Glossary

1. Equity rating

   Definition: An equity rating evaluates the probability that the return on equity of an investment exceeds a certain threshold.
   Meaning: This rating helps investors and analysts assess how likely it is that the minimum investment target will be achieved.
   

2. Debt Capital Rating

   Definition: Debt Capital Rating stands for debt capital rating. It evaluates the likelihood of insolvency of an investment, or its ability to service debt obligations.
   Meaning: A better Debt Capital Rating means a lower likelihood of insolvency, thereby reducing risk for investors and lenders.
   

3. Cost of Equity Capital

   Definition: The Cost of Equity Capital is the return that an investor can expect for taking on a particular risk. It is often referred to as the 'cost of equity capital.'
   Meaning: The Cost of Equity Capital serves as a benchmark for investment decisions and for assessing the value of the investment. A lower cost of equity indicates lower risks and therefore higher attractiveness for investors.
   

4. Value at Risk – VaR (99)

   Definition: Value at Risk (VaR) is a risk measure that describes, for a given time interval, the likelihood that a certain loss threshold will not be exceeded, assuming everything else remains the same.
   Meaning: VaR helps investors quantify and assess financial risks by defining the potential loss limit that, with a given level of confidence (e.g., 99%), will not be exceeded.
   

5. Earnings risk

   Definition: Earnings risk refers to the uncertainty regarding the future cash flows of an investment.
   Meaning: Earnings risk is critical to the financial success and valuation of an investment. Higher earnings risks can lead to greater uncertainty and potentially lower company valuations. The calculation is based on cash flow volatility.
   

6. Value-to-price ratio (Capital value rate)

   Definition: The value-to-price ratio (VPR) is a metric that measures the intrinsic or fundamental value of an investment relative to its investment amount. This metric helps investors assess whether an investment is overvalued, undervalued, or fairly valued.

   Meaning:

   • Overvalued: A value-to-price ratio of less than 1 indicates that the market price of the investment is higher than its intrinsic value.

   • Undervalued: A value-to-price ratio of greater than 1 indicates that the intrinsic value of the investment is higher than the current market price.

   • Fairly valued: A value-to-price ratio of about 1 means that the market price and the intrinsic value of the investment are roughly equal, which indicates a fair valuation.

7. Expected total return on capital

   Definition: The expected total return on capital measures the anticipated return relative to the risk taken on by an investment, for the entire capital employed. It is usually expressed as a percentage.
   Meaning: Investors and analysts use this metric to assess the attractiveness of an investment. A high expected total return on capital is an indicator of a profitable investment.