Category: Financial Terms

Price Action Price action is the movement of an asset’s price over time as shown on a chart. It forms the foundation of technical analysis: traders read past price movements to identify trends, support and resistance levels, breakouts, and reversal points to inform entry and exit decisions. Key takeaways Price action = historical price movements…

Pretax Profit Margin What it is The pretax profit margin measures how much of a company’s revenue is retained as profit before income taxes. Expressed as a percentage, it shows how many cents of each sales dollar become profit after all expenses except taxes are deducted. It’s most useful for comparing profitability across companies within…

Pretax Earnings Pretax earnings (also called earnings before tax or EBT) are a company’s income after all operating expenses—including cost of goods sold, depreciation, interest, and other operating costs—have been deducted from revenue, but before income taxes are subtracted. Because it excludes taxes, pretax earnings help compare underlying profitability across companies, industries, and jurisdictions with…

Press Conference: Purpose, Process, and Benefits Key takeaways A press conference is a structured event where an organization distributes information to the media and answers reporters’ questions. It’s used for positive announcements (product launches, executive hires) and crisis or reputation management. Success depends on clear messaging, appropriate location, well-timed invitations, and effective follow-up. Press conferences…

Preservation of Capital Preservation of capital (or capital preservation) is a conservative investment strategy whose primary goal is to protect the principal value of a portfolio and avoid losses. Investors who prioritize preservation accept lower returns in exchange for greater safety and liquidity. Key takeaways Preservation of capital aims to minimize loss of principal, not…

Present Value of an Annuity What it is The present value (PV) of an annuity is the current worth of a series of future, equal payments, discounted at a specified rate (the discount rate). It answers the question: how much money today is equivalent to receiving a fixed payment each period in the future? Why…

Present Value Interest Factor of an Annuity (PVIFA) The present value interest factor of an annuity (PVIFA) is a factor used to calculate the present value of a series of equal, periodic payments (an ordinary annuity). It helps compare the value of receiving a lump sum today versus receiving a sequence of future payments by…

Present Value Interest Factor (PVIF) Overview The present value interest factor (PVIF) is a multiplier used to convert a single future sum into its present value, reflecting the time value of money. It’s widely used in finance to discount future cash flows, compare lump sums to annuities, and value investments. Formula For a single future…

Present Value Present value (PV) is the current worth of a sum of money or stream of cash flows to be received in the future, discounted at an appropriate rate. It reflects the time value of money: a dollar today is worth more than a dollar tomorrow because it can be invested to earn a…

Prepayment Risk What is prepayment risk? Prepayment risk is the danger that the principal on a fixed-income security will be repaid earlier than expected, causing the investor to lose future interest payments on that principal. It primarily affects securities that can be redeemed before maturity—most notably callable bonds and mortgage-backed securities (MBS). Key takeaways Prepayment…

Key Takeaways * A prepayment penalty is a fee a lender may charge if a borrower pays off or substantially reduces a loan balance early, typically within the first few years. * Penalties protect lenders from lost interest income and are usually calculated as a percentage of the remaining balance or as several months’ interest….

Prepayment: Definition, Types, and Potential Penalties What is a prepayment? A prepayment is the settlement of a debt or expense before its official due date. It can apply to loans (mortgages, auto loans, personal loans), recurring expenses (rent, subscriptions), or taxes. Individuals and organizations prepay for various reasons, including interest savings, cash-flow management, or accounting…

Prepaid Expenses: Definition and Example What is a prepaid expense? A prepaid expense is an amount a company pays in advance for goods or services it will receive in the future. Because the payment creates a future economic benefit, it is recorded as an asset on the balance sheet until the benefit is realized, at…

Premium Bond A premium bond is a bond that trades above its face (par) value. For example, a bond with a $1,000 face value might trade for $1,050 — a $50 premium. Premiums typically arise when a bond’s fixed coupon rate is higher than prevailing market interest rates or when the issuer’s strong creditworthiness makes…

Understanding Premiums in Finance: Definitions, Types, and Examples A premium in finance is any price or payment that is above a base or intrinsic value. The term appears across investing, insurance, and derivatives, with context determining whether it refers to a price difference, a periodic payment, or compensation for risk. Key takeaways A premium can…

Preferred Stock Preferred stock is a class of equity that gives holders priority over common shareholders for dividends and asset distributions but typically offers limited or no voting rights. It combines features of both stocks and bonds, making it attractive to investors seeking steady income with some equity upside. Key takeaways Preferred shareholders have priority…

Preferred Provider Organization (PPO): Definition and Overview A Preferred Provider Organization (PPO) is a type of health insurance plan that emphasizes flexibility in choosing providers. PPOs maintain a network of “preferred” doctors, specialists, hospitals, and other healthcare facilities that agree to provide services at negotiated, reduced rates. Members receive the highest level of benefits when…

Preferred Dividends: Definition and Overview Preferred dividends are payments made to holders of a company’s preferred stock. They generally: Have a fixed rate set at issuance. Take priority over dividends on common stock — preferred shareholders are paid first. Are typically paid quarterly or annually. Offer more stable income than common-stock dividends but usually do…

Preference Shares Preference shares (preferred stock) are a class of equity that combines features of common stock and fixed-income securities. Holders typically receive dividends before common shareholders and have priority in asset distribution if a company is liquidated. In exchange, preferred shareholders usually have limited or no voting rights and less upside participation in company…

Preemptive Rights: Protecting Your Ownership from Dilution Key takeaways Preemptive rights (also called anti-dilution rights) give eligible shareholders the first opportunity to buy new shares before they’re offered to the public, so they can maintain their ownership percentage and voting power. In the U.S., preemptive rights are typically contractual (offered to early investors or insiders);…

Predatory Pricing: Definition, Example, and Why It’s Used What is predatory pricing? Predatory pricing is the strategy of setting prices unrealistically low—often below cost—with the purpose of driving competitors out of a market. If successful, the predator aims to eliminate rivals, secure monopoly power, and later raise prices to recoup losses. While low prices can…

Pre‑Market Trading Explained: Benefits, Risks, and How It Works Pre‑market trading refers to buying and selling securities before the regular market opens. In the U.S., pre‑market hours generally run from 4:00 a.m. to 9:30 a.m. Eastern Time, with most activity concentrated in the hour or two before the 9:30 a.m. open. These sessions let traders…

Pre-IPO Placements: Definition, Process, and an Alibaba Example What is a pre-IPO placement? A pre-IPO placement is the private sale of sizable blocks of a company’s stock before the company lists publicly. These placements let companies raise capital and shore up financial stability ahead of an initial public offering (IPO). Buyers are typically institutional investors…

Pre-foreclosure: What It Is and What Homeowners Can Do Key takeaways * Pre-foreclosure is the initial legal stage after a borrower falls significantly behind on mortgage payments and the lender files a notice of default. * It creates an opportunity to cure the default, negotiate alternatives (forbearance, loan modification), or sell the home (often via…

Power of Attorney Key takeaways A power of attorney (POA) is a legal document that lets one person (the agent or attorney-in-fact) act on behalf of another (the principal). POAs can cover financial, legal, and medical decisions and may be broad or narrowly limited. A durable POA remains effective if the principal becomes incapacitated; a…

Power Distance Index (PDI) What is the PDI? The Power Distance Index (PDI), developed by Geert Hofstede, measures how much members of a society accept unequal distributions of power, authority, and wealth. A high PDI indicates acceptance of clear hierarchies and centralized authority; a low PDI reflects more egalitarian relations and openness between managers and…

Understanding the Poverty Trap: Causes, Types, and Solutions A poverty trap is a self-reinforcing cycle that makes it very difficult for individuals, families, or communities to escape poverty without a substantial external injection of resources. Limited access to education, healthcare, credit, infrastructure, and effective institutions can keep a population in persistent low-income equilibrium where small…

Understanding Poverty: Definition, Causes, and Measurement Poverty is a multidimensional socioeconomic condition in which individuals, families, or communities lack the resources needed to meet a minimum standard of living. Beyond low income, it can include limited access to housing, clean water, food, healthcare, education, and other essentials that enable a flourishing life. Key takeaways Poverty…

Post-Trade Processing: What It Is and Why It Matters Post-trade processing is the set of activities that verify, reconcile, and finalize a financial transaction after a trade is executed. It ensures that trade terms match between buyer and seller, ownership records are updated, and cash and securities move to their proper destinations. This stage is…

Post-Money Valuation: Definition, Example, and Importance What is post-money valuation? Post-money valuation is a company’s estimated value immediately after receiving outside equity financing. It equals the company’s pre-money valuation plus the new equity investment. Explore More Resources › Read more Government Exam Guru › Free Thousands of Mock Test for Any Exam › Live News…

Positive Pay: How Banks Help Prevent Check Fraud Positive Pay is a bank-provided fraud detection service that helps businesses protect their accounts from counterfeit, forged, and altered checks. Companies submit details of checks they issue, and the bank matches presented checks against that list before honoring them. How Positive Pay Works (Step by step) Enroll…

Positive Economics Positive economics is the branch of economics that focuses on objective, fact-based analysis of what is — describing and explaining economic behavior and outcomes without value judgments. It contrasts with normative economics, which expresses opinions about what ought to be done. Key takeaways Positive economics relies on observable data and testable statements. Conclusions…

Positive Correlation: Definition, Measurement, and Examples What is positive correlation? A positive correlation is a statistical relationship in which two variables tend to move in the same direction: when one increases, the other tends to increase; when one decreases, the other tends to decrease. Correlation indicates association, not causation—two variables can move together because of…

Position Trader What is a position trader? A position trader buys and holds an investment for an extended period—weeks, months, or years—expecting it to appreciate as a prevailing trend continues. Unlike day traders, position traders are less concerned with short-term price noise and focus on capturing the bulk of a trend’s movement. Key takeaways Position…

Understanding Portfolio Variance Portfolio variance quantifies the risk of a portfolio by measuring how the returns of its constituent assets fluctuate together. It incorporates each asset’s variance and the covariances (or correlations) between assets. Because assets can move differently relative to one another, a portfolio’s variance is not simply the weighted average of individual variances….