Free financial dictionary
Finance, explained like a friend would.
236 financial terms in plain English. Each with an analogy, a real example, and the red flags nobody mentions.
Dictionary Trading & markets
P/E Ratio
The quick answer
Compares a stock's price to its yearly profit per share: roughly how many years of current earnings it would take the company to pay back its own price tag.
The Analogy
A friend's lemonade stand makes $1,000 a year and he'll sell it to you for $10,000. You're paying 10 times its profit: a P/E of 10.
Red Flags & Pitfalls
The debt illusion. P/E ignores debt. A “bargain” at 5 can be sitting on billions in loans.
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Plain English
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Where a term is used to mislead, we say so.
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A temporary recovery in the price of a declining security, characterised by a short-lived upward retracement within a prevailing bearish trend, typically attributable to short covering and speculative accumulation.
A brief, temporary rise in a falling stock's price before it drops even lower.
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