Definition of 'Underwriter'

A company or other entity that administers the public issuance and distribution of securities from a corporation or
other issuing body. An underwriter works closely with the issuing body to determine the offering price of the
securities, buys them from the issuer and sells them to investors via the underwriter's distribution network.

Underwriters generally receive underwriting fees from their issuing clients, but they also usually earn profits when
selling the underwritten shares to investors. However, underwriters assume the responsibility of distributing a
securities issue to the public. If they can't sell all of the securities at the specified offering price, they may be forced
to sell the securities for less than they paid for them, or retain the securities themselves.

Definition of 'Secondary Offering'

1. The issuance of new stock for public sale from a company that has already made its initial public offering (IPO).
Usually, these kinds of public offerings are made by companies wishing to refinance, or raise capital for growth.
Money raised from these kinds of secondary offerings goes to the company, through the investment bank that
underwrites the offering. Investment banks are issued an allotment, and possibly an overallotment which they may
choose to exercise if there is a strong possibility of making money on the spread between the allotment price and
the selling price of the securities.

2. A sale of securities in which one or more major stockholders in a company sell all or a large portion of their
holdings. The proceeds of this sale are paid to the stockholders that sell their shares. Often, the company that
issued the shares holds a large percentage of the stocks it issues.

Private equity
In finance, private equity is an asset class consisting of equity securities and debt in operating companies that are
not publicly traded on a stock exchange.[1]
A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel
investor. Each of these categories of investor has its own set of goals, preferences and investment strategies;
however, all provide working capital to a target company to nurture expansion, new-product development, or
restructuring of the companys operations, management, or ownership.[2]

Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage
of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time
frame.[1]


Definition of 'Private Placement'
The sale of securities to a relatively small number of select investors as a way of raising capital. Investors involved
in private placements are usually large banks, mutual funds, insurance companies and pension funds. Private
placement is the opposite of a public issue, in which securities are made available for sale on the open market.
Since a private placement is offered to a few, select individuals, the placement does not have to be registered with
the Securities and Exchange Commission. In many cases, detailed financial information is not disclosed and a the
need for a prospectus is waived. Finally, since the placements are private rather than public, the average investor
is only made aware of the placement after it has occurred.

Definition of 'Market Capitalization'

The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by
multiplying a company's shares outstanding by the current market price of one share. The investment community
uses this figure to determine a company's size, as opposed to sales or total asset figures.
Frequently referred to as "market cap."
If a company has 35 million shares outstanding, each with a market value of $100, the company's market
capitalization is $3.5 billion (35,000,000 x $100 per share).
Company size is a basic determinant of asset allocation and risk-return parameters for stocks and stock mutual
funds. The term should not be confused with a company's "capitalization," which is a financial statement term that
refers to the sum of a company's shareholders' equity plus long-term debt.
The stocks of large, medium and small companies are referred to as large-cap, mid-cap, and small-cap,
respectively. Investment professionals differ on their exact definitions, but the current approximate categories of
market capitalization are:
Large Cap: $10 billion plus and include the companies with the largest market capitalization.
Mid Cap: $2 billion to $10 billion
Small Cap: Less than $2 billion
In order to make an investment decision, you may need to factor in the market cap of some investments.

Definition of 'Enterprise Value - EV'

A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise
value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash
equivalents.
Think of enterprise value as the theoretical takeover price. In the event of a buyout, an acquirer would have to
take on the company's debt, but would pocket its cash. EV differs significantly from simple market capitalization in
several ways, and many consider it to be a more accurate representation of a firm's value. The value of a firm's
debt, for example, would need to be paid by the buyer when taking over a company, thus EV provides a much
more accurate takeover valuation because it includes debt in its value calculation.

Definition of 'Short-Term Debt'

An account shown in the current liabilities portion of a company's balance sheet. This account is comprised of any
debt incurred by a company that is due within one year. The debt in this account is usually made up of short-term
bank loans taken out by a company.
The value of this account is very important when determining a company's financial health. If the account is larger
than the company's cash and cash equivalents, this suggests that the company may be in poor financial health and
does not have enough cash to pay off its short-term debts. Although short-term debts are due within a year, there
may be a portion of the long-term debt included in this account. This portion pertains to payments that must be
made on any long-term debt throughout the year.

Definition of 'Long-Term Debt'

Loans and financial obligations lasting over one year. Long-term debt for a company would include any financing or
leasing obligations that are to come due in a greater than 12-month period. Such obligations would include
company bond issues or long-term leases that have been capitalized on a firm's balance sheet.

In the U.K., long-term debts are known as "long-term loans."
Bank loans and financing agreements, in addition to bonds and notes that have maturities greater than one year,
would be considered long-term debt. Other securities such as repos and commercial papers would not be long-
term debt, because their maturities are typically shorter than one year.

IPO:

Initial public offering (IPO) or stock market launch is a type of public offering where shares of stock in a company
are sold to the general public, on a securities exchange, for the first time. Through this process, a private
company transforms into a public company. Initial public offerings are used by companies to raise expansion
capital, to possiblymonetize the investments of early private investors, and to become publicly traded enterprises.
A company selling shares is never required to repay the capital to its public investors. After the IPO, when shares
trade freely in the open market, money passes between public investors. Although an IPO offers many advantages,
there are also significant disadvantages, chief among these are the costs associated with the process and the
requirement to disclose certain information that could prove helpful to competitors, or create difficulties with
vendors.

Definition of 'Price-Earnings Ratio - P/E Ratio'

A valuation ratio of a company's current share price compared to its per-share earnings.
For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per
share, the P/E ratio for the stock would be 22.05 ($43/$1.95).

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of
earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last
two actual quarters and the estimates of the next two quarters.

Also sometimes known as "price multiple" or "earnings multiple."

Definition of 'Amortization'

1. The paying off of debt with a fixed repayment schedule in regular installments over a period of time. Consumers
are most likely to encounter amortization with a mortgage or car loan.

2. The spreading out of capital expenses for intangible assets over a specific period of time (usually over the asset's
useful life) for accounting and tax purposes. Amortization is similar to depreciation, which is used for tangible
assets, and to depletion, which is used with natural resources. Amortization roughly matches an assets expense
with the revenue it generates.

Net Assets
In finance, net assets refers to the value of a company's assets minus its liabilities. For individuals, the concept is
the same as net worth.
How it works/Example:
The formula for net assets is:
Net assets = Total assets - Total liabilities
Let's assume that Company XYZ's balance sheet reported $10,500,000 in assets and $5,000,000 in total liabilities.
The company's net assets would be:
Net Assets = $10,500,000 - $5,000,000 = $5,500,000
It is important to note that most assets and liabilities on the balance sheet are listed at their book valuerather than
at their fair market value, and thus net assets doesn't necessarily represent the cash a company would have
leftover if it sold all of its assets and paid all of its liabilities.
In accountancy, depreciation refers to two aspects of the same concept:
the decrease in value of assets (fair value depreciation), and
the allocation of the cost of assets to periods in which the assets are used (depreciation with the matching
principle).
The former affects the balance sheet of a business or entity, and the latter affects the net income that they report.
Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be
used. This expense is recognized by businesses for financial reporting and tax purposes. Methods of computing
depreciation, and the periods over which assets are depreciated, may vary between asset types within the same
business and may vary for tax purposes. These may be specified by law or accounting standards, which may vary
by country. There are several standard methods of computing depreciation expense, including fixed percentage,
straight line, and declining balance methods. Depreciation expense generally begins when the asset is placed in
service. For example, a depreciation expense of 100 per year for 5 years may be recognized for an asset costing
500.

Mergers and acquisitions (abbreviated M&A) are both aspects of strategic management, corporate finance
and management dealing with the buying, selling, dividing and combining of different companies and
similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new
location, without creating a subsidiary, other child entity or using a joint venture. Mergers and acquisitions activity
can be defined as a type of restructuring in that they result in some entity reorganization with the aim to provide
growth or positive value. Consolidation of an industry or sector occurs when widespread M&A activity
concentrates the resources of many small companies into a few larger ones, such as occurred with the automotive
industry between 1910 and 1940.
The distinction between a "merger" and an "acquisition" has become increasingly blurred in various respects
(particularly in terms of the ultimate economic outcome), although it has not completely disappeared in all
situations. From a legal point of view, a merger is a legal consolidation of two companies into one entity, whereas
an acquisition occurs when one company takes over another and completely establishes itself as the new owner
(in which case the target company still exists as an independent legal entity controlled by the acquirer). Either
structure can result in the economic and financial consolidation of the two entities. In practice, a deal that is an
acquisition for legal purposes may be euphemistically called a "merger of equals" if both CEOs agree that joining
together is in the best interest of both of their companies, while when the deal is unfriendly (that is, when the
target company does not want to be purchased) it is almost always regarded as an "acquisition".