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Date: Tuesday 13th 2008f May 2008 08:54:28 AM

Glossary
 

V
 

Valuation :  The process of determining the worth of an asset.

Our take: Investor's task is to apply valuation technique to an asset and buy an asset that is undervalued relative to its worth.

 

Value Added: The enhancement of a company gives to its products or services.

Our take: Offering a one year warranty to a product is one way to offer value added service
 

Value Fund: A mutual fund that primarily holds value stocks, which is perceived to be undervalued.
Our take: For value fund, they will invest in stocks spotting  a low P/E ratio and/or a low P/BV ratio.
 

Value Investing: Investing style of selecting stocks that trade less than their fair value.
Our take: For the most part, value investing will pick stocks deemed to be undervalued by buying it at a low P/E ratio and P/BV ratio, among others.
 
Value Stock: Stock that trades at a lower valuation compared to its fundamentals.
Our take: Contrast to growth stock, value stock generally spots lower than average earning growth, which results in its lower valuation.
 
Value Trap: A stock that is deemed to be undervalued but yet continues to drop in price as the business worsened.
Our take: Generally, when a company shows the first sign of trouble, it is not the last. Some investors will buy right after the initial sell off, which may not be the bottom. As a result, what is perceived as value, continues as value trap.
 
Value Added Tax: Tax that is placed on a product as value being added at each stage of production/ distribution.
Our take: In the US, value added tax ranges depending on which state you live in.
 
Variable Cost: Cost that changes in proportion to the change in unit product produced.
Our take: Raw material is an example of variable cost for a manufacturing company. As more products are lined up, more raw material is used in proportion to the increase in production.
 
Variable Interest Rate: Interest rate that moves up and down depending on interest rate from the central bank.
Our take: If we apply for a loan with variable interest rate, when interest rate goes up, our monthly payment will rise as well and vice versa.
 
Velocity of Money: The term describing the rate of which money is exchanged.
Our take: Higher velocity of money indicates the strength of an economy
 
Vendor Financing: The practice of lending money to a firm's customers in order to boost sales.
Our take: Vendor financing can boost short term revenue while in the long run, there is a bloated inventory down the distribution chain.
 
Venture Capital: Financing of a new businesses done by a handful of experienced investors. Venture capitalist generally take an equity stake in the company they invest on.
Our take: Venture capital funding is essential for tiny company that does not have access to the capital market. For investors themselves, venture capital funding is a very risky investment bet albeit with a high potential return.
 
Venture Capitalist: Investors that invest in a small startup where access to the capital market is limited.
Our take: Venture capitalist generally takes an equity stake in the company they invest on. The nature of the investment is a high risk high reward opportunity.
 
Vertical Integration: When a company decides to expand into a business along its production path.
Our take: For example, a restaurant is buying a flour mill.
 
Vertical Merger: A merger between companies that are on the same path of production path.
Our take: For example, a merger between a steel company and a car company. Steel is needed in the production of automobile.
 
Volatility: A measure of the fluctuation of a security
Our take: A security that fluctuate a lot can be said to have a higher volatility. .
 
Volume: The number of shares traded over a specific time frame.
Our take: In technical analysis, volume is used to identify the strength of a trend.
 
Voodoo Accounting: Any types of accounting that does not follow GAAP and is not using conservative estimate
Our take: Many companies can apply voodoo accounting to temporarily boost short term result.
 
Voting Right: The right of a stockholder to vote on certain corporate policies
Our take: There are several companies with dual structure of ownership. In this condition, insiders generally has a larger voting right that the number of shares it owns. Example of this type of company is: Google (GOOG), Dow Jones (DJ).
 

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