Investing terms can often feel confusing, especially for beginners. This glossary is designed to give you clear, simple definitions of the most important concepts in fundamental investing so you can understand how markets work and make better financial decisions.
Fundamental investing focuses on analyzing businesses based on their financial performance, competitive advantage, and long-term value. To do that effectively, you need to understand the language investors use—from basic terms like assets and cash flow to more advanced concepts like return on invested capital (ROIC) and discounted cash flow (DCF).
In this investing glossary, each term is explained in plain language with a focus on real-world understanding—not technical jargon. Whenever possible, definitions are connected to broader investing concepts so you can see how each idea fits into the bigger picture.
You’ll learn key terms related to:
Financial statements and accounting concepts
Business analysis and valuation methods
Stock market fundamentals and investment strategies
Risk, return, and long-term decision-making
If you’re just getting started, this glossary is the perfect place to build your foundation. If you’re already learning, it will help reinforce and clarify the concepts that matter most.
Start with our complete guide: What Is Fundamental Investing
Then explore deeper topics in Investing Basics and Business Analysis
EV/EBITDA is a valuation multiple that compares a company’s enterprise value to its EBITDA. In fundamental investing, EV/EBITDA helps investors evaluate how expensive a business is relative to its operating earnings before interest, taxes, depreciation, and amortization. It is commonly used to compare companies with different debt levels, tax rates, capital structures, or depreciation policies.
Price-to-free-cash-flow ratio is a valuation metric that compares a company’s market capitalization to its free cash flow. In fundamental investing, the price-to-free-cash-flow ratio helps investors understand how much the market is paying for each dollar of cash a company generates after operating expenses and capital expenditures. It is often used to evaluate companies with strong
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Price-to-book ratio, or P/B Ratio, is a valuation metric that compares a company’s market value to its book value. In fundamental investing, the P/B Ratio helps investors understand how much the market is paying for a company’s net assets. It is often used to analyze banks, insurance companies, asset-heavy businesses, financial companies, and companies where
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Warrants are financial securities that give the holder the right, but not the obligation, to buy a company’s stock at a specified price before a certain expiration date. In fundamental investing, warrants matter because they can affect dilution, fully diluted shares outstanding, intrinsic value per share, and shareholder returns. Warrants can provide upside if the
A SPAC, or special purpose acquisition company, is a publicly traded shell company created to raise money from investors and later merge with a private company to take that company public. SPACs do not have operating businesses when they are formed. Instead, they raise cash through an initial public offering (IPO), place most of that
A direct listing is a way for a private company to become publicly traded by listing its existing shares directly on a stock exchange without a traditional initial public offering (IPO). In fundamental investing, a direct listing matters because it allows investors to buy shares of a newly public company, but the process, pricing, capital
Price-to-sales ratio, or P/S Ratio, is a valuation metric that compares a company’s market capitalization to its revenue. In fundamental investing, the P/S Ratio helps investors understand how much the market is paying for each dollar of a company’s sales. It is often used to analyze companies with little or no current earnings, early-stage growth
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Stock-based compensation is a form of employee pay that gives workers equity or equity-linked awards, such as restricted stock units, stock options, or performance shares. In fundamental investing, stock-based compensation matters because it can affect expenses, profitability, free cash flow, shares outstanding, dilution, and intrinsic value per share. It can help companies attract and retain
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A secondary offering is the sale of additional shares by a public company or by existing shareholders after the company has already completed its initial public offering (IPO). In fundamental investing, a secondary offering matters because it can affect shares outstanding, dilution, ownership percentage, market capitalization, and intrinsic value per share. A secondary offering may
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Value investing is an investment approach that focuses on buying stocks, businesses, or other assets for less than their estimated intrinsic value. In fundamental investing, value investors analyze a company’s financial statements, cash flow, earnings power, balance sheet, competitive position, and long-term business quality to estimate what the business is worth. They then compare that
