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
Basic Earnings Per Share (Basic EPS) measures the amount of a company’s profit attributable to each weighted-average common share outstanding during a reporting period. A common formula is: Basic EPS is one of the most widely used profitability metrics in fundamental analysis because it converts total company earnings into a per-share figure. That makes it
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Diluted Earnings Per Share (Diluted EPS) measures a company’s earnings per share after accounting for the potential dilution from securities that could become common stock. It provides a more conservative view of per-share profitability than basic EPS because it reflects the effect of potentially dilutive securities such as: A common formula is: For fundamental investors,
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A deferred tax liability (DTL) is a balance-sheet liability that represents taxes a company is expected to pay in future periods because accounting income and taxable income are recognized at different times. Deferred tax liabilities commonly arise when: A deferred tax liability does not necessarily mean the company owes that amount in cash immediately. It
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A deferred tax asset (DTA) is a balance-sheet asset that represents future tax benefits a company may be able to use to reduce taxable income or future tax payments. Deferred tax assets commonly arise when: A deferred tax asset does not represent cash on hand. It represents the potential future tax savings created by temporary
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Intangible assets are non-physical assets that can provide economic value to a business over time. Common examples include: Unlike property, plant, and equipment, intangible assets do not have a physical form. For fundamental investors, intangible assets matter because they can influence a company’s competitive position, reported earnings, book value, acquisition accounting, and return on capital.
Noncontrolling interest (NCI) is the ownership stake in a consolidated subsidiary that belongs to investors other than the controlling parent company. It is the modern accounting term for what was historically called minority interest. For example, if a parent company owns 75% of a subsidiary and outside investors own the remaining 25%, that 25% represents
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Minority interest is the portion of a consolidated subsidiary that is owned by investors other than the parent company. In modern accounting, minority interest is more commonly called noncontrolling interest (NCI). For example, if a parent company owns 80% of a subsidiary and outside investors own the remaining 20%, that 20% represents the minority interest.
Durable earnings are profits a company can sustain over time because they are supported by recurring demand, healthy margins, strong cash generation, and a resilient business model. Durable earnings are different from temporary or unusually high profits caused by: For fundamental investors, durable earnings matter because long-term business value depends more on the quality and
Shareholder value is the economic value created for a company’s owners through growth in the value of their shares, cash distributions, and other benefits attributable to ownership. In fundamental investing, shareholder value is closely tied to a company’s ability to: The key idea is that growth in company size does not automatically equal growth in
Capital allocation is the process of deciding how a company uses its available financial resources to create long-term value. Management can allocate capital in several ways, including: Capital allocation matters because even a highly profitable business can destroy shareholder value if management deploys capital poorly. At its core, capital allocation is about one question: “Where
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