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Price floor |
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Price floorA government-imposed lower limit on the price that may be charged for a product. If that limit is binding, it implies a situation of excess supply, which the government may need to purchase itself to keep price from falling.Similar MatchesMarket price of riskMarket price of riskA measure of the extra return, or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio. Price earnings ratio (P/E ratio)Price earnings ratio (P/E ratio)P/E = current share price of a company divided by its earnings per shareA company with a share price of 100p and earnings per share (EPS) of 5p has a P/E ratio of 100/5 = 20.A company's P/E (also known as its multiple) shows how high its shares are priced in relation to its historical earnings. Although mathematically, it relates share price to past performance, the reality is that P/Es are more about forward expectations than the past. A high P/E indicates that the City expects the company's earnings to grow fast in the future.P/E 're-ratings' by the City can have a dramatic effect on share price. If a company regarded as a growth stock announces sharply reduced trading figures, fund managers may revise their view of the company, and decide that it doesn't justify a growth stock P/E of 20, and can only justify a more normal P/E of, say 12. If earnings were 10p share, that re-rating would suggest a change in share price from 200p to 120p.Equally, if a company announces some major technical breakthrough, or a major contract, the City may decide that its future earnings potential justifies a growth P/E, and re-rate it upwards from 12 to 20 (or equivalent figures). In which case the share price will leap.There is nothing formal about this re-rating procedure. It is simply buyers in the market pushing up the price to reflect a new perception of a company. But P/Es do tend to be comparative, in that companies in the same sector with similar prospects would normally have similar P/Es. If they don't, there is invariably a reason accounting for the difference. Target priceTarget priceIn the context of takeovers, the price at which an acquirer aims to buy a target firm. In the context of options, the price of the underlying security at which an option will become in the money. In the context of stocks, the price that an investor hopes a stock will reach in a certain time period. Price elasticPrice elasticHaving a price elasticity greater than one (in absolute value). Supply priceSupply priceThe price at which a given quantity is supplied; the supply curve viewed from the perspective of price as a function of quantity. Further SuggestionsDepressed priceCall price Realistic on price Earnings price ratio Retail Price Index Strike price Public offering price Reservation price average price Iso-price curve Factor price "Customer picking prices" Price impact costs Reference price World price Sell price subscription price limit price Price leadership offer price Price support Factor price equalization Variable price security Minimum import price Trading price |
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