FinanceTalking Financial Glossary

An abbreviation of the term 'actual', often found in analyst research reports. . For example 2009A used in a table shows that the numbers in that column are the company's actual published historical results.

"A" shares are usually non-voting shares. They are issued by companies who wish to gain extra capital without giving any control or a fixed dividend to the investor. In the UK, they were often issued by family companies, to avoid dilution of family control. However, the trend here has been to enfranchise all shareholders, so these shares are now very rare. Non-voting shares can still be found in continental European companies.

An abbreviation for 'advertising & promotional spend'.

Association of British Insurers. A trade association that represents insurance companies.

Indicates entries that are above the horizontal line on a company's profit and loss account that separates items which establish the profit or loss from entries which show how the profit is distributed.

Asset Backed Securities - publicly traded loans which are secured on assets such as credit card receivables, mortgages etc. The interest and repayment of the loan is made from the money received from the assets.

Percentage (%) rise/fall in the share price over the stated period,

Determining what something is actually worth - the present value of future cash flows

The Accounting Standards Board - the official standard setting body in the UK. The ASB publishes accounting standards which companies must follow if their accounts are to show a true and fair view.

The amounts that an organisation owes to its suppliers for goods and services. Accounts payable are also known as creditors.

The amounts owed by customers to a company for goods and services supplied. Accounts receivable are also known as debtors.

If an acquisition is accretive, it adds to earnings per share

A cost which has been incurred before the end of an accounting period, but for which no invoice has yet been received. Such payables are known as accruals. The cost must be accrued in the year end accounts, increasing liabilities and increasing expenses.

One of the fundamental accounting concepts. If the only records were of cash received or paid, this would not be giving a fair view of an organisations profit or loss. The business might have sold goods but not yet received the money. Equally, it may have incurred costs, which it has not yet paid. Under the accruals concept, the profit takes into account the earned income and incurred expenses, regardless of whether the cash has been received or paid.

The total amount of depreciation on an asset since its year of purchase.

The ratio of a company's current assets, excluding inventories, to current liabilities. The ratio indicates the company's ability to pay any debts without it being necessary to make further sales. This provides evidence of its solvency.

When a life insurance company makes an acquisition, part of the purchase price represents the value of the insurance contracts in the target company. This is in effect, the present value of the policies acquired (in effect the PVNBP, except it is not new business sales, it is existing business that you are buying from another company). See also PVNB

The accounting procedures used when one company acquires another.

Active investors aim to outperform the stock market average (an index) by seeking out stocks that will provide superior returns. Their fund managers generally have access to extensive research and analysis to help them make the right choices, and one of the consequences of this effort is that the management charges passed on to investors in the fund tend to be higher.

A person who is trained in statistics and probability theory. Actuaries work for insurance companies advising insurers of the amount of premium to charge for each type of risk. They also advise on the administration of pension funds.

A person who manages the property of another, having been appointed by the courts or by private arrangement.

American Depositary Receipt. A certificate confirming that a specific number of shares in a foreign company have been deposited with a US bank. The certificates are made up in US dollars and can be traded in US markets as a security. ADRs therefore provide a mechanism for non-US companies to have their shares traded in the US without having to issue shares denominated in US$.

IFRS requires financial assets and liabilities to be recorded at fair value. Fair value is the amount of consideration agreed upon in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act - ie it is very similar to market value. Banks have to include changes to fair value in their income statement to the extent that these changes represent likely impairments - ie the cash flows on the assets are likely to be less than originally anticipated. So for example, trading asset fair value changes will appear in the income statement. However, the change in fair value of available for sale financial assets (ie assets that the bank intends to hold to maturity) other than trading assets is not shown in the income statement - it goes straight to the available for sale reserve. So you will only see this change in value in the balance sheet and statement of changes in equity.

A stockbroker who acts as an agent for clients who wish to buy or sell shares.

Annual General Meeting. The annual meeting held for shareholders at which they get to vote on matters such as the annual report, the reappointment of directors and auditors etc.

The Alternative Investment Market - the London Stock Exchange's junior market, with a lighter regulatory regime for smaller growth companies.

Investment returns in excess of the market or a fund's benchmark.

Relates to US mortgages - Alt-A mortgages are an alternative to "A" or prime mortgages - ie they are between prime and sub-prime in terms of credit risk. Typically they may be "low doc" - ie there is little or no documentary evidence of the borrower's income, have a high loan to value ratio and the borrower may have an impaired credit history.

Conventional assets for investment comprise shares, bonds and cash. Alternative investments include hedge funds, private equity, property, art, wine and commodities.

AIM - the London Stock Exchange's junior market, with a lighter regulatory regime for smaller growth companies.

A certificate confirming that a specific number of shares in a foreign company have been deposited with a US bank. The certificates are made up in US dollars and can be traded in US markets as a security. ADRs therefore provide a mechanism for non-US companies to have their shares traded in the US without having to issue shares denominated in US$.

The third most-active market in the US, behind the New York Stock Exchange (NYSE) and the Nasdaq Stock Market. The exchange was founded in 1842 in New York City. Most stocks traded on it are those of small- to mid-sized companies. Also called Amex, and the curb exchange.

The third most-active market in the US, behind the New York Stock Exchange (NYSE) and the Nasdaq Stock Market. The exchange was founded in 1842 in New York City. Most stocks traded on it are those of small- to mid-sized companies. Also called Amex, and the curb exchange.

The depreciation of intangible assets is known as amortisation. The concept applies to assets such as licences and capitalised development costs.

Usually an investment analyst, who analyses sectors and companies, to give advice on making investments. Sell-side analysts work for brokers who sell shares to fund managers. Analysts working for fund management firms are known as buy-side analysts.

The annual meeting held for shareholders at which they get to vote on matters such as the annual report, the reappointment of directors and auditors etc.

The percentage rate of return on an investment or a loan paid annually. By law investment institutions must specify the APR when interest is paid more frequently than annually.

The report sent to shareholders each year by the directors, prior to the Annual General Meeting, in which they report on their stewardship of the shareholders' money.

An insurance policy which gives you annual income for life. A pension annuity converts your pension pot into an income which finances you during your retirement.

Annual Premium Equivalent - a measure of new business sales growth in the insurance industry. The APE includes new regular business premiums on an annualised basis (ie 12 months worth even if the business was only written half way through the year) plus 10% of any new single premium business.

The percentage rate of return on an investment or a loan paid annually. By law investment institutions must specify the APR when interest is paid more frequently than annually.

Arbitrageurs take advantage of differences in prices of securities, currencies etc in two or more markets.

Arbitrageurs take advantage of differences in prices of securities, currencies etc in two or more markets. When referred to in an analyst report, the analyst may be highlighting an investment opportunity via arbitrage.

Arbitrageurs take advantage of differences in prices of securities, currencies etc in two or more markets.

An arm's length transaction is one where each party is independent, eg not connected financially.

Average revenue per user - a KPI often used in the telecoms sector.

A legal document that lays down the internal rules within which the directors run a company. The main items covered are: the issue of shares, the procedure for the board and the AGM, the election and retirement of directors and the declaration of dividends.

The Accounting Standards Board - the official standard setting body in the UK. The ASB publishes accounting standards which companies must follow if their accounts are to show a true and fair view.

An item of value owned by a company or a right to future economic value. Fixed or non-current assets are the assets for continuing use in the business, while current assets are usually those which are convertible into cash within 12 months.

An investment service offered by investment banks and fund management companies.

An asset stripper will buy a company with a view to selling off the individual assets or businesses to make a profit.

The value of a company's assets less its liabilities (net assets), divided by the number of ordinary shares in issue. In theory, this represents the amount attributable to each share if the company was wound up. However, the function of the balance sheet is not to value assets (which are often stated at historic cost), so the net asset value is likely to be lower than the market value.

Publicly traded loans which are secured on assets such as credit card receivables, mortgages etc. The repayment of the loan is made from the money received from the assets.

A company that is not a subsidiary, but where the group's investment is substantial and long-term and the group can exercise a significant influence over the company. Associate status is usually assumed for stakes of 20-50%.

The ABI is a trade association that represents insurance companies.

A committee of non-executive directors charged with managing the relationship with the auditors and keeping an eye on the accounts. The requirement for UK listed companies to have an audit committee comes from the Combined Code.

A person who carries out an audit. External auditors are usually members of a body such as the Institute of Chartered Accountants. The external auditor should be independent of the company being audited and should be professionally qualified. Internal auditors are also used by companies to ensure the robustness of the internal controls. External auditors are normally appointed by the shareholders at the AGM. Their role is usually to check whether the accounts comply with the legislation and to give an opinion as to whether they show a true and fair view.

Assets under management. An indicator of size in the fund management industry.

The directors cannot issue shares in excess of the limits authorised by the company's memorandum of association. In practice, the Articles of Association lay out the procedure for changing the authorised capital, which is usually a simple ordinary resolution.

IFRS requires financial assets and liabilities to be recorded at fair value. Fair value is the amount of consideration agreed upon in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act - ie it is very similar to market value. Banks have to include changes to fair value in their income statement to the extent that these changes represent likely impairments - ie the cash flows on the assets are likely to be less than originally anticipated. So for example, trading asset fair value changes will appear in the income statement. However, the change in fair value of available for sale financial assets (ie assets that the bank intends to hold to maturity) other than trading assets is not shown in the income statement - it goes straight to the available for sale reserve. So you will only see this change in value in the balance sheet and statement of changes in equity.

The average number of shares traded on a daily basis over a set period, eg 12 months

Acquired Value of In-Force business. When a life insurance company makes an acquisition, part of the purchase price represents the value of the insurance contracts in the target company. This is in effect, the present value of the policies acquired (in effect the PVNBP, except it is not new business sales, it is existing business that you are buying from another company). See also PVNB