Definitions Starting with "P"


The p-value is used in hypothesis testing to determine whether to accept or reject the null hypothesis. It is the smallest level of significance where the null hypothesis can be rejected. Read more

Pac Man Defense

A Pac Man Defense is a strategy for averting hostile takeovers. In instances where a company is the subject of a hostile takeover, it can employ a Pac Man Defense by making an offer to purchase the firm that is attempting to acquire it. Read more

Pacific Exchange (PCX)

The Pacific Exchange (PCX) was a stock exchange based in San Francisco and Los Angeles. Founded in 1882, the PCX used to be a trading floor in San Francisco. Read more

Package Deal

A package deal combines several products, discounts, features or services as one transaction. Let's say John Doe is considering taking a cruise. Read more


Paid-up means that all payment obligations under a contract are met. Let's say John Doe takes out a car loan to purchase a 1985 Camaro. Read more

Paid-Up Capital

Paid-up capital, also called "paid-in capital," is a measure of how much money investors have pumped into the company since inception in return for equity. The line item appears on the balance sheet. Read more

Painting the Tape

In the finance world, painting the tape means to trade securities in a manipulative way in order to influence the reported trading data for those securities. Let's say traders A and B want more people to buy the stock of Company XYZ. Read more


A pairoff, also known as "pairing off," occurs when a brokerage firm buys and sells short and long positions that offset one another and then settles those trades in cash. Let's say Brokerage XYZ agrees to sell 100 shares of Company 123 to Brokerage ABC for $15,000. Read more

Pairs Trade

A pairs trade occurs when an investor buys two stocks in the same industry. Let's say John Doe buys shares of Ford and General Motors. Read more

Pale Recession

A pale recession is a term describing a recession that does not have much impact on an economy. Former Federal Reserve Chairman Alan Greenspan coined this term in a 2008 television interview. Read more


Palladium is a metal used in manufacturing electronics and other items. Palladium is a rare metal that is silvery white. Read more

Panic Buying

Panic buying refers to the purchase of a stock immediately after a sudden, substantial price increase. Investors watching the market may jump to buy a stock immediately after a major move in the stock's price, hoping to take advantage of the surge in the price. Read more

Panic Selling

Panic selling is the sudden and widespread selling of a security. Panic selling may occur after a sudden, sharp decline in the price of a security. Read more

Paper Dealer

A paper dealer is a financial institution that buys and sells commercial paper. Commercial paper is an unsecured and discounted promissory note issued to finance the short-term credit needs of large institutional buyers. Read more

Paper Loss

Paper loss refers to the amount that would be lost on a security if it were sold. Also called a book loss, a paper loss is the not-yet-realized amount lost on a security based on the spread between its current market price and its original purchase price. Read more

Paper Millionaire

A paper millionaire is a person who has at least $1 million of unrealized gains. Let's say John Doe starts a business. Read more

Paper Money

Paper money is a medium of exchange for goods or services within an economy. It is printed on paper, rather than in coin form. Read more

Paper Profit

Paper profit refers to the amount you would gain on a security if it were sold. Also called book profit, paper profit is the not-yet-realized amount gained on a security based on the spread between its current market price and its original purchase price. Read more

Paper Trading

Paper trading is simulating market trading (buying and selling).   Investors can practice trading by simulating securities purchases and sales without actually executing transactions with money. Read more

Par Value

Par value is the face value of a bond. It is the principal amount that the lender (investor) is lending to the borrower (issuer). Read more

Paradox of Thrift

The paradox of thrift is an economic theory that states that the more people save, the less they spend and thus the less they stimulate the economy. Developed by economist John Maynard Keynes, the paradox of thrift works this way: Assume everybody receives $1,000 of income. Read more

Parallel Shift

A parallel shift in the yield curve occurs when the interest rates among bonds (or T-Bills) with different maturity dates change at the same rate. For example, if the yield on a five-year Treasury increases by five basis points, then the yields on all other Treasuries also increase by five basis points. Read more

Parent Company

A parent company has control of the management and operations of a subsidiary company. It is also referred to as "holding company. Read more


Pari-passu is a latin term that means "at an equal rate or pace. " The term is often used in venture capital. Read more

Paris Club

The Paris Club is slang for 19 developed countries who meet in Paris to discuss issues with nations to which they have lent money. The Paris Club has several members, including the United States, United Kingdom, Japan, Belgium, Canada, France, Germany, Italy, Netherlands, Sweden, Switzerland and Russia. Read more

Paris Hilton Stock Index

The Paris Hilton Stock Index is a list of companies that benefit from the actions of and associations with Paris Hilton. The index contains the following stocks: News Corporation (NYSE: NWS), which owns her reality TV show The Simple Life Time Warner (NYSE: TWX), which broadcast her famous interview with Larry King after her jail release Daimler AG (NASDAQ: XETRA) , which makes Mercedes-Benz cars. Read more

Parsonage Allowance

In the tax world, a parsonage allowance is income earned by members of the clergy but excluded from gross income. Let's say John Doe is a pastor at the XYZ Church. Read more

Partial Redemption

A partial redemption occurs when an investor withdraws some of a security's value.   Let's say John Doe owns $200,000 of Treasury securities. Read more

Participating Preferred Stock

Participating preferred stock gives stock holders priority over common stock holders for payment of dividends and proceeds from liquidation of a company. The capital stock structure of a company is typically divided into two main groups: common stock (usually ownership by management, employees, and directors with voting rights), and preferred stock. Read more

Participation Rate

Participation rate usually refers to the portion of the economy's working age population that is in the civilian labor market. The participation rate measures the number of people who are in the labor force who are working, willing to work, or are actively looking for work. Read more


A partnership is a business structure in which the owners (partners) share with each other the profits and losses. A partnership is organized to provide for proportional ownership of a company among the partners based on some type of formula or value of investment in the company. Read more

Pass Through Income

Pass through income is sent from a pass-through entity to its owners. These special business structures help to reduce the effects of double taxation. Read more

Pass-Through Entity

A pass-through entity (also known as flow-through entity) is a business structure in which business income is treated as personal income of the owners. It is used to avoid double taxation, when business income is subject to corporate tax and then to the owner’s personal income. Read more

Pass-Through Security

Pass-through securities receive payments from an intermediary that collects payments from a pool of assets. Mortgage-backed securities (MBS) are some of the most common pass-through securities. Read more

Passbook Savings Account

A passbook savings account is the classic name for a traditional savings account. Though it may seem quaint now, tellers record the deposits, withdrawals, and interest earned for account holders in a small physical booklet called a passbook. Read more

Passive Income

Passive income is income generated from any business activity in which the earner does not participate. When people describe the dream of "getting rich quick" and "striking it big," they are usually describing  a scheme that involves a component of passive income in one form or another. Read more

Passive Investing

Passive investing is a strategy focused on achieving long-term appreciation of portfolio values with limited day-to-day management of the portfolio itself. A passive investor is one who limits on-going buying and selling activities. Read more

Passive Loss

A passive loss is a financial loss from rental property, limited partnership or other activities in which the investor is not materially involved. When an investor buys shares in a rental property, for example, in which he or she is not actively involved in the operations, it is considered a passive investment. Read more

Passive Management

Passive management is an investment strategy whereby an investor or financial advisor makes long-term investments in certain securities and is not influenced by short-term market fluctuations. The management style is the opposite of active management. Read more

Passive Trust

A passive trust, also called a "dry trust" or a "naked trust", is a trust into which a person transfers assets in order to pass them on to heirs or beneficiaries. For example, let's say John Doe is in a shaky marriage and wants to make sure $1 million of his money goes to his children rather than his second wife, whom he many divorce. Read more

Past Due

Past due means overdue. Typically, a bill is past due if the borrower is 30 days past the payment deadline. Read more

Past-Due Balance Method

The past-due balance method is a system for calculating interest charges based on loan or credit balances not paid prior to a specified due date. The past-due balance method for computing interest on credit card charges and certain types of loans comprises a grace period during which no interest is charged if repaid in full. Read more

Pasternak's Normalized Net Asset Value

Pasternak's normalized net asset value (NNAV) allows investors to compare master limited partnership (MLP) funds with each other and with non-MLP closed-end funds. Pasternak's NNAV was created by Carla Pasternak, an income-investing expert at StreetAuthority. Read more


A patent is a grant of property rights to an invention. In the United States, this is done through the U. Read more

Patent Troll

A patent troll is a person or company whose main business purpose is to sue other people or companies for patent infringement. For example, John Doe buys a patent for the design and manufacture of a flat, rotating disc used to hold objects on a countertop or other flat surface. Read more

Pay Yourself First

Pay yourself first is a phrase referring to the idea that investors should routinely and automatically put money into savings before spending on anything else. For example, let's assume you bring home $60,000 a year after taxes. Read more

Payable on Death (POD)

Payable on death (POD) is a bank account type or designation. It applies to accounts when the account owner designates a beneficiary or beneficiaries for the account. Read more


A paycation is when an employee takes paid vacation from his or her employer and works at another job. Let's say John Doe has earned two weeks of paid vacation at Company XYZ. Read more


Paycheck-to-paycheck means a lifestyle in which a person does not save money and would incur significant financial stress if he or she does not receive his or her next paycheck. For example, let's say John Doe's paycheck is $1,450 every two weeks, or $2,900 a month. Read more

Payday Loan

A payday loan is an advance on one’s paycheck. Independent lenders and some large banks offer the service. Read more


The term "payee" refers to an individual or entity that will receive a payment. It can also be referred to as the beneficiary in situations that pertain to a benefactor. Read more

Payment in Kind (PIK)

Payment in kind refers to the use of a good or service as payment instead of cash. Payment in kind may be made for an exchange of goods or services for work performed. Read more

Payment in Kind (PIK) Bonds

A payment in kind (PIK) bond is a bond that pays interest in additional bonds instead of cash. Instead of the returns on a bond being paid in cash, the dividend is returned to the bond buyer in the form of additional principal (more bonds). Read more

Payout Event

A payout event refers to the accelerated repayment of bond principal, usually on an asset-backed security (ABS). A payout event is also referred to as early amortization or early calls. Read more

Payout Ratio

The payout ratio, also known as the dividend payout ratio, is the percentage of a company's earnings paid out to investors as cash dividends. At the end of a specified period, companies will sometimes pay out dividends for every share owned. Read more


Payroll expenses are the total salaries and wages that a company pays its employees for their services. In the accounting world, “doing payroll” is also a term used for calculating and processing paychecks. Read more

Pegged Exchange Rate

A pegged exchange rate, also known as a fixed exchange rate, is a type of exchange rate in which a currency's value is fixed against either the value of another country's currency or another measure of value, such as gold. Generally, there are two ways in which countries can value their currency in the world market. Read more

Penny Stock

Penny stocks are small-cap equity shares that trade in the over-the-counter market for prices between several cents and ten dollars. Penny stocks are usually issued by small or micro-cap companies to raise capital. Read more

Pension Plan

A pension plan is an arrangement to provide employees with an income when they are no longer earning a regular income from employment. A pension plan is usually a type of retirement plan that gives employers the opportunity to make a contribution to a fund set aside for an employee's future benefit. Read more

Pension Shortfall

A pension shortfall occurs when a company offering a pension plan for its employees does not have enough money set aside to meet the company's pension obligations. In a defined pension plan, where a company bears the risk of the investment of the pension pool and is obligated to provide the pension benefits to employees upon retirement, a poor investment performance by the investment pool may result in a pension shortfall. Read more

Per Capita

Per capita is a measure of a quantity per person. For example, per capita GDP is a country’s gross domestic product (GDP) per person. Read more

Per Share Basis

Per share basis is a carefully scrutinized metric that is often used as a barometer to gauge a company's profitability per unit of shareholder ownership. In many cases, cash flow per share is one of the most important measures. Read more

Perfect Hedge

In finance, a perfect hedge is an investing strategy intended to protect an investment or portfolio against all losses. It usually involves securities that move in the opposite direction than the asset being protected. Read more

Performance Bonus

Performance bonuses are intended to be motivational tools that encourage employees to keep goals in mind and take action in their everyday work to help the company achieve those goals. It is important to note, however, that performance bonuses are generally taxed as income, which means a $10,000 bonus can easily become a $6,000 bonus if the recipient's federal and state tax rates total 40%. Read more

Permanent Life Insurance

Permanent life insurance is a life insurance plan that does not expire as long as the policy is in force. Permanent life insurance differs from term life insurance in that term life insurance covers the insured for a specified period (5, 10, 15, 20 years, etc. Read more

Permanent Open Market Operations (POMO)

Permanent open market operations (POMO) are used by the Federal Reserve to either add to or drain the capital reserves available in the banking system. If the Federal Reserve wants to increase the amount of capital available to the banking system, it will buy Treasury securities from banks in exchange for Federal Reserve Notes (aka, cash dollars). Read more

Perpetual Bond

A perpetual bond is a debt with no maturity date. Investors may collect interest from these bonds indefinitely much as they would expect from a dividend-paying stock or preferred stock. Read more

Person to Person Payments (P2P)

Person to person payments allow you to transfer funds from your bank account or credit card to another individual.

Read more

Personal Consumption Expenditures (PCE)

Personal Consumption Expenditures (PCE), or the PCE price index, is a statistic compiled and released quarterly by the U. S. Read more

Personal Income

Personal income, aka "before-tax income," is the total annual gross earnings of an individual from all income sources, such as: salaries and wages, investment interest and dividends, employer contributions to pension plans, and rental properties. Personal income is used in calculating adjusted gross income (AGI) -- which is important to individuals for income-tax purposes. Read more

Personal Income and Outlay Report

The Personal Income and Outlay report is compiled by the U. S. Read more

Personal Property

Personal property is a class of property that can be moved from one location to another. Generally, real property is a class of property that cannot be moved. Read more


Petrocurrency, also commonly referred to as "petrodollars," is cash -- usually U. S. Read more

Petty Cash

Petty cash is money kept on-hand, generally, by businesses for making change for clients and to cover minor costs. Petty cash is commonly associated with storefront-type businesses who deal with clients who may pay in cash. Read more

Philadelphia Gold and Silver Index

The Philadelphia Gold and Silver Index (Nasdaq: XAU) is traded on the Philadelphia Stock Exchange and is made up of 16 precious metal mining companies. The Philadelphia Gold and Silver Index is made up of gold and silver mining company stocks and is not to be confused with physical gold and silver. Read more

Philadelphia Semiconductor Index (SOX)

The Philadelphia Semiconductor Index, or SOX, is an index created by and traded on the Philadelphia Stock Exchange. It was introduced on December 1, 1993 with a split-adjusted value of 100. Read more

Phillips Curve

The Phillips curve refers to the theory that unemployment rates relate inversely to inflation rates. Proposed by British economist A. Read more

Physical Asset

A physical asset is anything that has commercial or exchange value and has a physical form. For example, let’s assume that XYZ Company intends to purchase an office building for $10,000,000. Read more


The Eurozone nations of Portugal, Ireland, Italy, Greece and Spain make up a group of financially weak countries often referred to in the financial media by the acronym PIIGS. The Eurozone is made up of 16 different countries that all use a single currency, the Euro. Read more

PIN-Debit Transaction

A PIN-debit transaction, also known as an online transaction, is a password-protected payment method that authorizes a transfer of funds over an electronic funds transfer (EFT) When you pay for goods or services with your debit card, you have an option for the payment to be processed in two different ways: as an offline transaction via a credit card processing network, or as an online transaction via an EFT system, requiring a personal identification number (PIN) to complete the process. When processed as an online transaction, the exchange of funds is completed using an EFT network, such as Star, Pulse or Interlink, depending on which EFT system your bank is associated with as a member bank. Read more

Pink Sheets

Pink Sheets is a publication compiled daily by the National Quotation Bureau that shows over-the-counter (OTC) stocks' bid and ask prices and the dealers that exchange them.  The companies listed on the pink sheets generally do not meet meet the standards required to trade on formal exchanges (such as the NYSE, Nasdaq, AMEX)  due to their small size or inability to file with the SEC. Read more

Pledged Asset

A pledged asset is collateral pledged by a borrower to a lender (usually in return for a loan). The lender has the right to seize the collateral if the borrower defaults on the obligation. Read more

Plowback Ratio

The opposite of the dividend payout ratio, a company's plowback ratio is calculated as follows: Plowback ratio = 1 – (Annual Dividend Per Share / Earnings Per Share) Let's assume Company XYZ reported earnings per share of $5 last year and paid $1 in dividends. Using the formula above, Company XYZ's dividend payout ratio is: $1 / $5 = 20% Company XYZ distributed 20% of its income in dividends and reinvested the rest back into the company. Read more


A plutocracy is a system of government where the wealthiest people in a country rule or possess the power, and thus govern directly or indirectly. Plutocracy is often linked to the term “dynastic wealth. Read more

PMI - Private Mortgage Insurance

Private mortgage insurance (PMI), also called mortgage insurance, is what borrowers must pay on each mortgage payment if they didn't make a 20 percent down payment toward their home loan. The insurance protects the lender financially in case the borrower fails to repay. Read more

Point-and-Figure Chart

A point-and-figure chart is a graph which records discrete price changes without accounting for an associated period of time. They are often used in technical analysis as a means of predicting future price changes. Read more

Poison Pill

A poison pill is a strategy that tries to create a shield against a takeover bid by another company by triggering a new, prohibitive cost that must be paid after the takeover. There are many poison pill strategies that have been used by companies against hostile takeovers and corporate raiders. Read more

Political Risk

Political risk is the potential for financial, market, or personnel losses that occur due to political decisions or disruptions. Political risk is also known as "geopolitical risk. Read more

Ponzi Scheme

A Ponzi scheme is an investment scam that pays existing investors out of money invested by new investors, giving the appearance of earnings and profits where there are none. Ponzi schemes are also known as pyramid schemes. Read more

Pork Barrel Spending

Pork barrel spending is a type of appropriated expenditure that is added into a non-related Congressional bill.   Pork barrel spending may also be referred to as earmarking. Read more

Pork Bellies

Pork Bellies are a major commodity traded on the Chicago Mercantile Exchange. Pork bellies are a commodity of pork products traded as a futures contract on the Chicago Mercantile Exchange since 1961. Read more

Porter's 5 Forces

Porter's 5 Forces is an analytical framework for assessing business competitiveness strategies in a particular market. Michael E. Read more

Portfolio Hedging

Portfolio hedging describes a variety of techniques used by investment managers, individual investors and corporations to reduce risk exposure in an investment portfolio. Hedging uses one investment to minimize the negative impact of adverse price swings in another. Read more

Portfolio Management

Portfolio management refers to the professional management of securities and other assets. Also referred to as "asset management" and "wealth management. Read more

Portfolio Manager

A portfolio manager is responsible for investing a fund's assets, overseeing investment strategy and carrying-out day-to-day trading. A portfolio manager manages mutual funds and other investment funds, such as hedge or venture funds. Read more

Position Limit

Position limit refers to the ceiling placed on the number of contracts on a single security which may be held by an individual or cooperative group. Determined by the Commodity Futures Trading Commission (CFTC), position limits place an upper limit on the number of contracts which an investor or combined group of investors may hold for a specific security. Read more

Positive Correlation

Positive correlation describes a relationship in which changes in one variable are associated with the same kind of changes in another variable. For example, many economists have discovered that people tend to buy more cars and appliances during economic booms. Read more

Pre-Market Trading

Pre-market trading is the trading that occurs on electronic market exchanges before regular stock market trading hours begin. In the U. Read more

Pre-Tax Contribution

A pre-tax contribution is a payment made with money that has not been taxed.   Anybody can take a portion of their monthly pay and put it in a savings account. Read more

Pre-Tax Operating Income

Pre-tax operating income is a company's operating income before taxes. The formula for pre-tax operating income is: Pre-Tax Operating Income = Gross Revenue - Operating Expenses – Depreciation Let's assume Company XYZ reported the following information for the fiscal year: Using the formula and the information above, we can calculate that Company XYZ's pre-tax operating income was: $1,000,000 - $500,000 - $300,000 - $100,000 = $100,000 Pre-tax operating income is a measure of a company's operating efficiency because it only takes into account expenses that are directly related to ongoing business operations. Read more

Predictive Indicator

A predictive indicator is a ratio, index, report or other measurement that signals a company or market's direction in advance.   The business cycle has highs and lows. Read more

Preemptive Rights

Preemptive rights are a clause in an option, security or merger agreement that gives the investor the right to maintain his or her percentage ownership of a company by buying a proportionate number of shares of any future issue of the security. Preemptive rights are sometimes called "subscription rights," "anti-dilution provisions," or "subscription privileges. Read more

Preferred Shares

Preferred shares represent an ownership stake in a company -- in other words, a claim on its assets and earnings. However, as the term suggests, "preferred" shares carry certain advantages. Read more

Preferred Stock

Like shares of common stock, shares of preferred stock represent an ownership stake in a company -- in other words, a claim on its assets and earnings. However, as the term suggests, "preferred" stock carries certain advantages. Read more

Premium Put Convertible Bond

A premium put convertible bond is a bond that can be redeemed by the investor at premium before its maturity date. Premium put convertible bonds have a feature comparable to a put option that permits the holder to redeem the bond at a premium in advance of maturity date. Read more

Premium to Net Asset Value (NAV)

Premium to net asset value (NAV) refers to a situation where shares of a closed-end stock fund are trading at a price higher than the fund's net asset value per share. For example, a fund could be described as "trading 5% premium to NAV. Read more

Prepackaged Bankruptcy

Prepackaged bankruptcy refers to a plan for reorganization under Chapter 11 that a company drafts in cooperation with its lenders. If a company determines that Chapter 11 bankruptcy is inevitable, it may first contact and meet with its lenders in order to formulate a mutually beneficial reorganization plan prior to any official proceedings. Read more

Prepayment Risk

Prepayment risk is the risk that a borrower will pay off a loan earlier than expected. For example, let's say that John Doe borrows $300,000 to buy a house in Phoenix. Read more

Present Value (PV)

Present value (PV) measures the current value of an amount of money – or a stream of cash flows – that is expected in the future. This value will differ from the cash flows’ nominal value, since time itself affects value. Read more

Preservation of Capital

Preservation of capital is an investment strategy that focuses on preventing any losses of an investment's face value. A preservation of capital is a conservative investment philosophy that invests in very safe securities, such as Treasuries (T-Bills), which will not lose any value and only gain enough to counter the effects of inflation. Read more

Previous Close

Previous close shows what the price of a stock or market index was when the market closed on the previous trading day. Over the course of a day as securities are traded, a stock's price will rise and fall based on any number of factors. Read more

Price Action

Price action is a term often used in technical analysis to interpret and describe price movements of securities.  Technical trading revolves around chart and pattern analysis, and when patterns change dramatically, technical traders often refer to this as price action. Read more

Price Band

A price band is a price floor and a cap between which a seller will let buyers place bids on a security, usually during an initial public offering (IPO) For example, let's say Company XYZ is going to go public. As part of the IPO process, Bank ABC (Company XYZ's investment bank) sets a price band on its shares of $45 to $50 per share. Read more

Price Basing

Price basing is a way to use the prices of futures contracts to determine the retail prices of commodities. Price basing happens all the time in the media when it comes to gasoline prices. Read more

Price by Volume (PBV) Chart

A price by volume (PBV) chart is a horizontal histogram that shows a cumulative total of how many shares of a stock traded at a given price. Mechanically speaking, a PBV chart is simply price, plotted as a line on the X axis, and volume, plotted on the Y axis as a bar. Read more

Price Cap Regulation

A price cap regulation places a ceiling on the amount companies in a given industry (typically utilities and telecommunications providers) can charge for services. Price cap regulation typically has four tenets:1. Read more

Price Ceiling

A price ceiling is the maximum price a seller can legally charge a buyer for a good or service. Regulators usually set price ceilings. Read more

Price Change

In the stock market, a price change is the difference in trading prices from one period to the next or the difference between the daily opening and closing prices of a share of stock. For example, let's say Company XYZ shares opened at $25 this morning and closed at $24. Read more

Price Channel

In technical analysis, a price channel is an upper limit (called the resistance) and a lower limit (called the support) in which a security's price tends to stay. Price channels can slope up (indicating bullish sentiment) or down (indicating bearish sentiment); they don't have to simply go "sideways. Read more

Price Continuity

Price continuity occurs when the number of transactions (volume) does not in and of itself affect a security's price. In trading, buyers offer bid prices and sellers offer asking prices. Read more

Price Creep

Price creep refers to a gradual increase in the price of a good or service. Price creep usually occurs because production costs have increased. Read more

Price Discovery

Price discovery refers to the act of determining the proper price of a security, commodity, or good or service by studying market supply and demand and other factors associated with transactions. In a simple sense, price discovery involves finding where supply and demand meet. Read more

Price Discrimination

Price discrimination is the act of charging different customers different prices for the same good or service. A common example of price discrimination is ladies' night: men must pay full price for drinks at the bar, but women pay only 50% of the regular price. Read more

Price Efficiency

Price efficiency simply refers to whether the price of a security incorporates all the available information about the security. For example, assume that Company XYZ is a public company trading at $15 per share. Read more

Price Elasticity of Demand (PED)

Price elasticity of demand (PED) measures the change in the demand for a product or service in response to a change in its price. With most goods, an increase in price leads to a decrease in demand – and a decrease in price leads to an increase in demand. Read more

Price Fixing

Price fixing is an agreement among businesses to sell the same product or service at the same price. Price fixing involves the cooperation among two or more business competitors to set or stabilize a price for a product or service. Read more

Price Improvement

Price improvement is the often unexpected event of obtaining a better bid or ask price than the price quoted at the time the buy or sell order is made. For example, assume you own 1,000 shares of Company XYZ. Read more

Price Inflation

Price inflation is simply an increase in the price of a good or service over time. The consumer price index (CPI) is the most common measure of price inflation. Read more

Price Leadership

Price leadership is the act of setting the price for a good or service in an industry. Let's assume that Company XYZ manufactures windshield wipers. Read more

Price Level Adjusted Mortgage (PLAM)

A price level adjusted mortgage (PLAM) is a mortgage with a fixed interest rate but an adjustable principal balance. For example, let's assume you take out a traditional 30-year, $100,000 mortgage at 7%. Read more

Price Maker

In economics, a price maker is a monopolistic company that can dictate the prices of its goods because there are no substitutes for it. In trading, a price maker is a stockholder who controls a large number of shares and is able to affect the stock's price. Read more

Price Multiple

A price multiple is a ratio that combines some measure of a company's performance and the company's stock price. In general, a price multiple ratio looks like this: Price multiple = Price / Performance Metric For example, Company XYZ has revenue of $20,000,000 per year. Read more

Price per Flowing Barrel

Price per flowing barrel is a measure of an oil and gas company's valuation as compared to the number of barrels of oil or gas it produces. The formula used to calculate a company's price per flowing barrel is: Price per Flowing Barrel = (Market Capitalization + Debt - Cash) / Barrels Produced per Day  Let's assume oil company XYZ produces 50,000 barrels per day of oil per day and its market capitalization (shares outstanding x share price) is $45,000,000. Read more

Price Persistence

Also called relative strength, price persistence is the tendency of a security's price to stay on trend relative to a market index such as the S&P 500. It is a measure of momentum. Read more

Price Protection

Price protection is an agreement between a buyer and a seller whereby the parties agree to fix the price of a good or service for a specific period of time. In practice, price protection (sometimes called purchase protection) is a feature of many credit cards, whereby customers can get a refund on purchases made with the credit card if the price of those purchases goes down within a certain time frame after the purchase. Read more

Price Ratchet

A price ratchet is a trigger that changes the price of a security. For example, let's assume that the United States government defaults on interest payments on its Treasury securities. Read more

Price Rate of Change

The price rate of change is simply the percentage change in a security's price between two periods.  The formula for the price rate of change is:Price Rate of Change = (Price at Time B - Price at Time A) / Price at Time AFor example, let's say Company XYZ's share price was $10 yesterday and was $5 a week ago. Read more

Price Rigging

Also known as collusion or price fixing, price rigging occurs when a group of people or businesses agree to set the price for something.  In the stock market, traders with inside information might conspire to work together on trades in order to benefit from the inside information. Read more

Price Risk

Price risk is simply the risk that the price of a security will fall. Earnings volatility, unexpected financial performance, pricing changes, and bad management are common factors in price risk. Read more

Price Sensitivity

In consumer behavior, price sensitivity (also called the elasticity of demand) is the degree to which price affects the sales of a product or service. Thus, the formula for price sensitivity is: Price Sensitivity = % Change in Quantity Purchased/% Change in Price In the bond world, duration is a measure of a bond’s price sensitivity to changes in interest rates. Read more

Price Stickiness

Price stickiness refers to the price persistence of a good, service, security or economic measure (like wages) despite changing economic conditions. Prices can be sticky on the way up or sticky on the way down, meaning that they move in one direction easily but require great effort to move in the other direction. Read more

Price Taker

A price-taker is the opposite of a price maker, which is a monopolistic company that can dictate the prices of its goods because there are no substitutes for its goods. In the trading world, a price-taker is a stockholder who does not to affect the price of the stock if he or she buys or sells those shares. Read more

Price Talk

Price talk refers to discussions about the price of a pending initial public offering (IPO) or upcoming bond issue.   Price talk is usually debate and discussion about what a fair price is for certain new securities. Read more

Price Target

A price target is an analyst's expectation for the future price of a security.  For example, let's assume that the Jones-Smith investment bank provides research reports about Company XYZ stock. Read more

Price Tension

Price tension refers to the presence of a large bid-ask spread. Let's assume you are watching Company XYZ stock. Read more

Price Transparency

Price transparency is the ability to know all of the bid prices, ask prices, and trading quantities for a given stock, good, or service at any point in time. For example, NYSE quotes have limited price transparency. Read more

Price War

A price war is an event whereby two or more companies continually lower prices to undercut each other. Airline companies are famous for their price wars. Read more

Price-Based Option

A price-based option is a derivative based on the price of an underlying debt security, usually a bond. A price-based option gives the holder the right, but not the obligation, to purchase or sell (depending on whether the option is a call or a put) the underlying bond for a specific price (the strike price) on or before the option's expiration date. Read more

Price-Earnings Relative

The price-earnings relative is a comparison of a stock's P/E ratio to the cumulative P/E ratio of a related market index. The price-earnings relative considers the P/E of a given stock relative to the P/E ratio for a comparable market index, such as the Dow Jones or S&P 500. Read more

Price-Level Targeting

Price-level targeting is an economic strategy whereby a central bank tries to reestablish an overall price level rather than reestablish a particular inflation rate. For example, let's assume that inflation is usually 4% per year in the United States, but then it drops to 1% per year. Read more

Price-to-Book Ratio (P/B)

The price-to-book ratio measures a company's market price in relation to its book value. The ratio denotes how much equity investors are paying for each dollar in net assets. Read more

Price-to-Cash Flow Ratio (P/CF)

The price-to-cash flow ratio (P/CF) is used to evaluate the price of a company's stock as compared to the amount of cash flow it generates. The formula for the price-to-cash flow ratio is: Price-to-Cash Flow Ratio = Price per share / (Cash flow / Shares outstanding) For example, let's assume that Company XYZ has a share price of $3 and has 10,000,000 shares outstanding. Read more

Price-to-Earnings Ratio (P/E)

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

Price-to-Free Cash Flow Ratio (P/FCF)

The price-to-free cash flow ratio (P/FCF) is a valuation method used to compare a company’s current share price to its per-share free cash flow. The formula for the price-to-free cash flow ratio is:Price to Free Cash Flow = Market Capitalization / Free Cash FlowFor example, let's assume that Company XYZ has 10,000,000 shares outstanding, which are trading at $3 per share. Read more

Price-to-Innovation-Adjusted Earnings Ratio

The price-to-innovation-adjusted earnings ratio is used to evaluate the price of a company's stock as compared to its earnings when adjusted for the amount the company spends on R&D. The formula for price-to-innovation-adjusted earnings is: Price-to-Innovation-Adjusted Earnings = Price per share / (EPS + R&D per share) For example, let's assume that Company XYZ, a company that designs and manufactures medical devices, earned $10,000,000 in profits last year. Read more

Price-to-Research Ratio

The price-to-research ratio is used to evaluate the price of a company's stock as compared to its ability to generate future profits from new products. The formula for the price-to-research ratio is: Price-to-Research Ratio = Market Capitalization / R&D Expense For example, let's assume that Company XYZ spent $5,000,000 on R&D last year. Read more

Price-to-Sales Ratio (P/S)

The price-to-sales ratio helps determine a stock’s relative valuation. The formula to calculate the P/S ratio is:P/S Ratio = Price Per Share / Annual Net Sales Per ShareLet's assume Company XYZ reports net sales of $5,000,000 and it currently has 500,000 shares outstanding. Read more

Price-to-Tangible Book Value Ratio

The price-to-tangible book value ratio measures a company's market price in relation to its tangible book value. The ratio denotes how much investors are paying for each dollar of physical assets. Read more

Price-Weighted Index

A price-weighted index is an index in which the member companies are weighted in proportion to their price per share, rather than by number of shares outstanding, market capitalization or other factors. The Dow Jones Industrial Average (DJIA) is a price-weighted index. Read more

Price/Earnings-to-Growth and Dividend Yield Ratio (PEGY)

The price/earnings-to-growth and dividend yield ratio (PEGY) demonstrates how much the market is willing to pay for earnings growth and dividend yield. By incorporating dividend yield, the PEGY ratio accounts for a companies' inclination (or disinclination) to pay out dividends. Read more

Price/Earnings-to-Growth Ratio (PEG)

The PEG ratio is a derivative of the P/E ratio that takes into account future growth in earnings.   The formula for the PEG ratio is: PEG Ratio = Price-to-Earnings (P/E) Ratio / Annual Earnings Per Share Growth The PEG ratio uses the basic format of the P/E ratio for a numerator and then divides by the potential growth for the stock. Read more

Priced Out

"Priced out" refers to something being too expensive. Alternatively, priced out refers to the adjustment in a security's market price in response to new information. Read more

Pricing Power

Pricing power is the effect the price of a good or service has on the demand for that good or service. For example, a company that manufactures a pill that cures cancer has a lot of pricing power: the demand for the pill will probably change very little if the price goes up. Read more

Primary Downtrend

When financial assets and markets -- as with the broader economy -- fall steadily for an extended period of time, it is known as a primary downtrend, or "bear market. " A primary downtrend is when each successive decline of the primary trend carries the market to lower lows and lower highs, lasting from several months to several years. Read more

Primary Uptrend

When financial assets and markets -- as with the broader economy -- move in an upward direction for extended periods of time, it is known as a primary uptrend, or “bull market. ”A primary uptrend is when each successive advance of the primary trend peaks and troughs higher than the one preceding it, and can last from several months to several years. Read more

Prime Rate

The prime rate is the interest rate commercial banks charge their most creditworthy customers, which are usually corporations. Anyone who has borrowed money knows that different banks charge different interest rates. Read more


In finance,  principal refers to the face amount of a debt instrument or an amount of money borrowed. For example, if you borrow $25,000 from XYZ Bank to purchase a car, the principal balance is $25,000. Read more

Principal, Interest, Taxes and Insurance (PITI)

The sum total of a mortgage payment is comprised of principal, interest, taxes, and insurance (PITI). The amount of principal paid, interest paid, property taxes, and homeowners insurance is broken down on a monthly basis to determine what the borrower’s monthly outlay would be. Read more

Principal-Only STRIPS

Principal-only STRIPS are synthetic zero-coupon bonds that are based on the principal component of Treasury securities. STRIPS stands for Separate Trading of Registered Interest and Principal of Securities. Read more

Private Company

Out of the 18 million businesses in the United States, fewer than 4,000 are publicly listed on a stock exchange. That means private companies remain the default model of conducting business. Read more

Private Equity

Private equity is money for investments made directly in private companies or in public companies that become private. Although some private equity comes from private individuals, most private equity funding comes from private equity firms. Read more

Private Placement

A private placement is an offering of securities that is not registered with the U. S. Read more

Private-Purpose Bond

A private-purpose bond is a municipal bond that uses a significant amount of its proceeds to fund private activities or benefit private parties. Let's assume Company XYZ wants to open a factory in ABC Town, which is economically depressed, but Company XYZ doesn't have the $100 million necessary to construct the factory. Read more

Privately Held

A privately held company is different from a public company in that its stock is not traded on public exchanges like the New York Stock Exchange, Nasdaq, American Stock Exchange, etc. Instead, shares of privately held companies are offered, owned and traded privately among interested investors. Read more

Privately Owned

A privately owned company is different from a publicly traded company in that its stock is not traded on public exchanges like the New York Stock Exchange, Nasdaq, American Stock Exchange, etc. Instead, shares of privately owned companies are offered, owned and traded privately among interested investors. Read more

Pro Bono

Pro bono refers to any work or service that someone provides free of charge for the common good. From the Latin phrase "pro bono publico" meaning "for the public good," the motivation behind pro bono work is to benefit society as opposed to making money. Read more

Pro Rata

Pro rata refers to the proportional distribution of a sum across a number of units. A Latin term meaning "in proportion," pro rata is a method of allocating fractional amounts of something equally among all parts of a whole. Read more

Probate Court

Probate court is a section of the court system that transfers money and property from the deceased to heirs, beneficiaries or other entities. John Doe writes a will. Read more


The simplest definition of procurement is the act of a business buying goods or services.

Read more

Producer Price Index (PPI)

The Producer Price Index (PPI) is used to measure the change over time of the average price of goods produced domestically. The producer price index consists of a weighted index of goods prices at wholesale. Read more


Productivity refers to the measure of output (e. g. Read more


Discover more about profit in business, from a straightforward definition to simple profit examples. 

Read more

Profit & Loss Statement (P&L)

Profit and loss (P&L) statements are one of the three financial statements used to assess a company’s performance and financial position. The two others are the balance sheet and the cash flow statement. Read more

Profit Before Tax

Profit before tax measures a company's operating and non-operating profits before taxes are considered. It is the same as earnings before taxes. Read more

Profit Center

A profit center is a part of a company that directly adds to its profits. A company may have a variety of distinct departments, divisions, or operating groups, each with separate responsibilities and each contributing to the overall success of a company. Read more

Profit Margin

Profit margin usually refers to the percentage of revenue remaining after all costs, depreciation, interest, taxes, and other expenses have been deducted. The formula is: (Total Sales - Total Expenses)/Total Sales = Profit Margin Note that preferred stock dividends are typically included in the calculation, but common stock dividends are not. Read more

Profit Sharing Plan

A profit sharing plan gives employees a share in the company's profits.  A profit sharing plan is usually structured to give a percentage of the profits to employees based on the company's earnings. Read more

Profit Taking

Profit taking is the act of selling stock to take advantage of a sharp rise in the stock price. Occasionally, investors will sell off their shares in a stock after the stock rises sharply. Read more

Profit Warning

A profit warning is a public communication from a company that its earnings will fall below expectations. Profit warnings are part of the large, fluid world of earnings guidance, whereby the management of publicly traded companies issue estimates about what they expect earnings to be for the coming quarter. Read more

Program Trading

Program trading refers to automated trading by investors using computer programs.  Program trading is used by institutional investors for large-volume trades through direct connections with the market's computers. Read more

Progressive Tax

A progressive tax is one in which the tax rate increases as the amount being taxed increases. Most western countries use a progressive tax in one way or another. Read more

Promissory Note

A promissory note is a written document that binds one party to pay another through credit. The agreement is considered a debt instrument as it typically contains loan-type features such as the repayment terms, principal amount owed, interest rate, maturity date, date of issuance and both parties' signatures. Read more

Property Insurance

Property insurance is an insurance policy or series of policies that provides insurance coverage for property protection and/or liability. The policy provides reimbursement to the policy owner in the event of theft, damage, and/or injuries to someone on the property. Read more

Property Lien

A property lien is a lender's claim against a piece of real estate that may be legally sold should the borrower fail to repay a loan. When someone takes out a sizeable loan, such as a home mortgage, the lender often requires an asset that can be held as collateral against the loan. Read more

Property Tax

Property tax is a tax on property -- usually real estate -- as determined by an assessor. Let's assume you own a house. Read more


A prospectus is a legal document filed with the Securities Exchange Commission (SEC) to accompany securities or investment offerings for sale. Containing key facts and information about the offering, a prospectus makes investors more aware of the risks of an investment. Read more

Protective Put

An investor employs a protective put strategy when he purchases a put option of a stock of which he already owns shares. A protective put is usually used by an investor who has unrealized gains on a stock. Read more

Protective Stop

A protective stop is a stop-loss order put in place to guard against losses beyond a specific threshold. Investors often have an idea of how much of their investment they're willing to lose. Read more

Proxy Statement

A proxy statement is the common name for the Securities and Exchange Commission (SEC) Form 14-A. It is the document containing the voting ballot and material information related to the propositions to be determined. Read more

Public Company

A public company is a company that is permitted to sell its registered securities to the general public. Also referred to as a "publicly-traded company. Read more

Public Limited Company (PLC)

A public limited company is a company which offers equity shares with limited liability to public investors on a registered exchange. More common in the U. Read more

Public Offering

A public offering is a process of issuing new securities for sale to the public.   For example, let’s say the founders of Company XYZ want to sell half of their shares. Read more

Public Offering Price (POP)

Public offering price (POP) refers to the price at which shares of a company are issued in an initial public offering (IPO) When a company issues stock for the first time as part of an IPO, the underwriting investment bank is responsible for determining the stock's public offering price (POP). The POP is based on numerous variables including, but not limited to, the stock prices of similarly-valued companies in the same industry, the issuing company's growth potential and the issuing company's current value as expressed by its financial statements. Read more

Public Option

The public option refers to a portion of Obamacare that would have created a Medicare-like health insurance policy that most U. S. Read more

Public-Purpose Bonds

A public-purpose bond is a municipal bond that is used to fund projects that benefit the general public rather than private groups or individuals. Public-purpose bond contrast with private-purpose bonds, which use a significant amount their proceeds to fund private activities or benefit private parties. Read more

Publicly Traded Partnership

A publicly traded partnership is a limited partnership that is traded in a capital market. Typically, a publicly traded partnership is a partnership between the limited partners who provide the capital (or at least the initial capital) for the company and the general partners who manage the company. Read more

Pump and Dump

Pump and dump refers to an investment scam wherein optimistic, but untrue, statements are publicized about a specific stock in order to artificially increase the price through higher demand. In a pump and dump scenario, an investor or group of investors holding a long position in a low-price, small-cap stock unfoundedly publicize the stock as a promising opportunity. Read more

Purchase Protection

Purchase protection is an agreement between a customer and a seller whereby the two sides agree to set the price of a good or service in place for a particular time period. In reality, purchase protection (also called price protection) is an aspect of many credit cards, whereby customers are able to receive refunds on items purchased with the credit card if the price of those items decreases within a specific time frame after the purchase. Read more

Purchasing Power

Purchasing power is a phrase to describe the quantity of goods or services that a dollar can buy. A decrease in purchasing power is called inflation. Read more

Pure Yield Pickup Swap

A pure yield pickup swap describes an investing strategy where an investor exchanges lower yield bonds for higher yield bonds. In a pure yield pickup swap, an investor who holds bonds with lower yields purchases higher yield bonds using the proceeds from the sale of the former. Read more

Put Bond

A put bond permits the bond holder to force the issuer to repurchase the security before maturity.  In bond financing, the issuer sells bonds at a coupon rate (i. Read more

Put Option

A put option is a financial contract between the buyer and seller of a securities option allowing the buyer to force the seller (or the writer of the option contract) to buy the security. In options trading, a buyer may purchase a short position (i. Read more

Put-Call Parity

Put-call parity refers to the relationship between put and call options for a given security, strike price and expiration date. Under put-call parity, the option prices should match, yielding no profit or loss. Read more

Put/Call Ratio

The put/call ratio is a popular sentiment indicator based upon the trading volumes of put options compared to call options. The ratio attempts to gauge the prevailing level of bullishness or bearishness in the market. Read more

Putable Bond

Putable bonds are bonds that give the holder the right to sell his or her bond to the issuer prior to the bond's maturity date. The bond indenture will stipulate when and how the bond can be sold, and there are often multiple sell dates throughout the life of a putable bond. Read more


Pyramiding refers to purchasing additional units of a security with unrealized profits on open trades. Investors engage in pyramiding in order to increase their portfolio position using the paper profits from the rising value of open trades in order to purchase additional units of securities. Read more