Definitions Starting with "E"

E-CBOT

The e-CBOT is an automated trading platform for trading futures on the Chicago Board of Trade (CBOT). The CBOT is a commodities futures and commodities options exchange. Read more

E-Meeting

An e-meeting is simply an electronic meeting. Let’s say John Doe is working with 15 people on a project. Read more

E-Micro Forex Futures

E-micro forex futures are currency futures contracts that are a 10th the size of a standard futures contract.   Forex futures are financial contracts giving the buyer an obligation to purchase a certain currency (and the seller an obligation to sell that currency) at a set price at a future point in time. Read more

E-Mini

An E-mini is a stock index futures contract that is electronically traded on the Chicago Mercantile Exchange (CME) and is 1/5 the size of a standard stock index futures contract. An E-mini S&P 500 futures contract is valued using the following formula: E-mini S&P 500 contract value = ($50) x (S&P 500 stock index) As the price of the S&P 500 fluctuates, the price of the S&P 500 E-mini futures contract fluctuates as well. Read more

Each Way

Each way refers to a broker's act of earning a commission from both the buyer and the seller in a transaction. Let's say John Doe is a broker for XYZ brokerage. Read more

EAFE Index

EAFE stands for Europe, Australasia, and the Far East -- a region that is considered the most developed outside of North America. The Morgan Stanley Capital International (MSCI) EAFE index is the most common way to track the performance of stocks in the EAFE markets. Read more

Early Adopter

An early adopter is a person who purchases or tries new products -- typically technology -- before most other consumers. Early adopters are one of five types of consumers (the others are innovators, early majority, late majority, and laggards) along the "Diffusion of Innovations Curve" pioneered by Everett Rogers. Read more

Early Amortization

Early amortization refers to the accelerated repayment of bond principal, generally for an asset-backed security (ABS). Early amortization is also referred to as payout events or early calls. Read more

Early Call

An early call refers to the accelerated repayment of bond principal, normally on an asset-backed security (ABS). An early call is also known as early amortization or a "payout event. Read more

Early Exercise

Early exercise refers to a situation in which an option holder has the right to exercise or assign an option before its expiration date. The option holder may decide to exercise the option before it reaches maturity by buying or selling the option. Read more

Early Majority

The early majority is a group of people who purchase or try new products -- typically technology -- after a much smaller population of innovators and early adopters have done so. The early majority is one of five types of consumers (the others are innovators, early adopters, late majority, and laggards) along the "Diffusion of Innovations Curve" pioneered by Everett Rogers. Read more

Early Withdrawal

Early withdrawal refers to a depositor's or investor's withdrawal of funds from an account before the agreed-upon withdrawal date. Early withdrawals usually incur penalties. Read more

Earmarking

Earmarking refers to the act of setting aside funds for special purposes or specific projects. Companies and governments earmark funds frequently. Read more

Earned Income

Earned income is an IRS term for income that is obtained by participating in a business or trade. Earned income typically includes salaries and bonuses, wages, commissions and tips. Read more

Earned Income Tax Credit (EIC)

The earned income tax credit (EIC) is a tax credit for low-income workers.  Earned income is an IRS term for income obtained by participating in a business or trade -- typically, this means salaries, bonuses, wages, commissions, and tips. Read more

Earned Premium

An earned premium is the portion of an insurance premium that applies to the expired portion of an insurance policy. For an earned premium example, let's say John purchases a life insurance policy from Company XYZ. Read more

Earned Surplus

Earned surplus is the sum of a company's profits, after dividend payments, since the company's inception. It can also be called retained earnings, retained capital, or accumulated earnings. Read more

Earnest Money

Earnest money is a good faith deposit, typically on a house purchase. It is not the same as a down payment. Read more

Earning Assets

Earning assets are assets that generate income like interest or dividends. Typically, earning assets require very little ongoing work from the owner of the assets. Read more

Earning Potential

Earning potential often refers to the top salary for a particular field or profession. In the finance world, the meaning is not much different: earning potential is the biggest profit a company could potentially make. Read more

Earnings

Earnings are the corporate profits of a company over a specific time period after taxes and other expenses have been paid. The net (after-tax) earnings of a company are calculated by deducting such factors as operating expenses, cost of sales, taxes, and the like. Read more

Earnings Allowance

The earnings allowance is the minimum amount a bank requires a customer to have available in a checking account in order to avoid monthly service charges. Let's say Company XYZ has a cash account with Bank ABC. Read more

Earnings Announcement

An earnings announcement is a public statement of a company's profits, usually on a quarterly basis. For example, let's say Company XYZ is a public company. Read more

Earnings Before Interest After Taxes (EBIAT)

Earnings before interest after taxes (EBIAT) is a measure of a company's operating performance. EBIAT is a measure of how profitable a company would be if it paid taxes on its operating profit without the benefit of the tax shelter that is created by using debt. Read more

Earnings Before Interest and Depreciation (EBID)

Earnings before interest and depreciation (EBID) are a post-tax measure of a company's operating performance. The formula for EBID is: EBID = EBIT + Depreciation - Taxes EBID can be easily derived from the company's income statement. Read more

Earnings Before Tax (EBT)

Earnings before tax (EBT) measures a company's operating and non-operating profits before taxes are considered. It is the same as profit before taxes. Read more

Earnings Call

An earnings call is a public announcement, usually via conference call, of a company's profits, usually on a quarterly basis. Company XYZ is a public company. Read more

Earnings Credit Rate (ECR)

An earnings credit rate (ECR) is a discount a bank gives a depositor on the depositor's bank fees. Let's say Company XYZ has $950,000 in combined deposits with Bank ABC. Read more

Earnings Estimate

An earnings estimate is an estimate of a company's future quarterly or annual profits by a market analyst. Earnings estimates are created by analysts who work for investment research companies. Read more

Earnings Momentum

Earnings momentum is a term to describe accelerating or slowing growth in earnings per share (EPS).   Let's assume that Company XYZ has reported the following EPS: Q1: $0. Read more

Earnings Multiplier

The earnings multiplier, also called the price-to-earnings ratio (P/E), is a valuation method used to compare a company’s current share price to its per-share earnings. The market value per share is the current trading price for one share in a company, a relatively straightforward definition. Read more

Earnings Per Share (EPS)

The term earnings per share (EPS) represents the portion of a company's earnings, net of taxes and preferred stock dividends, that is allocated to each share of common stock. The figure can be calculated simply by dividing net income earned in a given reporting period (usually quarterly or annually) by the total number of shares outstanding during the same term. Read more

Earnings Power

Earnings power is the ability to generate profits. Company XYZ is a start-up that sells pet rocks. Read more

Earnings Restatement

An earnings restatement, also called an earnings recast, is the act of disclosing amended financial statements. Let's assume Company XYZ sells its pharmaceutical division to Company ABC. Read more

Earnings Season

Earnings season refers to the four times per year when most public companies announce their quarterly and/or annual earnings. Although there are no official dates, earnings seasons usually last about a month and start in mid-January (after the fourth quarter ends in December), mid-April (after the first quarter ends in March), mid-July (after the second quarter ends in June), and mid-October (after the third quarter ends in September). Read more

Earnings Surprise

An earnings surprise in an unexpected difference between a company's actual earnings per share and analysts' expected earnings per share. Let's assume that analysts expect Company XYZ to report $0. Read more

Earnings Yield

The earnings yield is the ratio of a company's last twelve months (LTM) of earnings per share (EPS) to its stock price. It is the inverse of the price-to-earnings (P/E) ratio. Read more

Earnout

An earnout is an agreement between the buyer and seller of a business whereby the buyer agrees to pay the seller additional money based on the performance of the business. Let's say Jane Smith buys a frame business from John Doe for $1 million. Read more

Easement

An easement is a legal right to trespass.   Let's say John Doe owns five acres of land. Read more

Easement in Gross

An easement in gross is a legal right to use another person's land for as long as the owner owns that land or the holder of the easement dies. Let's say John Doe owns five acres of land, which includes a good fishing pond. Read more

Easy Money

Easy money is a phrase that often refers to the presence of low interest rates. In the context of the Federal Reserve, easy money is a method of helping the economy expand by increasing the money supply. Read more

Easy-to-Borrow List

An easy-to-borrow list is a brokerage firm's list of securities that are available for shorting.   Short selling involves a three-step trading strategy that seeks to capitalize on an anticipated decline in the price of a security. Read more

Eat Well, Sleep Well

The phrase "eat well, sleep well" refers to the risk-return trade-off that most investors must make. When investors decide which securities to buy, they also make a decision about the risk they are willing to bear. Read more

Eat Your Own Dog Food

The term "eat your own dog food" means a company uses its own products and services. Let's say Company XYZ manufactures laptop computers. Read more

Eating Someone's Lunch

Eating someone's lunch is a business strategy where a company gains market share by aggressively taking it away from a competing company. Eating someone's lunch can be carried out in a number of ways including: Aggressive pricing strategies Release of new products Implementation of better services Aggressive marketing of products or services In all these scenarios, the strategy is based on the desire to eat up a larger portion of the market share for a particular product or service. Read more

Eating Stock

Eating stock occurs when a broker/dealer or market maker has to purchase stock because there are not enough buyers. Let's say Company XYZ is an investment bank that is underwriting the initial public offering of ABC Company. Read more

EBIDA Definition - Earnings Before Interest, Depreciation and Amortization

Earnings before Interest, Depreciation, and Amortization (EBIDA) is a post-tax measure of a company's operating performance. The formula for EBIDA is: EBIDA = EBIT + Depreciation + Amortization - Taxes EBIDA can easily be derived using the company's income statement. Read more

EBIT - Earnings Before Interest and Taxes

Earnings Before Interest and Taxes (EBIT) measures the profitability of a company without taking into account its cost of capital or tax implications. EBIT is calculated using information provided on a company’s income statement. Read more

EBITD - Earnings Before Interest, Taxes and Depreciation

Earnings before interest, tax and depreciation (EBITD) is a pre-tax measure of a company's operating performance. Essentially, it's a way to evaluate a company's performance without having to factor in many financing decisions, accounting decisions, or tax differences. Read more

EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization

Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a measure of corporate profitability. EBITDA is used to evaluate a company's underlying profitability without factoring in financing/accounting decisions or tax environments. Read more

EBITDA Margin

EBITDA margin is a measurement of a company's EBITDA (its earnings before interest, taxes, depreciation, and amortization) as a percentage of its total revenue.   The formula for EBITDA margin is: EBITDA Margin = EBITDA / Total Revenue  A widely-used financial ratio, EBITDA margin provides investors with a better understanding of how much cash profit a company brought into its business in a given time period relative to its total revenue. Read more

EBITDAE - Earnings Before Interest, Taxes, Depreciation, Amortization and Exceptional Items

Earnings before interest, taxes, depreciation, amortization and exceptional items (EBITDAE) are a measure of a company's operating performance. The formula for EBITDAE is: EBITDAE = EBIT + Depreciation + Amortization + Exceptional Items Essentially, the EBITDAE provides a way to evaluate a company's performance without having to factor in financing decisions, accounting decisions, unusual events, or tax environments. Read more

EBITDAL - Earnings Before Interest, Taxes, Depreciation, Amortization And Special Losses

Earnings before interest, taxes, depreciation, amortization, and special losses (EBITDAL) is a measure of a company's operating performance. Essentially, it's a way to evaluate a company's performance without having to factor in financing decisions, accounting decisions, unusual events or tax environments. Read more

EBITDAR - Earnings Before Interest, Tax, Depreciation, Amortization, and Restructuring or Rent Costs

EBITDAR, which stands for earnings before interest, tax, depreciation, and either restructuring or rent costs (depending on what you're measuring) measures a company's profitability without taking into account its capital structure, tax rate, or primary non-cash items such as depreciation or amortization. It also backs out restructuring or rent costs, so that a company or analyst can approximate the cash available before either of these costs are paid for. Read more

EBITDAX - Earnings Before Interest, Tax, Depreciation, Amortization and Exploration

A variation of EBITDA, EBITDAX is a measure used by natural resource exploration companies to reflect ongoing or core profitability. The acronym stands for earnings before interest, taxes, depreciation, amortization and exploration expense. Read more

ECN Broker

An ECN broker is a person who uses electronic communications networks to give clients access to buyers and sellers in the currency markets. An ECN broker is sort of like a market maker for currency markets. Read more

Econometrician

Econometricians are economists who use math and statistics to measure economic data. Econometricians measure things such as gross domestic product, inflation, or to predict changes in the economy. Read more

Econometrics

Econometrics is the use of math and statistics to measure economic data. Econometricians use econometrics to measure things such as gross domestic product, inflation, or to predict changes in the economy. Read more

Economic Blight

Economic blight occurs when an area of a town shows visible signs of age, disrepair, and crime. For many people, thinking about the "bad side of town" is to think about economic blight. Read more

Economic Exposure

Economic exposure is the risk that a company's cash flow, foreign investments, and earnings may suffer as a result of fluctuating foreign currency exchange rates. The extent to which a company may be affected by economic exposure depends very much on the company's specific industry and business interests. Read more

Economic Indicator

An economic indicator is an index or other data that suggests whether the economy is expanding or contracting. For example, the U. Read more

Economic Moat

An economic moat is a competitive advantage that is difficult to copy or emulate, thereby creating a barrier to competition from other firms. Common economic moats include patents, brand identity, technology, buying power and operational efficiency. Read more

Economic Profit

Economic profit is a measure of performance that compares net operating profit to total cost of capital. Economic profit is also referred to as economic value added (EVA), which is a trademarked concept originally devised by Stern Stewart & Co. Read more

Economic Recovery

An economic recovery is a period of economic expansion, typically after a recession. Let's assume that there has been a significant decline in industrial production, employment, and wholesale or retail trade. Read more

Economic Refugee

An economic refugee is a person who moves to another country in search of a higher standard of living. Let's say John Doe lives in Cyprus. Read more

Economic Rent

Economic rent is the minimum amount of money that an owner of land, labor or capital must receive in order to let someone else use that land, labor or capital. For example, your economic rent is the amount of money that makes you get out of bed in the morning. Read more

Economic Risk

Economic risk refers to the possibility that changes in macroeconomic conditions will negatively impact a company or investment. For instance, political instability or exchange rate fluctuations can impact losses or gains. Read more

Economic Stimulus

An economic stimulus occurs when a federal government attempts to use targeted monetary or fiscal policies to stimulate an economy (especially when it enters a recession or depression). Sometimes referred to as “priming the pump”, an economic stimulus is thought to revive a stagnant economy. Read more

Economic Tsunami

An economic tsunami is a set of circumstances that produce an event that triggers considerable distress in the financial markets and/or the economy. In the meteorology world, a tsunami is a wave or series of waves caused by the movement of a large body of water. Read more

Economic Value Added (EVA)

 Discover the components of EVA, and how it encourages managers to consider assets and expenses in their decision-making processes.

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Economics

Economics is the academic study of the production, distribution, and consumption of goods and services. Economics can be broken down into two main disciplines: macroeconomics and microeconomics. Read more

Economies of Scale

Economies of scale is a term that refers to the reduction of per-unit costs through an increase in production volume. This idea is also referred to as diminishing marginal cost. Read more

Economies of Scope

Economies of scope is a term that refers to the reduction of per-unit costs through the production of a wider variety of goods or services. Let's assume Company XYZ strictly manufactures vacuum cleaners. Read more

Economist

An economist is a social scientist devoted to the study of the relationship between human behavior and supply and demand. The study of economics is generally divided into two areas: microeconomics and macroeconomics. Read more

Economy

In its broadest sense, the economy is the organized system of human activity involved in the production, consumption, exchange, and distribution of goods and services. Derived from the Greek word oikonomos, meaning "one who manages a household," economy was not used in the modern sense of the economic system of a country or area until the nineteenth and twentieth centuries. Read more

EDGAR Public Dissemination Service (PDS) System

The EDGAR Public Dissemination Service (PDS) System is an electronic system that receives SEC filings. Keane Federal Systems operates the EDGAR Public Dissemination Service (PDS) System. Read more

Education Credit

An education credit is a tax credit associated with the payment of education expenses during the tax year. Currently, there are three major education credits in the United States (amounts subject to change by the IRS). Read more

Education IRA

An education IRA, now more formally known as a Coverdell Education Savings Account (or Coverdell ESA), is a tax-advantaged savings account intended to help parents and guardians prepare for the expense of their child’s education. An education IRA may be opened on behalf of a minor under the age of 18. Read more

Educator Expenses Deduction

The educator expenses deduction is an IRS deduction that allows teachers to exclude out-of-pocket teaching expenses from income. In order to qualify for the educator expenses deduction, a person must have worked at least 900 hours in an elementary or secondary school during a given school year. Read more

EE Bonds

EE Bonds are one of two types of savings bond sold by the U. S. Read more

Effective Annual Interest Rate

The effective annual interest rate is the rate of interest an investor earns in a year after accounting for the effects of compounding.  The formula for effective annual interest rate is:(1 + i / n)n - 1Where: i = the stated annual interest raten = the number of compounding periods in one yearFor example, let’s assume you buy a certificate of deposit with a 12% stated annual interest rate. Read more

Effective Duration

Effective duration is a calculation used to approximate the actual, modified duration of a callable bond. It takes into account that future interest rate changes will affect the expected cash flows for a callable bond. Read more

Effective Tax Rate

The effective tax rate is the average rate at which an individual is taxed on earned income, or the average rate at which a corporation is taxed on pre-tax profits. The formulas for effective tax rate are as follows:Individual: Total Tax Expense / Taxable IncomeCorporation: Total Tax Expense / Earnings Before TaxesEffective tax rates simplify comparisons among companies or taxpayers. Read more

Effective Yield

For bonds, effective yield is an annual rate of return associated with a periodic interest rate. The formula for effective yield is: [1 + (i/n)]n - 1 Where:i = the nominal rate n = the number of payment periods in one yearLet's assume you purchase a Company XYZ bond that has a 5% coupon. Read more

Efficiency Ratio

An efficiency ratio is a measure of a bank's overhead as a percentage of its revenue. The formula varies, but the most common one is: Efficiency Ratio = Expenses* / Revenue *not including interest expense For example, if Bank XYZ's costs (excluding interest expense) totaled $5,000,000 and its revenues totaled $10,000,000, then using the formula above, we can calculate that Bank XYZ's efficiency ratio is $5,000,000 / $10,000,000 = 50%. Read more

Efficient Frontier

Our expert definition of efficient frontier makes it easy to understand this important investing concept. 

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Eighthed

To get eighthed is to be outbid or undercut by one-eighth of a dollar (12. 5 cents). Read more

Either-Or Order

An either-or order is a group of limit orders linked together within a brokerage account. If one order is executed, all other linked orders are automatically canceled. Read more

Elastic

Something is elastic when its price varies with the price of another item. It the business world, the term most often refers to how much the price of a good or service changes when the supply of that good or service changes. Read more

Elasticity

From examples of elastic goods to calculating elasticity, this definition contains everything you need to understand this financial term.

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Elasticity of Supply

The elasticity of supply, also known as price elasticity of supply, measures the responsiveness of the quantity supplied to a change in the price of a good, with all other factors remaining the same. The formula for elasticity of supply is:Elasticity of Supply = (% change in quantity supplied) / (% change in price)As demand for a good or product increases, the price will rise and the quantity supplied will increase in response. Read more

Election Period

An election period is a window of time during which a person can take a certain action. In the bond world, the term refers to the period of time a holder of an extendible or retractable bond can extend or retract a bond. Read more

Electronic Commerce

Electronic commerce is a way of doing business over large electronic networks such as the Internet. Also called e-commerce, electronic commerce greatly facilitates transactions between companies and consumers (B2C), between one company and another (B2B), and between individual consumers (C2C). Read more

Electronic Communication Network (ECN)

Commonly known as an ECN, an electronic communication network is a system for trading financial instruments that takes place outside of the markets and is sanctioned by the Securities and Exchange Commission (SEC). An ECN connects buyers and sellers over a network that eliminates the need for an intermediary such as a broker or investment bank. Read more

Electronic Data Gathering, Analysis and Retrieval (EDGAR)

EDGAR, the Electronic Data Gathering, Analysis and Retrieval system, is an automated system of submission used by public companies required to file forms with the U. S. Read more

Electronic Filing

Electronic filing, or e-File, is the online tax return filing system developed by the Internal Revenue Service (IRS) Individual taxpayers, businesses, large and mid-sized corporations, and non-profits can file their required tax returns, including quarterly filings, directly online with the IRS through its automated e-File system. The e-File system allows taxpayers to make payments from a credit or debit card, or through the U. Read more

Electronic Funds Transfer (EFT)

An electronic funds transfer (EFT) allows payments between two parties via electronic signals. Electronic funds transfers began in the 1960s but became widespread in the 1970s with the introduction of the automatic teller machine (ATM). Read more

Elephants

Elephants are large institutions that make big trades. CalPERS (the California Public Employees' Retirement System) is the nation's largest pension fund. Read more

Elevator Pitch

An elevator pitch is a quick explanation of a business idea or other proposal. The term reflects the idea that in the time it takes to ride an elevator, the speaker should be able to summarize the key elements of the idea in a compelling way. Read more

Elves

Elves make up a group of analysts and money managers who appeared on the PBS show "Wall Street Week," which was hosted by Louis Rukeyser. "Wall Street Week" aired from 1970 to 2005. Read more

Embargo

An embargo is a government-instituted prevention of exports to a certain country. In the media world, an embargo is the release of information with the condition that it cannot be published or disseminated before a certain date. Read more

Embedded Option

An embedded option is a provision in a security (typically a bond) that gives either the issuer (the company) or the investor the right to take some action in the future. Different from a stand-alone option, an embedded option is an option that is embedded into the stock, bond, etc. Read more

Emerging Market Economy

An emerging market economy describes a nation's economy that is progressing toward becoming more advanced, usually by means of rapid growth and industrialization. These countries experience an expanding role both in the world economy and on the political frontier. Read more

Emerging Markets Fund

An emerging markets fund is a fund that invests in the securities of companies and governments in developing countries. Emerging markets have lower per-capita incomes, above-average sociopolitical instability, higher unemployment, and lower levels of business or industrial activity relative to the United States; however, they also typically have much higher economic growth rates. Read more

Eminent Domain

Eminent domain is a legal strategy that allows a federal or local government to seize private property for public use. The seizing authority must pay fair market value for the property seized. Read more

Employee Benefits Security Administration (EBSA)

The Employee Benefits Security Administration (EBSA) is the branch of the United States Department of Labor responsible for overseeing the administration and planning of employee pension funds by company investment managers. The United States Department of Labor ensures that the American workforce is treated fairly and is compensated in accordance with the law. Read more

Employee Contribution Fund

An employee contribution fund is a company-sponsored plan where employees deposit (contribute) their own money towards a charity. In an employee contribution fund, a company sets up a program where employees can make donations (usually deducted directly from their paychecks) to a charity that the company supports. Read more

Employee Contribution Plan

An employee contribution plan is an employer-sponsored retirement plan where employees deposit (contribute) their own money to a special account. Employee contribution plans are usually funded by contributions that are automatically deducted automatically from an employee's paycheck. Read more

Employee Retirement Income Security Act of 1974 (ERISA)

Th Employee Retirement Income Security Act of 1974 (ERISA) is an American federal statute that protects the retirement assets of Americans by establishing a set of rules that must be followed by fiduciaries to prevent misuse of plan assets. Title I of ERISA deals with protecting employee benefit rights. Read more

Employee Share Ownership Trust (ESOT)

Employee Share Ownership Trust (ESOT) refers to a plan that assists in acquiring and allocating a company's stock for employees. A company uses an ESOT to sell its stock to its employees. Read more

Employee Stock Options (ESOs)

Employee stock options (ESOs) are  call options on a company's common stock granted to a select group of its employees. Certain restrictions on the option provide a financial incentive for employees to align their goals with those of the company's shareholders. Read more

Employee Stock Ownership Plan (ESOP)

An employee stock ownership plan (ESOP), also known as a stock purchase plan, is a defined contribution plan whereby an employer invests the fund's assets in its own stock. To establish an ESOP, a corporation first establishes a trust in which the company's employees are partial owners. Read more

Employer Identification Number (EIN)

An employer identification number (EIN) is a number assigned to businesses by the IRS. It is also known as the Federal Employer Identification Number (FEIN) or the Federal Tax Identification Number. Read more

Employment Cost Index

The employment cost index, or ECI, is a quarterly report compiled by the Bureau of Labor Statistics within the U. S. Read more

Encumbrance

An encumbrance is a limitation on the ownership of a property. In the real estate world, an encumbrance is similar to a lien. Read more

Ending Inventory

Ending inventory is the book value of inventory at the end of a financial or accounting reporting period. Ending inventory equals the beginning inventory balance plus the cost of any inventory purchases minus the cost of any inventory sold and shrinkage. Read more

Endowment

An endowment is any asset donated to and for the perpetual benefit of a non-profit institution. The donation is usually made with the requirement that the principal remain intact and money earned from investing the principal be used for a specific purpose. Read more

Enrolled Agent (EA)

An enrolled agent (EA) is person who is authorized to represent a taxpayer before the Internal Revenue Service (IRS). To become an EA, a person has to pass a three-part comprehensive IRS test of individual and business tax returns or be a former IRS employee with appropriate experience. Read more

Enterprise Multiple

Enterprise multiple is a financial indicator used to determine the value of a company. It is equal to a company’s enterprise value divided by its EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Read more

Enterprise Value (EV)

  Enterprise value represents the entire economic value of a company. More specifically, it is a measure of the theoretical takeover price that an investor would have to pay in order to acquire a particular firm. Read more

Enterprise Value to Cash Flow from Operations (EV/CFO)

Enterprise value to cash flow from operations (EV/CFO) is the ratio of the entire economic value of a company to the cash it produces. The formula for EV/CFO is: EV/CFO = (Market Capitalization + Total Debt – Cash)/Cash from Operations Some analysts adjust the debt portion of the formula to include preferred stock; they may also adjust the cash portion of the formula to include current accounts receivable and liquid inventory. Read more

Enterprise Zone

An enterprise zone is a geographical area (often a few blocks or miles in a town) with a 0% tax on gains from the sale of assets and property sold in an enterprise zone. For example, let's say that downtown ABCTown has decayed over the last 10 years. Read more

Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA) is legislation designed to ensure that all qualified people have access to credit. It prevents lenders from rejecting credit applicants based on race, gender, marital status, age, religion, or national origin and requires lenders to consider public assistance in the same light as other forms of income. Read more

Equity

Put simply, equity is ownership of an asset of value. Ownership is created when the owner contributes to the financing of the asset purchase. Read more

Equity Financing

Equity financing occurs when a company aims to raise capital by offering investors partial ownership interest in the company. This type of financing allows the company to raise enough funds without taking out loans or incurring any debt. Read more

Equity Fund

An equity fund is an open or closed-end fund that invests primarily in stocks, allowing investors to buy into the fund and thus buy a basket of stocks more easily than they could purchase the individual securities. There are literally thousands of equity funds out there, and each has unique characteristics. Read more

Equity Income Fund

An equity income fund is a mutual fund composed largely of dividend-paying stocks. Equity income funds are made up of a variety of different income investments, but they generally invest in securities from established, creditworthy companies that make consistent dividend payments. Read more

Equity Linked Foreign Exchange Option (ELF-X)

An Equity Linked Foreign Exchange Option (or ELF-X) is a put option or call option that shelters an investor from foreign exchange risk. It enables an investor to sell a foreign stock position or portfolio at a future date (the expiration date of the option contract) without the risk of foreign exchange loss. Read more

Equity Linked Note (ELN)

An equity linked note (or ELN) is a debt instrument that varies from a standard fixed-income security in that the coupon is built on the return of a single stock, basket of stocks, or equity index, otherwise known as the underlying equity. An ELN is a principal-protected instrument generally intended to return 100% of the original investment at maturity, but deviates from a typical fixed-coupon bond in that its coupon is governed by the appreciation of the underlying equity. Read more

Equity Multiplier

The equity multiplier is a ratio used to determine the financial leverage of a company.  The formula for the equity multiplier is:Equity Multiplier = Total Assets / Total Stockholders' EquityIf company ABC has total assets of 20 units and total stockholders' equity of 4 units, its equity multiplier is 5 (20/4). Read more

Equity Risk Premium

The equity risk premium is the difference between the rate of return of a risk-free investment and the geometric mean return of an individual stock over the same time period. Since all investments carry varying degrees of risk, the equity risk premium is a measure of the cost of that risk. Read more

Equity Underwriter

Equity underwriters are usually investment banks with a team of IPO specialists. They help to market, distribute and administer the public issuance of securities.

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Equity-Linked Securities (ELKS)

As the name implies, equity-linked securities (ELKS) are hybrid debt securities whose return is connected to an underlying equity (usually a stock). ELKS pay a higher yield than the underlying security and generally mature in one year. Read more

Equivalent Annual Cost (EAC)

Equivalent annual cost (or EAC) is the cost per year of owning, operating, and maintaining an asset over its lifetime. EAC is often used as a tool in capital budget decision making for evaluating investments of unequal lifespans. Read more

Equivalent Taxable Interest Rate

An equivalent taxable interest rate (also called equivalent taxable yield) is the return that is required on a taxable investment to make it equal to the return on a tax-exempt investment. The equivalent taxable interest rate is commonly used when evaluating municipal bond returns. Read more

Errors and Omissions Insurance

Errors and omissions (E&O) insurance is a type of professional liability insurance used by professionals and their firms to protect themselves, their companies, and their employees in the event of claims of negligent action or incorrect work. The features of an E&O policy will vary based on the coverage amount, specific professional industry, and the size of the organization being covered. Read more

Escrow

Escrow is a financial arrangement whereby a third party holds funds in safekeeping pending the completion of a contract or other obligation. For example, let's assume a situation where someone is purchasing a home. Read more

Escrow Account

In the real estate world, mortgage companies use escrow accounts to collect property taxes, homeowners insurance, private mortgage insurance and other payments that are required by the homeowner but are not part of principal and interest. Escrow accounts are also called impound accounts. Read more

Escrow Agreement

An escrow agreement is a certificate from an approved bank guaranteeing that an indicated financial security is deposited at that particular bank. John writes a call option for stock in company ABC. Read more

Estate

An estate is all of an individual’s property and financial assets and liabilities at the time of his or her death. An estate might include a home and other real estate owned by an individual, as well as valuables such as jewelry and artwork, and financial assets such as stocks and bonds. Read more

Estate Freeze

An estate freeze is an estate planning strategy used by an owner to lock in an asset's value and avoid future tax liability when the asset is transferred to a beneficiary. An estate freeze is commonly used for:Transfer of control of a privately-owned business between generationsDivision of income among family membersProtection from creditors Tax deferment from shares sold of the privately-owned businessIn most cases, an estate freeze is used when ownership of a company is passed from one generation to the next. Read more

Estate Planning

Estate planning is the act of preparing for the transfer of a person's wealth and assets after his or her death. Assets, life insurance, pensions, real estate, cars, personal belongings, and debts are all part of one's estate. Read more

Estate Tax

An estate tax is levied on assets inherited by the heirs to a deceased person's estate.   The estate tax is applied differently according to U. Read more

Euro Interbank Offered Rate (EURIBOR)

Euro Interbank Offered Rate (EURIBOR), is the rate at which European banks offer to lend unsecured funds to each other in the euro market. EURIBOR is sponsored by the European Banking Federation which represents some 5,000 banks and by the Financial Markets Association. Read more

Euro LIBOR

Euro LIBOR is the interest rate at which banks borrow euros from other banks in the London interbank market. Euro LIBOR is essentially LIBOR denominated in Euros. Read more

Eurobank

A eurobank is a financial institution that makes loans and accepts deposits in foreign currencies -- simplifying international trade, transactions and investing. If an American company wants to buy parts from a European company, it can use a eurobank to obtain the proper currency. Read more

Eurobond

A eurobond is a bond denominated in a currency not native to the issuer's home country. Eurobonds are commonly issued by governments, corporations, and international organizations. Read more

Eurodollar

A eurodollar is U. S. Read more

Europe, Australasia, Far East (EAFE)

Discover the countries in EAFE, why EAFE is important to investors, and much more. 

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European Credit Research Institute (ECRI)

The European Credit Research Institute (ECRI) provides analyses of retail financial services markets within the member states of the European Union. The ECRI is an independent, non-profit research institute founded in 1999 by a group of European banking and financial institutions. Read more

European Option

A European option is a type of put or call option that can be exercised only on its expiration date. Suppose an investor, John, buys a European call option on March 1st that expires on the third Friday in March. Read more

Evening Star Candlestick Formation

The bearish evening star candlestick formation is a major reversal candlestick pattern. In many cases, only one candle is necessary to put a trader on high alert that a reversal may be happening. Read more

Event Risk

Event risk is the risk of a negative impact on a company's financial position as a result of an unexpected event like a natural disaster, industrial accident or hostile takeover. Occasionally companies face events that unexpectedly impact their ability to operate or their ability to make debt payments. Read more

Evergreen Option

An evergreen option is an employee incentive offered by many companies as a way for the employee to accumulate company shares. Evergreen options offers employees the opportunity to accumulate ownership in the company where they work. Read more

Ex-Dividend Date

Some stocks pay cash (or additional stock) dividends to their investors throughout the year. Also referred to as “ex-date”, the ex-dividend date is important for investors because it determines whether they’re entitled to a dividend. Read more

Exceptional Item

An exceptional item is an unusually large and uncommon transaction charge that must be disclosed on the balance sheet in accordance with GAAP. Let's assume Company ABC is experiencing poor business. Read more

Excess Return

Excess return, also known as "alpha" or the "abnormal rate of return the portion of a security's or portfolio's return not explained by the overall market's rate of return. Rather, it is generated by the skill of the investor or portfolio manager, and is one of the most widely used measures of risk-adjusted performance. Read more

Exchange Rate

An exchange rate between two countries' currencies indicates the value of one currency relative to the other.   Let's say the current exchange rate between the dollar and the euro is 1. Read more

Exchange-Rate Risk

Exchange-rate risk, also called currency risk, is the risk that changes in the relative value of certain currencies will reduce the value of investments denominated in a foreign currency. Exchange-rate risk may be the single biggest risk for holders of bonds that make interest and principal payments in a foreign currency. Read more

Exchange-Traded Fund (ETF)

Exchange-traded funds (ETFs) are securities that closely resemble index funds, but can be bought and sold during the day just like common stocks. These investment vehicles allow investors a convenient way to purchase a broad basket of securities in a single transaction. Read more

Exchangeable Bonds

An exchangeable bond gives the holder the option to exchange the bond for the stock of a company other than the issuer (usually a subsidiary) at some future date and under prescribed conditions. This is different from a convertible bond, which gives the holder the option to exchange the bond for other securities (usually stock) offered by the issuer. Read more

Excise Tax

Excise tax refers to an indirect type of taxation imposed on the manufacture, sale or use of certain types of goods and products. Excise taxes are commonly included in the price of a product, such as cigarettes or alcohol, as well as in the price of an activity, often gambling. Read more

Executor

An executor administers the distribution of an estate to beneficiaries. A will is a legal document that indicates how a person wants his or her estate (money and property) to be distributed after death. Read more

Exercise Price

An exercise price is the price at which the holder of a call option has the right, but not the obligation, to purchase 100 shares of a particular underlying stock by the expiration date. Options are derivative instruments, meaning that their prices are derived from the price of another security. Read more

Existing Home Sales

Existing home sales is an economic indicator released by the National Association of Realtors. The data reflect the number of homes that have previously been constructed (and therefore accounted for by the new home sales indicator) and are now being resold. Read more

Exotic Option

An exotic option is any option contract comprising attributes not common to most contracts which result in complicated valuation schemes. It is the opposite of a plain vanilla option. Read more

Expansionary Policy

Expansionary policy, or expansionary monetary policy, is when the Federal Reserve uses tools at its disposal in order to increase the money supply for the purpose of stimulating or growing the economy. An expansionary policy is typically implemented by the Federal Reserve by enacting one or more of these tactics: Lowering the federal discount rate By lowering the discount rate, the fees it charges banks to borrow from it, the Fed seeks to lower overall interest rates, thereby lowering the cost of money and its availability. Read more

Expectations Theory

Expectations theory suggests that the forward rates in current long-term bonds are closely related to the bond market's expectation about future short-term interest rates.  Expectations theory attempts to explain the term structure of interest rates. Read more

Expected Family Contribution (EFC)

The expected family contribution (EFC) is the amount of money that a family is expected to contribute toward a student's college tuition or expenses in a given year. Upon completion and submission of the FAFSA, the student's financial information will be reviewed by the federal and state government education departments. Read more

Expense Ratio

The expense ratio is the recurring management fees for a mutual fund. A fund company charges its fund holders the expense ratio each year (expressed in terms of a percentage of the fund's assets). Read more

Expiration Date

The expiration date is the last day an options contract can be exercised. After that, the contract becomes null and void. Read more

Exponential Moving Average (EMA)

An exponential moving average (EMA) is a moving average for time-series data which places greater weight on more recent data. An exponential moving average places exponentially greater weight on data in a time series as the data becomes more recent. Read more

Extended Trading

Extended trading is the pre-market or after-market trading that occurs on electronic market exchanges either before or after regular stock market trading hours. In the United States, extended trading occurs between 8:00 a. Read more

External Debt

External debt, otherwise known as "foreign debt," is the component of total debt held by creditors of foreign countries, i. e. Read more

Extraordinary Item

An extraordinary item is an accounting term used to describe expenses that are infrequent, unusual and significant in size. Let's assume that Company XYZ, an American company, operates a chain of beach resorts in the Florida Keys, and the resorts are hit by a blizzard. Read more