Do you know all you need to know to follow the ups and downs of your favorite stocks? How about the difference between earnings and EBITDA or the role of the NASD? This week’s Jargon Watch reviews some basic investment terminology.
An angel investor is the person, group, or company that provides start-up capital for a new business that is often too small or unproven to attract venture capital funding. This first round of financing is a risky investment because the start-up has no track record—or only an unstable one. The second round of funding is generally an IPO (initial public offering).
VC (venture capitalist)
A VC is a person, group, or company that provides start-up capital for a new business that has good growth potential. The VC often provides help with management or technology advice and usually gets a part ownership in the company of 20—50 percent.
This is the final round of venture capital funding before a company goes public with an IPO, generally within six months to a year. Sometimes this financing, which is also called bridge financing, is set up so that it can be repaid from the monies raised in the IPO.
EDGAR (Electronic Data Gathering, Analysis, and Retrieval)
EDGAR is an electronic system that publicly traded companies use to transmit all documents required by the SEC (Securities and Exchange Commission) for filing. These documents relate to corporate stock offerings and obligations for ongoing disclosure and can be submitted electronically by direct transmission, magnetic tape, or diskette.
Earnings / EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization)
Earnings refers to net income for a company during a specific time period. It generally refers to income after taxes. EBITDA, on the other hand, stands for earnings before interest, taxes, depreciation, and amortization.
NASD (National Association of Securities Dealers)
The NASD is the largest self-regulatory organization of the securities industry in the United States. Its job is to create standards of practice and to enforce ethical and fair behavior. The Securities and Exchange Commission (SEC) oversees The NASD.
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