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Financial Glossary

As you make your way towards becoming more financially astute, you are bound to come across unfamiliar terms and the City jargon which is the language of the financial world. It is important to develop a full understanding of the key terms you will encounter as an investor, so we have put together a comprehensive glossary to help you on your way. The glossary covers the most common and most important financial words, abbreviations, and phrases. Print a copy of this page and keep it handy as you flip through the financial section of your daily newspaper, search investment websites, or make your way through company reports. If you can think of any key terms which we have neglected, please send an email to info@proshareclubs.co.uk and we will be happy to encorporate your suggestion into our next release.

Alternative Investment Market (AIM) A junior market compared with the main London Stock Exchange with less onerous listing requirements so it tends to attract smaller companies that have been trading for a short period of time.

Acquisitions Purchase of a business or a business line from another entity.

Bid Price The price at which a market maker will sell a security.

Broker Recommendation A stockbroker's opinion of the investment quality of a company's shares at the time that it's reviewed in comparison to other stocks in the sector.

Bulletin Board A place on a website where private investors can post comments and questions.

Creditors People to whom the company owes something, usually cash or a claim to services.

Called up Share Capital Nominal value of shares of the company that are issued and fully paid.

Debtors People who owe the company something, usually cash or a claim to services.

Disposals Sale of a business or business line to another entity.

Dividends A payment made to shareholders by companies out of profits.

Dividend per share growth The percentage change from the previous year in the dividend paid on each share.

Dividend Payment Date The date on which the most recent dividend will be paid to shareholders.

Dividend Yield A measure of the income you will get from owning a share and is calculated by dividing the annual dividend per share by the current share price.

Dividend cover A company's ability to pay ordinary dividends to shareholders out of profits earned and is calculated by dividing the basic Earnings Per Share (EPS) by the total dividend per share.

Director Dealings When directors buy or sell shares in their company.

Earnings Per Share A company's profitability expressed on a per share basis and calculated by dividing the company's annual earnings after tax by the number of shares in issue.

Ex-Dividend Date The date at which a new shareholder is no longer entitled to the most recent dividend payment.

Gearing Companies are financed by a combination of debt and shareholders equity. A gearing ratio will tell how much a company has borrowed in relation to the amount of shareholders funds in the business.

General Meetings A meeting of the shareholders of a company usually held on an annual basis - commonly known as an AGM - at which business such as the reception of the directors' report and accounts, declaration of dividends, election of directors is held. If something happens within the company that requires the shareholders to meet before the next scheduled AGM, then an extraordinary general meeting is held, commonly known as an EGM.

Gross gearing Calculated by dividing gross borrowings by shareholder funds

High/low price The highest and lowest prices for a security traded throughout the day.

Interest Monies charged by a bank or other financial organisation for borrowing money.

IPO Initial Public Offering, the term used for any company joining the stock market. It is a way for companies to raise cash and increase and diversify the current shareholder base.

Indices The stock exchange's own groupings of companies. May be grouped by market cap (FTSE 100), business type (Techmark) or some other parameter.

Intangible Assets A company's long-term assets that are usually non-physical in nature, but represent a right or expected future benefit. Examples are goodwill, brands and trademarks.

Investment Trusts a collective fund in the form of a listed company holding a portfolio of securities on behalf of its own shareholders. An investment trust and its shares are tradable in the same way as other companies and shares.

Market Capitalisation The market value of a company, calculated by multiplying the current share price by the number of shares in issue.

Net Assets The total figure for all assets less all liabilities.

Net Asset Value The value of the shareholders interest in a company, calculated by subtracting liabilities from assets

Net Gearing Calculated by dividing net borrowings by shareholder funds.

Offer Price The price at which a market maker will buy a security.

Official List The UK Listing Authority's list of all listed securities.

Operating Margin This shows the profit before interest and tax as a percentage of turnover and is calculated dividing turnover by the operating profit.

Operating Profit/Loss A company's profit after deducting operating costs from gross profits.

Preliminary Results Listed companies have to announce the annual financial results for the company, also know as prelims or finals. They are considered preliminary until they are reviewed, adjusted and approved by audit. They also have to announce interim results and some companies also announce quarterly figures.

Portfolio A collection of securities owned by an investor.

Post-Tax Profit A company's profit after tax has been deducted.

Profit Warning When a listed company expects profits to fall below analysts' forecasts by more then 10%, the directors are required to issue a profit warning through the London Stock Exchange.

Pre-tax Profit A company's operating profit before tax is deducted.

Pre-Tax Profit per share A company's profit after expenses but before tax divided by the number of shares in issue.

Price Earnings Ratio A measure of how a share price is valued in relation to a company's earnings and is calculated by dividing the company's share price by its earnings per share.

Price Earnings Growth Expressed as the percentage change from the previous reporting period of the Price Earnings ratio.

Reserves Can arise from the retention of profits or from events such as the issue of shares at a premium or the revaluation of assets.

Regulatory News Service The means by which UK listed companies make announcements to the London Stock Exchange.

RiskGrade Helps investors measure and compare the risk of financial investments to other companies at the same point in time.

Sales per share The sales per share ratio is used to evaluate a company's business activity compared to its share price.

Sectors Grouping of companies having similar products or services.

Share Premium Account Surplus of proceeds from share issue over the nominal value of shares issued.

Shareholder Funds The sum of all company assets less all liabilities.

Shares The certificate of ownership of a proportional amount of a company. Several different classes of shares are available (preferred, ordinary, etc).

Spread The difference between the buying and the selling price of an investment.

Stock Exchange The marketplace where buyers and sellers of a company's shares meet to make their trades.

Stocks The combined value of raw materials, work in progress or under construction and finished goods held.

Tangible Assets Physical assets owned by a company or individual that can be seen or touched such as buildings, goods for sale or machinery.

Total Assets The sum of all company assets; both fixed and current.

Trading Statement A statement made by a company regarding current business activities and sales experiences.

Turnover Also known as sales, the amount derived from the provision of goods and services falling within a company's normal activities after the deduction of trade discounts, VAT, etc.

Volume The number of shares traded over a given time period, usually one day.




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