- A sudden, sharp drop in prices.
Formulas
Market capitalizationPrice × Shares
Earnings yieldEPS ÷ Price × 100
Book value per shareE ÷ Shares
Price-to-bookPrice ÷ BVPS
PEG ratioP/E ÷ g
Payout ratioDPS ÷ EPS × 100
Current yieldC ÷ P × 100
Coupon paymentF × c
Master Market Basics in a game
Quizzes, a CEO simulator, a real estate tycoon game and startup tools. Free to start, in 7 languages.
Play BizJourney free →