A: A popular mesure for comparing stocks selling at different prices in order to single out over or undervalued issues. The P/E ratio is simply the price per share divided by the company's earnings per share. However, P/E is not always an accurate guide to a stock's quality. Some people tend to think that a stock is inflated and drastically overvalued if its price is many many times its earnings. Yet that same stock may be quite accurately valued to reflect the company's rapid growth and potential for high future earnings. When comparing P/Es it is therefore important to choose stocks in the same industry which are likely to face the same earnings prospects.

A: All shares representing ownership of a business, including common and preferred. See common stock. or preferred stock.

A: Securities that represent an ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation. The terms common stock and capital stock are often used interchangeably when the company has no preferred stock.

A: A type of stock that pays a fixed dividend regardless of corporate earnings, and which has priority over common stock in the payment of dividends. However, it carries no voting rights, and should earnings rise significantly the preferred holder is stuck with the same fixed dividend while common holders collect more. The fixed income stream of preferred stock makes it similar in many ways to bonds.

A: Property and items of value owned by a person or business. The primary classifications of assets are: current assets: cash and other liquid instruments, including accounts receivable, that can be converted to cash within one year at maximum; long term assets: plants, equipment, real estate and other capital assets, net of depreciation; prepaid and deferred assets: expenditures for future costs or expenses, such as insurance, interest or rent, that are set up as assets to be amortized over an applicable period; intangible assets: assets with a determined value, but which may not be scalable, such as goodwill, patents, copyrights, and brand name recognition.

A: All claims against the assets of a corporation. Liabilities can include accounts, wages and salaries payable; dividends declared; accrued taxes; and fixed or long-term debt such as bonds and bank loans.

A: The payment designated by the Board of Directors to be distributed pro rata among the shares out-standing. For preferred shares, the dividend is usually a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand, and may be omitted if business is poor or if the directors determine to withhold earnings to invest in plants and equip-ment. Sometimes a company will pay a dividend out of past earnings even if it is not currently operating at a profit.