Series 16 key terms

A written or electronic communication that analyzes a security or an issuer and gives investors enough information to base an investment decision on it; FINRA rules impose added requirements on these documents.

An associated person who is primarily responsible for preparing the substance of a research report, including the rating, price target, or recommendation it contains.

Internal policies and procedures that separate research staff from investment banking and other business units so that published views are not shaped by pressure to win or support banking business.

Review of a draft research report by compliance, legal, or investment banking staff before it is published, limited to checking factual accuracy, conflicts, and legal issues rather than the analyst's opinions.

The requirement that an analyst have adequate factual support and sound reasoning behind a rating, price target, or forecast before publishing it in a research report.

A live or recorded appearance by an analyst, such as a television, radio, webcast, or seminar presentation, that discusses securities and is treated under FINRA communication rules like published research.

A report prepared by someone other than the distributing member firm, such as an independent research provider; the firm must disclose the source and any compensation it paid or received.

The accounting rules that determine when a company records revenue from a sale, generally when a promised good or service is transferred to the customer for the amount expected to be collected.

Money a company has been paid or has billed for goods or services not yet delivered; it is reported as a liability on the balance sheet and becomes revenue in later periods.

Current assets minus current liabilities; it measures the cash a business has tied up in day-to-day operations and its ability to meet near-term obligations.

The degree to which a company's profits rise or fall faster than sales because a large share of its costs, such as plant and overhead, are fixed rather than variable.

Cash from operations minus capital expenditures, showing the cash a company generates after maintaining and expanding its asset base, available for debt repayment, dividends, buybacks, or reinvestment.

A write-down taken when the recorded value of an acquired business falls below its carrying amount on the balance sheet, signaling that the company overpaid or the business has deteriorated.

Adjusted profit figures that exclude items management calls unusual, such as restructuring or acquisition costs; analysts must examine what was removed because such adjustments can flatter results.

An assessment of how much reported profit comes from sustainable, cash-generating operations rather than one-time gains, accounting choices, or aggressive management estimates.

A valuation method that projects a company's future free cash flows and discounts them to present value at a rate reflecting risk, producing an estimate of intrinsic worth.

The blended after-tax cost of a company's debt and equity, weighted by their share of the capital structure; it is the discount rate most often used in a discounted cash flow model.

The estimated value of a business beyond the explicit forecast period in a DCF model, usually calculated with a perpetuity growth rate or an exit multiple applied to final-year cash flow.

A company's total value to all capital providers: market value of equity plus debt and preferred stock, minus cash; it allows comparison of companies with different debt levels.

A relative valuation technique that applies multiples, such as price-to-earnings or EV/EBITDA, observed at publicly traded peers to the subject company's metrics to estimate value.

A valuation approach that uses multiples paid in past mergers and acquisitions of similar companies; results are often higher than trading comparables because buyers pay a control premium.

A valuation method that values each business segment of a diversified company separately using the most suitable technique for each, then adds the pieces to reach total value.

A ratio that expresses a company's value relative to a financial metric, such as price-to-earnings or EV/EBITDA, used to compare companies and to convert forecasts into a value estimate.

An analyst's forecast of a company's earnings per share for a future period, built from projections of revenue, margins, share count, and other income statement line items.

The average or median of published analysts' forecasts for a company's earnings or another metric; reported results are commonly judged against it when a company releases financials.

The price an analyst expects a stock to reach within a stated horizon, typically twelve months, based on the valuation method explained in the research report.

A firm's standardized label, such as Buy, Hold, or Sell, that summarizes an analyst's recommendation on a security and is usually tied to an expected total return range.

A summary showing how many of a firm's outstanding ratings fall into each category, disclosed so clients can judge whether the ratings are skewed toward positive views.

The gap between reported earnings and the consensus estimate, often stated as a percentage, which frequently causes sharp short-term moves in a stock's price.

FINRA's main rule for equity research analysts and research reports; it governs how research interacts with investment banking, personal trading, retaliation, and prepublication review.

FINRA's rule for debt research reports and debt analysts, which imposes somewhat different restrictions than the equity research rules, particularly for reports provided only to institutional investors.

SEC rule requiring analysts to certify in each research report that the views expressed are their own and that no part of their compensation was tied to specific recommendations.

The signed statement in a research report, required by Regulation AC, confirming that the analyst's expressed views are accurate and disclosing whether pay relates to the recommendation.

A set period after an initial public offering or other securities offering during which the underwriting firm and its analysts are restricted from publishing research on the issuer.

A contractual period, commonly 180 days after an IPO, during which insiders and pre-IPO shareholders agree not to sell shares without the underwriter's consent.

Required statements in a research report about ownership, investment banking relationships, market making, compensation, and other interests that could bias the recommendation.

Rule 2241 protection that bars a firm from punishing, threatening, or otherwise retaliating against an analyst because a report or rating is negative or unfavorable to a banking client.

Limits on when analysts may trade securities they cover or hold positions ahead of publishing a report, designed to prevent front-running clients and misuse of unpublished research.