Below are some of the most used terms and definitions in the world of banking, finance and investment.

Payback period

The length of time required to recover the cost of an investment. The payback period of a given investment or project is an important determinant of whether to undertake the position or project, as longer payback periods are typically not desirable for investment positions. Calculated as: Cost of Project divided to Annual Cash Inflows

Portfolio Manager

The person or persons responsible for investing a mutual, exchange-traded or closed-end fund's assets, implementing its investment strategy and managing the day-to-day portfolio trading.

Price-Earnings Ratio - P/E Ratio

A valuation ratio of a company's current share price compared to its per-share earnings. Calculated as: Market Value per Share is divided by Earnings per Share (EPS)

Price-To-Book Ratio - P/B Ratio

A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. Also known as the "price-equity ratio".

Price-To-Sales Ratio - Price/Sales

A ratio for valuing a stock relative to its own past performance, other companies or the market itself. Price to sales is calculated by dividing a stock's current price by its revenue per share for the trailing 12 months: Share Price is divided to Revenue per Share. The ratio can also be referred to as a stock's "PSR".

Primary Market

A market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors. Also known as "new issue market" (NIM).

Private Equity

Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.

The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company.


  1. To attain possession of something, usually after exerting a substantial effort to do so.
  2. The purchasing of something usually for a company, government or other organization.

Put Option

An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.