Preferred Stock
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Capital stock with a claim on company earnings and assets that takes precedence over the claims of common stock in the event of the company's liquidation. Preferred stock often pays a regular dividend, which is also paid prior to any dividend payments to common stockholders. Preferred stock usually does not carry voting rights.
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Pretax Income
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Earnings before income tax is subtracted.
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Price/Earnings Ratio (P/E Ratio)
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A common measure for identifying undervalued and overvalued stock. It uses the relationship between a company's earnings and share price to value a company's stock. The P/E ratio is calculated by dividing the current market price per share by the earnings per share. A stock's P/E ratio gives you a sense of what you are paying for a stock in relation to its earning power (e.g., a stock with a P/E of 20 is trading at 20 times its earnings). If a company's market price is $40 and the earnings per share is $4, the P/E ratio for the company is 10.
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Price to Book Ratio
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A ratio calculated by dividing a company's total market capitalization by its book value.
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Pricing Pressure
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Condition resulting when, in response to the competitive nature of the market, companies must reduce the prices of their products or services. This can reduce earnings.
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Prime Rate
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In theory, the interest rate banks charge their best and biggest customers for short-term loans. In practice, banks sometimes vary the rate they offer, depending on other factors such as the customer's creditworthiness.
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Pro Forma (PF) Financial Statements
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Hypothetical financial statements based on a projected or recently completed transaction, such as a merger.
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Publicly Traded Company
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A company whose securities can be bought and sold by the general public.
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