Glossary of Investment Terms

Rate Base (Electric Utility Industries)—usually the net original cost of plant and equipment; in some instances, including an allowance for cash, working capital, materials, and supplies.

Real—in the context of economic activity, a measure that excludes the effects of inflation. Real Gross National Product, for example, is a measure of the nation's output of goods and services, adjusted for inflation.

Real Estate Investment Trust(REIT)—a financial intermediary that invests its equity capital and debt in income-producing real estate and mortgages. Under legislation passed in 1961, REITs were granted conduit tax treatment (the same as that permitted mutual funds) under which the part of earnings which flows through to shareholders in the form of dividends is exempt from Federal income taxes at the trust (or corporate) level, provided several conditions are met. Among the conditions for qualification as a REIT under the Internal Revenue Code: At least 95% of otherwise taxable income must be distributed to shareholders in the calendar year earned, and specified percentages of both investments and gross income must be related to real estate.

Realized Gain or Loss—profit or loss on the sale of an asset.

Receivables—the value of goods and services sold and shipped to customers, but for which the company has yet to be paid.

Receivables (Financial Services Industry)—the amount of money owed to finance companies by customers at year end, net of unearned discount (the charges to the borrower) and loss reserves.

Relative Price-Earnings (P/E) Ratio—the stock's current P/E divided by the median P/E for all stocks under Value Line review. (See also Price Earnings Ratio.)

Relative Strength Price Line—a representation shown in the price chart on each Value Line page as a series of dots. The line compares the price of a stock with the price of an index (in this case the Value Line Arithmetic Composite) over time. When the line is rising, the stock is acting better than the broad index. When it is falling, the stock is acting worse than the index.

Reserve Life (Natural Gas [Diversified] and Petroleum Industries)—a company's reserves of oil, gas, or other natural resources divided by annual production.

Reserve Replacement Ratio (Natural Gas and Petroleum Industries)—the ratio of reserve additions to production. Reserve replacement is calculated by summing the total reserves added over a five-year period. The ratio is calculated by dividing replacement by production over the same period.

Retail Sales—a monthly measure of all U.S. retail activity, published by the Commerce Department.

Retained Earnings—net profit for the year, less all common and preferred dividends, when relating to the income account. With respect to the balance sheet or common equity, it is the sum of net profit in all years of the company's existence less all dividends (common and preferred) ever paid. In this case, also known as earnings retained or earned surplus.

Retained to Common Equity—net profit less all common and preferred dividends divided by common equity including intangible assets, expressed as a percentage. Also known as the Plowback Ratio.

Return on Shareholders' Equity—annual net profit divided by year-end shareholders' equity

Return on Total Capital—annual net profit plus 1/2 of annual long-term interest divided by the total of shareholders' equity and long-term debt

Revenue—see Sales.

Revenue Passenger Miles (Air Transport Industry)—a measure of airline traffic. Each revenue passenger mile represents one revenue-paying passenger flown one mile.

Revenues (Banks)—this figure has not been used by most banks in the past. However, the combination of net interest income and non-interest income will provide investors with a close approximation.

Revenues (Electric Utility, Natural Gas [Distribution], Telecommunications Industries)—the amounts billed for services rendered.

Revenues (Real Estate Industry)—the total of rental, construction, and interest income and property sales.

Revenues Per Share—gross revenues for the year divided by the number of common shares outstanding at year end.