Editor’s note: This is a transcript of the audio file.
Most investors know IRA means Individual Retirement Account, not Irish Republican Army. But with so many acronyms in the investment world…it can be an alphabet soup of confusion. I’m Kristin Arnold with your Bankrate.com Personal Finance Minute.
Here are some ABC s of investment acronyms and their meanings:
ROE – doesn’t refer to pricey fish eggs….rather it stands for return on equity. ROE is a company’s annual income divided by shareholders’ equity.
Don’t confuse EPS for GPS. GPS is a convenient navigational device for your vehicle… EPS stands for earnings per share and can also steer you in the right direction. Like ROE, it’s a tool for measuring profitability. You get EPS by dividing the net income of the company by the number of its outstanding shares of common stock.
If you hated P.E. in school…you might like the P-E ratio…since it’s the best way to gauge stocks. Just divide the stock price by its annual earnings per share. No sweat!
Baseball players might year for RBI s , but investors want ROAs ! Returns on Assets is a way to measure how your company is doing. Simply divide the company’s net income by its total assets.
To learn more investing acronyms…visit the investing tab at Bankrate.com. I’m Kristin Arnold.