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Today Bryce and Alec revisit some of our favourite jargon and define these common terms.
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Bryce: [00:00:20] And now we're going to look at some of the key terms that you'll come across when you're doing some in-depth, well thought research on companies. And this is probably there's so many that we can discuss here, Ren. And they're used in many, many different strategies. And I guess it's up to you to decide which ones are important for you. So we're going to go through some of I guess, the more general ones that you will see when you're, I guess, looking at your information that's in front of you for your stock. So let's kick it off. Ren, what do we got?
Alec: [00:00:55] Let's do it. So probably the most important one to understand is market cap or market capitalisation. Now, this essentially is what the market has decided the company is worth. So when Apple's market cap reached $1,000,000,000,000, the market was saying that as a whole company, Apple was worth $1,000,000,000,000. Now, the way that you calculate market cap is the number of shares available in the market times by the share price. So very simply, if Equity Mates Investing podcast has a thousand shares on the market and each is trading at $100, then the market cap of Equity Mates is $100,000.
Bryce: [00:01:46] Nice. So does the market cap change.
Alec: [00:01:50] Changes all the time. Changes every second like the share price changes every second. The markets open.
Bryce: [00:01:56] Yes. Changes when the share price changes.
Alec: [00:01:58] Another one to keep in mind more generally is price to earnings. Now, we've probably touched on this before, but it's essentially what we were saying before about the earnings that you get from a company. You know, the hypothetical company that we paid $10 a share for and it got $5 in earnings. The ratio there is two. So for, you know, you paid two times the company's earnings in the share price and you see this ratio a lot. And it's a really simple way for people to sort of say, is the company cheap or expensive? Generally in Australia sort of 15 to 20 is around the average for price to earnings. So if you're paying, you know, $15 a share, you would expect $1 of earnings. Anything more than that might be a little bit expensive and anything below that, it might be a little bit cheap. But in America, it fluctuates wildly. You know, Amazon for a while had a price to earnings of 200 or plus and it just kept growing. So it's just a simple ratio that you will see a lot and you'll see spoken about a lot. And it generally is just an indicator of how expensive or cheap a company is.
Bryce: [00:03:17] If you enjoyed
