Investability Quotient - IQ

Categories: Investing

When you take an IQ test, you fill in some little bubbles with a number-two pencil, showing off your vocabulary and your ability to notice patterns in various shapes.

Stocks, on the other hand, don't really have to worry about analogies and pattern recognition. Instead, they get tested for a different kind of IQ...Investability Quotient. It's a measure created by the ratings firm Standard & Poor's. Just as your IQ test tries to predict how well you'll do in life by measuring your intelligence, S&P's version of IQ looks to anticipate a stock's investment prospects.

The IQ figure attempts to quantify a stock's potential upside and the risks associated with betting money on the shares. S&P then boils down this information into a single number, ranging from zero to 250 (zero being a bad score and 250 being the best possible).

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Finance: What is Liquidity?64 Views

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Finance a la shmoop what is liquidity all right liquidity is

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not this but liquidity is this alright liquidity or being liquid is the ability [A pool of water]

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to pay for things with cash and in some parts of the world

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moose pelts most pelts get your moose belt here five for a dollar you might own 4,000 acres of [Man wearing a hat stood by his land]

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land in Alaska most your neighbors are well

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moose but when you go into your local Ford dealer to buy a Ford f-150 with the

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pimped-out tires and the intentionally off-road package the dealer wants to be [Man purchasing a Ford F150]

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paid in cash not in Moose pelts. if you sold those pelts for cash and then paid

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him and then you'd be liquid like the rest of the moose well in the real world [A table full of moose juice]

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liquid things are stuff like stocks and publicly traded bonds and anything you

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can find on eBay that'll turn into cash in less than a week or so original [Website showing Barbie doll and car for sale]

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edition of Avengers comic yeah the one where Iron Man and Captain America share

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their first kiss and that that one's as good as sold now on the flip side of the [Coin flipped]

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coin long term investments like funding two kids in a garage who are building a

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search algorithm with likely 10 years or more before an IPO [Kids using a computer in a garage]

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yeah those investments are highly illiquid as in the opposite of cash

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immediately on hand because there are rarely any other buyers of the private [Man playing the piano to a crowd]

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company shares you bought when you invested in them at least not buyers for

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a long illiquid time meaning that most people simply won't give you cash for

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shares in a company with no profits little don't know revenues or even no [Graph of profits and revenue for a company]

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website. So is your home liquid? err not so much but you can borrow against

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it liquidly in other words sometimes

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illiquid things can allow you to have liquidity you know like if you have a [Man stood by a home holding a mortgage paper]

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mortgage of say a hundred grand on a home that's probably worth well over

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half a million bucks then any bank will most likely let you borrow a couple

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hundred grand pretty much at any time you want [Man borrowing home owner more money]

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if you pledged the home as collateral in other words if you don't pay the bank

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back they're going to start parking in your garage and pickin out drapes for [Car reversing into garage]

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the living room as they repossess it to pay off the money you borrowed from them [Bank man repossessing the home]

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promising to pay it back well fortunately this isn't a chemistry course so

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there's no need to learn about the solidity and gas-idity[Examples of solids and gas]

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Find other enlightening terms in Shmoop Finance Genius Bar(f)