Glossary of Financial Terms and Abbreviations

Advances, debtors
AIM
Annual General Meeting (AGM)
Annual Report & Accounts
APCIMS (Association of Private Client Stockbrokers and Investment Managers)
AR
Associated Companies

Balance Sheet
Bear
Bid Price
Blue Chip
Bull

Capital Employed
Cash
Cash Flow Statement
Cash, securities
Charts (Chartism)
Commission
Contingent Liabilities
Corporate Governance
Creative Accounting
Creditors, short
Creditors, long
Creditors
Contract Note
cum
Current Assets
Current Liabilities

Debtors
Debtors, others
div per share
dividend
dividend cover

Earnings Per Share (eps)
Equity
ex
Execution Only Stockbrokers

FAST Share
Fixed assets
Fixed investments
FRS3
FRS3 earn per share
FTSE
FTSE Index
Fundamental Analysis
Fund Manager

Gearing
Gilt-Edged Securities
Gross
Growth Companies

Horizontal Ratio Analysis

Index
Intangible Assets (intangibles)
Interims (int)
Investment Clubs
Investment Trust

Liquidity
Liquid assets, cash
Loans
Long term ins funds

Mkt cap / Market capitalisation
Market Maker
Merger
Mid Price
Minority Interest

Net
No. Emp
Norm earn per share

OFEX
Offer Price
Ord cap, reserves
Ordinary Shares
Other ins funds

Par Value
Patient Money
PEG Factor
Penny Share
Personal Equity Plans (PEP’s)
Portfolio
Preference Shares
Prefs, minorities
Prelim/Preliminary Statement
Pre tax profit
PROSHARE
Prospectus
Provisions

Recommendations
Relative Strength
Rem
Rights Issue
ROCE

Scrip Issues (Bonus Issues)
Securities
Shareholder Funds
Short term assets
Spread
Stamp Duty
Status
Stocks
Subordinated loans
Subsidiary Company

Tangible Assets
Technical Analysis
Tipsheet
Total Return
Tracker Funds
Turnover

UK GAAP
Unit Trust

Warrant

Yield

Advances, debtors
This is the Banking equivalent of stocks, being the money advanced to customers as financial loans or equivalent.

AIM
The Alternative Investment Market, an official Stock Exchange market for investors seeking investment opportunities in smaller, and usually, higher risk entities.

Annual General Meeting (AGM)
The meeting of shareholders held to approve the accounts and to re-appoint directors’ and auditors. Normally held 21 days after publication of the annual report. It must be held within 18 months of the previous AGM. A meeting that should be attended by shareholders as an opportunity to question directors’ on business and performance prospects and results.

Annual Report & Accounts
The directors’ report to shareholders setting out, in both text and financial terms, details of the company’s performance during the past year and the state of its finances and assets as at the latest reporting date, the Balance Sheet date.

APCIMS (Association of Private Client Stockbrokers and Investment Managers)
The official body of Stockbrokers and fund managers specialising in the provision of investment services for private clients.

AR
Annual Report & Accounts

Associated Companies
Where the company has an interest in another company that represents more than 20%, but less than a majority, of the voting rights in that company’s share capital, then this is deemed to be an investment in an “Associated Company” and the profits of the investment are consolidated into the results of the investment holding company. Under a 20% interest only dividends received will feature in the holding company’s accounts. Over a 50% interest, the investment is deemed to be a subsidiary company and its results and net assets will be fully consolidated in the holding company’s own accounts

Balance Sheet
The statement featured in the Annual Accounts that indicates the value of the company’s assets and liabilities as at the end of its financial period (the Balance Sheet date) and the ways that these have been financed through external debt, internal profit generation and funds raised from the issuing of share capital.

Bear
An investor who is negative towards shares, believing prices will fall. A Bear market is one where share prices across the entire market are generally, and consistently, falling.

Bid Price
The price the market maker will pay you for your shares when you sell (see Spread).

Blue Chip
The term used to define a company regarded as being a solid, and consequently safe, investment. The company will almost certainly be large, well established and profitable, but be conservatively managed.

Bull
An investor who is positive towards shares, believing prices will rise. A Bull market is one where share prices across the entire market are generally, and consistently, rising.

Capital Employed
The funds employed by the company in its activities. This represents the value, in the Balance Sheet, of the company’s share capital, reserves and debt. It can be expressed either before or after intangible assets, dependent upon the circumstances and requirement.

Cash
In a P&L Balance Sheet context applicable to insurance companies only, this is the aggregate of cash balances for the company AND its insurance funds.

Cash Flow Statement
The statement in the Annual Accounts that indicates, for the financial period, the sources of all cash, both from operations and from external sources of finance, and how this has been used for trading, capital preservation, investment and taxation purposes.

Cash, securities
The value of all liquid assets employed in the business, either as ready cash or invested in short term securities and readily convertible into cash.

Charts (Chartism)
Graphs of share and market (index) performance used to determine relative trends and, based on historic movements, identify likely future moves. The key aspect of Technical Analysis.

Commission
The charge made by your stockbroker for conducting your buy or sell instructions. This may either be a percentage of the value involved or, for small deals below a stated and agreed value, a fixed rate.

Contingent Liabilities
Potential liabilities that the company MAY face in the future if certain circumstances should arise. Indicated in the Notes to the Accounts it will include, for example, the likely costs arising from guarantees given to third parties.

Corporate Governance
The term used, following recent Government sponsored reports, to describe the policies and procedures that the company’s directors’ employ in their conduct of the company’s affairs, and their relationships with shareholders to whom they are responsible as managers of the shareholders interests in the company, and of its assets

Creative Accounting
The term used to indicate accounting and financial reporting practices which, whilst not illegal, are intended to convey a circumstance or position that is either misleading or illusory, creating a position of profitability or soundness that may not be totally valid.

Creditors, short
This is all current liabilities payable on demand or within one year of the Balance Sheet date.
For Banks this also includes short term bank liabilities such as deposits.

Creditors, long
This is all liabilities payable more than one year after the Balance Sheet date. This includes provisions and deferred taxation, loans and debt, including convertible debt, repayable more than one year after the Balance Sheet date.

Creditors
Applicable to insurance companies only this is the aggregate sum of all short term liabilities of the company AND its insurance funds.

Contract Note
The record the investor receives from his stockbroker confirming the terms of the deal that the stockbroker has undertaken on their behalf.

cum
When appended to the share price, this means “including”. Thus a share price quoted cum dividend (or cum div.), means that you will receive the next, and announced, dividend if you buy the shares.

Current Assets
The value of the assets held at the Balance Sheet date that are represented by cash, or can be expected to be converted into cash within the next 12 months.

Current Liabilities
The value of those liabilities at the Balance sheet date that the company is required to settle (pay) either on demand, or within the next 12 months.

Debtors
Amounts owing to the company, including the value of sales made under credit, where settlement from the customer is still awaited.

Debtors, others
Insurance companies only . This is the aggregate of all short term sums due to the company and its insurance funds.

div per share
Dividends are regarded as a crucial investment measure. It is the declared net dividend per share payable to registered shareholders for the financial period. This is the income a shareholder receives on each share invested in the company.

dividend
The sum paid by the company to its shareholders as their direct financial reward from holding the company’s shares. It is the income received from an investment in the company’s shares.

dividend cover
The indicator as to the rate that the company may be paying its dividends out of its earnings, and its ability to continue to pay dividends at that rate.

Earnings Per Share (eps)
The relationship of the profit, after tax, attributable to each share in issue. The key component of company performance featured in the price earnings ratio (P/E ratio or PER). The main subject of broker research on future corporate performance and a key factor in arriving at share and corporate value. "This value is displayed in pence (p)"

Equity
That part of the company’s share capital represented by ordinary, or voting, shares. The risk-sharing aspect of the company’s invested capital.

ex
When appended to the share price, means “excluding”. Thus a share price quoted ex dividend (xd or ex div.), means that you will not receive the announced dividend when you buy the shares. Conversely, you will still receive the dividend when you sell the shares xd, even though you do not hold the shares anymore at the actual time of the dividend payment.

Execution Only Stockbrokers
Those stockbrokers who offer clients, usually, an inexpensive trading facility with no advice, research or recommendations as to investment style or policy.

FAST Share
A telephone system to provide, on demand, share prices and market reports.

Fixed assets
Physical elements and items used in the operation of the business and will include all plant & machinery, land and buildings (both leasehold and freehold). A guide to the asset backing for the company's liabilities and debt

Fixed investments
Investments held for long term business or investment purposes. Taken in conjunction with fixed assets, they provide the tangible asset backing for the company's liabilities and debt.

FRS3
Financial Reporting Standard 3 (FRS3) issued by the Accounting Standards Board (ASB).

FRS3 earn per share
Under UK General Accepted Accounting Practices, and in accordance with FRS3 issued by the Accounting Standards Board, all companies must provide in their Annual Report an indication as to the earnings per share (eps) for the reporting period. This FRS3 eps is computed after including all exceptional and extraordinary items, both of a trading and non-trading nature, and after deducting tax and minority interests.

FTSE
Financial Times Stock Exchange, the joint operation for compilation and maintenance of the indices used as the key performance benchmarks for the UK Stock Market.

FTSE Index
Three indices comprise the FTSE All Share index - FTSE100, FTSE Mid 250 & FTSE Small Cap. A fourth index, the FTSE Fledgling, covers newly listed and other listed companies not included in the other indices.

Fundamental Analysis
A method of researching investment potential by concentrating on the value of the ccompany and its actual, and expected, business and financial performance of the company, based on the value of its net assets and on its historic, and forecast, profit record.

Fund Manager
A professional manager of investments in a Pension Fund, Insurance Company, Unit Trust etc.

Gearing (Debt to Equity)
The percentage that borrowings represent to shareholders funds (less intangibles) at the end of the latest and preceding financial period is shown for all companies except investment trusts, banks and insurance companies.

For the purpose of gross gearing, debt is taken to be total borrowings, including finance leases and convertible debt, and without any deduction in respect of cash assets. Where the difference is substantial (i.e. the greater of 10 percentage points or 10% of the gross, whichever is the larger amount) gearing net of cash is also shown. Shareholders funds are defined as follows:

Ordinary share capital
+ Preference share capital
+ Reserves
= Shareholders funds

The expression “neg. equity” indicates that there are actual borrowings but a negative equity base.

Gilt-Edged Securities
UK Government bonds or loan stocks. Debt securities or instruments issued by the Government paying, usually, a fixed rate of interest and regarded, because of the Government backing, as the safest form of capital retention. Hence, low risk but also, potentially, low reward.

Gross
Before deduction of income tax.

Growth Companies
Those companies that are expected to have continual growth, year on year, in their earnings per share.

Horizontal Ratio Analysis
Using financial ratios to provide comparison of a company’s performance across a series of different financial periods (years).

Index
Indication as to the FTSE index of which the company is a constituent.

Intangible Assets (intangibles)
The company assets that are usually non-monetary in nature and without physical form but which represent a right or expected future benefit. Examples are Goodwill on acquisition (being the value placed on the acquired company's reputation and market presence), Brands, Patents, Intellectual Property.

Interims (int)
The company’s results for, normally, the first six months of its reporting period (usually its financial year). Also the identification of the dividend declared and paid on the results for this period.

Investment Club
A group of like minded individuals (friends/colleagues/acquaintances) who gather together for the purpose of investing in the stock exchange.

Investment Trust
A closed-end investment fund which is a company listed on the Stock Exchange and whose purpose is to invest in other shares, often specialising in specific types of company, geographical area or industrial sector.

Liquidity
The portion of an investment portfolio that is not fully invested, but is represented by cash holdings. Also, the level of continual buy and sell activity making up the market demand for the shares and indicating the ease with which investors can undertake transactions.

Liquid assets, cash
Applicable to Banks it is the value at the balance sheet date of all assets that are either represented by cash or are transferable into cash at short notice.

Loans
Applicable to insurance companies only, this is the aggregate value of all loans made to the company or its insurance funds.

Long term ins funds
Applicable to insurance companies only, this is the value of the Long Term Insurance Funds as at the Balance Sheet date, being the capital value of the long term policy holders' interests.

Mkt cap / Market capitalisation
Market capitalisation is the number of shares in issue multiplied by the share price at the time the market capitalisation was calculated.

Market Maker
A Stock Exchange member firm that is obliged to make a continuous two-way price in the shares it follows. This is a commitment to offer to buy and sell the securities it trades in.

Merger
The agreed joining together of two companies, usually in the same industry, to provide a new, combined, entity with control still reflected in the ownership shares of the original companies.

Mid Price
The median (mid point) of the buying and selling spread (bid / offer spread) quoted by the market makers. The price shown in the share price pages and market reports within the financial media, but not the price at which you could necessarily expect to conclude a deal to buy or sell. The price at which you buy will be higher and the price at which you sell will be lower than the mid price in almost all circumstances.

Minority Interest
That part of a subsidiary company that the investing company does not itself hold, or control. If the company has an interest in 87% of the share capital of another company, then that other company is a subsidiary and 87% of its profits and assets will be featured in the consolidated accounts of the share owning company. The 13% not owned directly, will be featured in the consolidated accounts as a Minority Interest.

Net
After deduction of income tax.

No. Emp
This indicates the average number of staff employed by the company during the last reporting period.

Norm earn per share
Under current UK Generally Accepted Accounting Practices the company’s earnings per share are reported after including all exceptional and extraordinary credits and charges of a trading and non trading nature.

Hemmington Scott computes from the Annual Report & Accounts an adjusted, standardised value for earnings per share to provide a comparable basis for intercompany comparison. From an investment point of view this “normalised earnings per share (norm earn per share) includes three important characteristics:

- it reflects the underlying trading performance by excluding non-trading and exceptional results.
- it can be used as a measure of performance against expectations.
- it clarifies the historic record of operating performance.

OFEX
An unregulated, off exchange, alternative to the official Stock Market, organised by JP Jenkins Ltd. and targeted at smaller companies, with a potentially higher risk, but consequent prospects of greater reward.

Offer Price
The price the Market Maker will require in order to sell to you the shares you seek to buy (see Spread).

Ord cap, reserves
The net assets of the company attributable to ordinary shareholders, being the value of funds raised from share issues together with all profits reinvested in the business, after repayment of dividends.

Ordinary Shares
The commonest form of shares. Holders are the risk bearing owners of the company. They receive dividends that vary in amount, being subject to the company’s underlying profitability and the directors’ recommendations. These, in turn, are based on their expectations as to future cash requirements for the company’s continued operation and development.

Other ins funds
Applicable to insurance companies only, this is the value of the Insurance Funds reflecting short term policies, being the capital value of holders' interests in such policies.

Par Value
The face, or nominal, value attributed to each of the company’s shares. Part of the security’s title. This has no relationship to either the value of the company or to the quoted price.

Patient Money
The money left for investment purposes, after making full allowance for housing costs and living and emergency financial requirements.

PEG Factor
The factor used to indicate the relative attraction, and consequent value enhancing potential, from investing in a growth company. It indicates the relationship between the price earnings ratio (PER) and the earnings per share growth rate. A PER of 15, with an earnings growth rate for the company of 30%, gives a PEG factor of 0.5 (15/30).

Penny Share
The term usually applied to companies whose shares have a very low price, normally under 50p per share. Companies whose shares have speculative appeal, represent greater risk and are often issued by former, high riding companies, now deemed to be on harder times.

Personal Equity Plans (PEP’s)
Tax free investment vehicles for private investors. There are limits on the size of the initial capital sums that can be invested in each tax year.

Portfolio
The total investments held in different companies or investment trusts by an individual investor or organisation.

Preference Shares
Shares in the company usually paying a fixed rate of dividend and, usually, carrying no voting rights. Whilst ranking ahead of ordinary shares, they effectively form unsecured debt, often having a fixed date or period for redemption of the capital sum they represent.

Prefs, minorities
The value of any preference capital raised by the company, together with the value of minority interests in the capital and revenues of subsidiary companies not wholly owned.

Prelim/Preliminary Statement
The announcement made by the company to the Stock Exchange on its annual results, earnings and proposed dividend and made prior to the publication and release of the full Annual Report.

Pre tax profit
The figure reported by the company in its Profit & Loss Account reflecting the results of all business activities and decisions for the financial period.

PROSHARE
The UK Government supported agency set up to encourage, and support, investment in the stock market by private individuals. The key supporter of Investment Clubs.

Prospectus
The formal document issued by, or on behalf of, the company when it is first seeking entry to the Stock Exchange's Offical List. It describes the company’s business background, assets and financial performance. It probably also features an official forecast on future performance expectations. Prospectuses, or offer documents, will also be published for any subsequent issues of new shares, such as a rights issue.

Provisions
The sums that companies include in their Balance Sheet for prospective, future, liabilities that can not yet be fully quantified.

Relative Strength
One of the most important technical analysis indicators. The relative strength, for a given period, indicates the performance status of the company’s share price, relative to the performance of an underlying, benchmark index, for the market over the same period.

Rem
This is the remuneration of the total work force during the past financial period.

Rights Issue
An additional issue of shares by the company to existing share holders and at an advantageous, discounted, price. A means for the company to raise new funds for further development or to finance a new acquisition for cash. A 2 for 5 rights at 145p means that the existing share holder has the right to acquire a further 2 shares for every 5 currently held at a new cost of 145p per share acquired.

ROCE
Return on capital employed.
ROCE is a key statistic reflecting the rate of return that the company’s management has obtained, on the shareholders' behalf, by their management of the company’s assets.

Scrip Issue (Bonus Issue)
An issue to existing shareholders of new shares, at no cost. Usually intended to improve marketability of the shares and reduce the share’s quoted value to a more reasonable level, increasing the number of shares in issue and enhancing the liquidity in the market. A 2 for 5 scrip issue, for example, means the issue of 2 new shares to the existing shareholder for every 5 currently held.

Securities
The general name for stocks, shares and bonds issued by the company to investors.

Shareholders' Funds
The level of the shareholders capital invested in the business. It represents the original issued value of the company's share capital and the total of all reserves created since its incorporation, either from trading surpluses or from asset realisations and re-valuations.

Short term assets
The Banking equivalent of debtors. This is the value as at the balance sheet date of all financial assets employed in the business.

Spread
The difference between the Market makers buying (offer) and selling (bid) prices.

Stamp Duty
A Government tax on the purchase of shares. Stamp Duty is not paid on the eventual sale of the shares.

Status
Indicates the market on which the company’s equity capital is traded.
Full - Fully listed on the main London Stock Market
AIM - Member of the Alternative Investment Market

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

Subordinated loans
Applicable to Banks, subordinated loans are loans made by the company where there is a charge or conversion capability. That means that in repayment terms the charge on the debt falls between normal loans and share capital.

Subsidiary Company
When the company in which you are investing, itself owns more than 50% of another company, then the company in which the investment is held is a subsidiary company and all its trading results and assets will be consolidated into the group results of the investing company. The surplus of the original acquisition price, over the book value of assets acquired, is Goodwill on acquisition, an intangible asset that is usually written off directly against the capital and reserves of the acquiring company.

Tangible Assets
The combined total of fixed assets and long term investments.

Technical Analysis
A method of researching investment potential by concentrating on the share price and its relative trends and performance, rather than the underlying financial and business characteristics of the company issuing the securities.

Tipsheet
A newsletter usually for private investors, which contains recommendations on specific companies in which to invest. Usually produced to follow a specific investment style or criteria.

Total Return
The annual benefit that accrues to the individual share investment, and to the whole portfolio, through reinvesting the dividend income received in more of the shares of the company that produced that dividend. Effectively, the total of the value received by the investor in income (the dividends received) and capital (the growth in value of the share price).

Tracker Funds
Professional investment funds that merely seek to emulate the investment performance of a specific share index, by usually, investing in only the companies that make up the index and in the same proportion that each company comprises of the index.

Turnover
The sales, or gross revenue, of the company during the financial period. This data is not appropriate to Banks or Insurance companies and is therefore not presented.

UK GAAP
UK General Accepted Accounting Practices

Unit Trust
An open ended collective investment vehicle, not quoted on the Stock Exchange, but investing in stock market listed securities. Units can be redeemed at will, thereby reducing the pool of funds available for investment by the investment managers of the trust.

Warrant
A tradable security providing the holder with the right to buy specific shares at a set price on a future date.

Yield
The annual dividend or interest income relative to the value of the underlying security on which it is received. This is expressed as the percentage the income per share bears to the share price. Featured either as a gross or net of tax value, dependent upon the tax status of the shareholder.

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