Shareholder glossary
AGM
Annual General Meeting (AGM). The standard meeting for shareholders at which routine matters, such as the election of directors, presentations and the approval of year-end reports and accounts are dealt with. Compare with EGM.
Assets
Fixed assets include land, machines and buildings; Current Assets consist of cash, money owed to the company, stock, investments and work in progress; Intangible Assets are goodwill, trade marks, patents, etc; Liquid assets are funds kept in cash or in a form that can be quickly and easily turned into cash.
Authorised Share Capital
The amount of share capital that a limited company is authorised to issue. This does not provide any indication of the worth of the company which is related to its Issued Share Capital and reserves, its net asset value and its profitability.
Base Rate
The reference rate on which commercial banks calculate lending charges to their customers. Most loans are expressed in terms of a percentage over base rate. The greater the perceived Credit Risk of the borrower, the greater the number of percentage points over base rate that will be charged.
Beneficial Owner
The person or persons who have ultimate rights to the value of an investment or property, as distinct from the registered owner who may be a nominee.
Bid Price
The price at which securities in the market may be bought.
Bond
A certificate of debt issued by a company, government, or other institution. A bondholder is a creditor of the issuer and receives interest at a rate stated at the time of issue.
Bonus Issue
Sometimes called a Capitalisation Issue. The issue of new shares to an existing shareholder, but at no extra cost. It is a means for the company to distribute historic retained profits to shareholders. Compare with Rights Issue. See also Scrip Issue.
Capital Gain
Profit made on the sale of shares, commodities, property or land. In the UK, capital gains tax may be payable on the profit.
Capitalisation Issue
See Bonus Issue.
Cash Flow
Measure of the actual cash generated by a business rather than the accounting profit. In the UK, typically Pre-tax Profit plus depreciation, movements in working capital, amortisation and other non-cash charges.
Certificate
The document evidencing ownership of stocks, shares or unit trusts confirming relevant registration details. See also CREST.
Close Period
The period during which directors and other employees deemed to be aware of price-sensitive information, are not permitted to Trade in the shares of the company. For example, usually two months prior to the company’s release of its Interim or Preliminary Results.
Consolidation
Where a company increases the Nominal Value of its shares and reduces the number of shares in issue by consolidating holdings. For example, five 5p shares might be consolidated into one 25p Share.
Corporate Bond
Strictly speaking, corporate bonds are those issued by companies. Generally, however, the term is used to cover all bonds other than those issued by governments in their own currencies. Therefore the ‘credit’ sector, as it is often known, includes issues by companies, organisations and government agencies. The key feature that distinguishes corporate bonds from government bonds is the risk of default – see Credit Risk.
Corporate Governance
The way in which a company ensures that it is attaching maximum importance to the interests of its shareholders and how shareholders can influence management. Governance issues include executive pay levels and how institutional investors use their votes. See also Voting Rights.
Credit Ratings
Also known as bond ratings these are gradings by agencies such as Standard & Poor’s or Moody’s Investors Services to classify the investment worthiness of a company’s debt. See Corporate Bonds.
Credit Risk
The risk that a bond issuer will default on their obligations. A function of the credit quality of the issuer.
CREST
A service which enables the securities of UK registered companies to be held and transferred between members of CREST without the need for paper-based certificates and transfer forms.
Cum Dividend
Cum is the Latin prefix meaning with. A share quoted “cum dividend” carries the right to a recently declared dividend. Cum scrip and cum rights have similar meanings. Compare with Ex dividend.
Current Assets
Assets of a company which can be realised in cash, sold or consumed within one year. Typically the sum of cash, cash equivalents, Receivables, inventories, prepaid expenses and other current assets.
Current Liabilities
Liabilities of a company that the company expects to satisfy within one year. Typically account payable, Short Term Debt, notes payable, taxes payable, Dividends payable and other current liabilities.
Debt/Equity Ratio
A ratio which describes the leverage or Gearing of the company and is calculated as total debt divided by common shareholders’ equity expressed as a percentage. See Gearing
Depreciation
The reduction in the balance sheet value of a company Asset to reflect its loss of value through age and wear and tear.
Dividends
The proportion of a company’s Profit that it pays to its shareholders, usually declared as a dividend per share (DPS). In the UK the dividend is normally paid in two parts; an interim dividend payment and a final dividend once the final results are known. Compare with Earnings.
Dividend Cover
The number of times a company could pay its recently declared dividend out of its profit after tax.
Dividend Yield
The return that the annual Dividend of a Share represents in relation to the current share price. Calculated by dividing the annual Dividend per share by the current Market Price. See Yield.
Earnings
Profit available to ordinary shareholders, after all operating expenses, interest charges, taxes and preference dividends have been deducted. Excludes extraordinary items. Compare with Dividends.
Earnings Per Share (EPS)
A common way of expressing company Profits – dividing the Profits after tax by the number of shares in issue. Earnings Per Share is the basis for the calculation of the Price/Earnings Ratio.
EGM
Extraordinary General Meeting. A meeting of shareholders which may be called to approve special events such as a takeover, or major acquisition. Compare with AGM.
Equity
The voting capital in the company, represented by the Ordinary Shares.
Ex dividend
To clarify who receives the Dividend on a Share that is sold around the time the Dividend is due, a date is fixed when a Share becomes ex-dividend. Anyone buying after this date will not receive the recently declared Dividend. A Share price will normally fall by the amount of the Dividend on the day that it goes ex-dividend.
Flotation
The process of listing a company’s shares on a stock exchange. See also Listing Particulars.
FTSE 250
An arithmetically weighted index of leading UK shares (by market capitalisation) listed on the London Stock Exchange. Updated daily the FTSE 250 Index (or “Footsie”) only covers companies 101 to 350.
Gearing
Used to describe the relationship between debt and Equity and is calculated by dividing the company debt by common shareholders Equity. A highly geared company is one that carries a high proportion of debt. See Debt/Equity Ratio.
Holding Company
A company whose main Assets are shareholdings (usually controlling) in other companies.
Intangible Assets
Describes Assets that do not have a physical, tangible existence. Examples of intangible assets could include goodwill, brand value or patents etc.
Interest Payable
This is the interest that is due to be paid on a company’s borrowings.
Interim Results
Unaudited first half figures that provide an indication of the company’s trading and Profit performance since the last full year accounting period.
Issued Share Capital
The portion of a company’s Authorised Share Capital that has been issued by the company.
Inventories
Also known as stock, this relates to items that have been manufactured or acquired for resale, work not yet completed and raw materials. Appears as a Current Asset on the company balance sheet.
Joint Venture (JV)
Co-operation on a project or business between two or more corporate bodies.
Liabilities
The debts of a company and other financial obligations; the opposite of Assets.
Liquidity
The capability of a market to accommodate supply and demand without unreasonable price changes. Liquidity is a vital requirement for healthy capital markets. Also the proportion of cash or cash equivalents in a company's assets. Sometimes used as a measure of the near term financial health of a company.
Listing Particulars
Detailed information that must be published by a company applying to be listed. See Flotation.
Long Term Debt
All interest-bearing financial obligations which mature in more than a year.
Margins
Profit margin is profit as a percentage of revenue (or turnover). It is calculated before interest charges and tax.
Market Abuse
The Financial Services and Markets Act 2000 introduced a new regime to tackle market abuse. Broadly speaking market abuse is defined within this act as the misuse of information, the giving of false or misleading impressions and market distortion. This sits alongside the insider legislation of the Criminal Justice Act 1993 (Part V).
Market Price
The price at which a share can currently be Traded in the market.
Market Capitalisation
The total value of a company as determined by the Market Price per Share multiplied by the number of Shares in issue.
Net Income
Income (Profit) shown after all operating and non-operating income and expenses, income taxes, minority interest and extraordinary items but before preference and ordinary Dividends.
New Issue
New shares issued by companies to raise additional cash. The new shares are offered to existing shareholders, through a Rights Issue or to a wider audience, through a Placing.
Nominal Value
Sometimes known as par value, this is the face value of a security as opposed to its market value. In the case of a Bond it represents the principal sum due on redemption.
Nominal Return
Return of an investment without taking account of inflation. Thus, the nominal return on a bond might be 8 percent, but if inflation is running at 3 percent, the real return is only 5 percent. Compare with Real Return.
Nominee
Shares or investments need not be registered in the name of their Beneficial Owner. They may be registered under the name of a nominee, a practice often used to ease the administration of holding, buying and selling shares on behalf of clients.
Offer Price
The price at which securities may be sold in the market.
Operating Profit
The difference between revenue (or turnover) and the costs incurred during operations (total operating expenses), ie before interest and tax are taken into account.
Option
The right (but not the obligation) to buy or sell securities at a given price (exercise or strike price) before a given date (expiry date).
Ordinary Shares
Securities which represent an ownership interest in a company.
Placing
Raising money by issuing new shares and 'placing' them, generally in substantial amounts, with major investors who have agreed to purchase the shares. Shares are not offered to the general public.
Preliminary Results (Prelims)
The first release of a company’s results for the financial year to the stock exchange. Also known as preliminary announcement.
Pre-tax Profit
All income (or loss) before tax. See Profit.
Price/Earnings Ratio
A ratio used to value a company’s shares. It is calculated by dividing the current Market Price per share by the Earnings Per Share.
Profit
The surplus of revenue generated over expenses incurred for a particular accounting period. Operating Profit refers to the profit generated before interest and tax have been taken into account.
Proxy
A written authorisation given by a shareholder to someone else to vote on his behalf at a company’s annual general meeting (AGM) or special meeting (EGM).
Real Return
Return adjusted to take account of inflation. Compare with Nominal Return.
Receivables
A Current Asset that represents amounts due to the company from the sale of goods and services on credit.
Redemption
The repayment of the principal sum outstanding on a Bond. The date on which this occurs is the redemption date.
Retail Price Index (RPI)
A broad basket of goods/services whose price is calculated monthly and which provides a broad measure of the level of inflation.
Return on Assets
Ratio which measures the return a company generates from its total Assets.
Rights issue
When existing shareholders are given rights to purchase new shares in proportion to their existing holding. Compare with Bonus Issue.
Security
A generic term for a financial asset such as a Bond or Equity (Share).
Settlement
The completion of a purchase or sale of bonds or shares. The moment when the cash is delivered to the seller and the stock is delivered to the buyer. Settlement in the UK equity markets takes place 5 working days after the date of the original bargain or Trade.
Settlement Date
The date on which Settlement takes place. Compare with Trade Date.
Share
A stake in a company which confers ownership rights on the holder. Shares are also known as Equities.
Short Term Debt
The portion of debt that is payable within one year. Falls under Current Liabilities on the company balance sheet.
Stamp Duty
An ad valorem duty, currently 0.5%, on purchases and certain transfers of UK shares. Levied by the government and payable by the buyer only.
Tangible Fixed Assets
Tangible fixed assets represents property, plant and equipment, after the deduction of depreciation. Compare with Intangible Assets.
Trade
A binding agreement to buy or sell securities. Also known as a deal or a bargain.
Trade Date
The date on which a trade takes place. Compare with Settlement Date.
Voting Rights
Ordinary Shares usually have associated voting rights that enable the holder to influence the management of the company. See also Corporate Governance.
Yield
The Rate of return gained on an investment. It also refers to the dividend payable on a Share (and is expressed as a percentage of the market price). See Dividend Yield.