FinanceTalking Financial Glossary

An amount owed to a company that is very unlikely to be paid. The amount owing is written off as a loss. Doubtful debts are accounted for by way of a provision or impairment charge.

A financial snapshot. The balance sheet shows the assets of a business and how they are financed. The excess of the assets over the liabilities is the equity or shareholders funds.

Commercial institutions which make and receive payments on their customers behalf, accepting deposits, providing short term loans to companies, organisations and private individuals.

The central bank of the UK and historically the supervisor of the banking system, although this role is now conducted by the Financial Services Authority. The Bank of England is banker to the government and to other banks. It is the sole issuer of bank notes for England and Wales. The Bank is the lender of last resort to the banking system. Since 1998, the Bank's Monetary Policy Committee (MPC) has been solely responsible for setting interest rates with the aim of keeping inflation below the target set by the Government.

Activities undertaken by banks including personal banking, commercial banking and corporate banking.

Obstacles to prevent companies entering an existing market or sector, eg patents, regulation, scale advantages etc.

The rate of interest that banks use as a basis for the rates they charge their customers. Because banks take a risk when they lend, most customers will pay a premium over the base rate in order to borrow money.

100 basis points = 1%. So 50 basis points is 0.5%. Basis points make it easier to talk about very small percentages.

The basis for co-operation between European banks. The concordat was agreed in 1975 and revised in 1983. It provides a moral rather than a legal obligation for banks to be supervised and to help one another. The Basle Concordat sets out a minimum capital requirement for banks which is designed to ensure that they do not take too many risks with the depositors' money and so do not jeopardise the banking system.

The British Bankers Association. An organisation based in London representing the views of all the banks recognised in the UK. It was founded in 1919 and is regarded as the banks' trade association.

A scheme for categorising businesses devised by the Boston Consulting Group, a leading firm of strategic business consultants. The scheme puts businesses into categories according to their market share and the expected growth of their markets.

A dealer who expects prices to fall.

An approach to a company by another company indicating that an offer is about to be made for their shares. A teddy bear hug is when the target company indicates that is not against the merger, but wants a higher price.

A market in which prices are falling or expected to fall. Dealers are more likely to sell securities, currency, or goods than to buy them.

A bond that can be transferred from one person to another without registration. The proof of ownership is possession of the security certificate. The issuing company will have no register of ownership.

A bond or share that can be transferred from one person to another without registration. The proof of ownership is possession of the security certificate. The issuing company will have no register of ownership.

A share that can be transferred from one person to another without registration. The proof of ownership is possession of the security certificate. The issuing company will have no register of ownership.

A view that the market prices or company shares are going to fall. Dealers are more likely to sell securities, currency, or goods than to buy them.

Indicating entries below the horizontal line on a company's profit and loss account that separate the entries that establish the profit or loss from the entries that show how the profit is distributed.

The beneficial owner of a share is the underlying owner, who has paid for the stock and is entitled to the benefits of ownership.

The price movement of a security measured against the overall stock market. The bigger the beta coefficient of a security, the greater its volatility. The market has a beta of 1, so stocks with betas of less than 1 are less volatile than average and those with betas of more than 1 are more volatile than the average.

The extra a bidder is prepared to pay over the market price before the bid is announced.

The price at which a marketmaker will buy shares. The offer price is the price at which a marketmaker will sell.

The difference between the bid price (price at which someone will buy) and the offer price (price at which someone will sell) of shares.

The upheaval on the London Stock Exchange when major changes in operation were introduced on 27th October 1986.

An instrument a bit like a post-dated cheque, which can be used to pay for supplies.

Sometimes a group of managers within a company will decide that they would like to own the part of the business that they currently operate. The management might therefore put in a bid for the business. This is called a management buy-out (MBO). A variation on this is when an outside management team acquire a business (a management buy-in). Alternatively, a new management team could link up with the existing managers and employees to acquire a business (a buy-in management buy-out, or BIMBO). In these cases, the managers themselves rarely have the money to buy the business, so they will look for outside equity and debt finance.

A person or firm that makes an unwelcome takeover bid for a company.

One of the two Mondays on which the two largest stock market crashes occurred in this century. The original Wall Street Crash occurred on Monday 28th October 1929, when the Dow Jones Industrial Average fell by 13%. On Monday, 19th October 1987, the Dow Jones average lost 23%. In both cases Black Monday in the USA triggered heavy stock market falls around the world, including in London.

Wednesday 16th September 1992, when sterling left the Exchange Rate Mechanism. This led to a 15% fall in sterling against the Deutschmark.

The sale or purchase of large quantities of a share.

The City Code on take-overs and mergers - a code of conduct operated by the Panel on Takeovers & Mergers.

The name for any of the ordinary shares in the most highly regarded companies traded on stock market. Blue-chip companies generally have a well known name and a sound growth record. The term is often used to refer to FTSE100 companies.

The name given for the legislation in certain US states that insists on stocks being registered in that state before they can be traded there.

The board of directors is comprised of individuals elected by shareholders who run the business on behalf of the shareholders.

A certificate representing a chunk of loan issued by a borrower to an investor (lender). In the UK, Government bonds are referred to as Gilts. Interest payments on bonds are made twice a year. Bonds which are traded are often referred to as fixed interest securities because the interest is paid at fixed six-monthly intervals.

An issue of securities to lenders. The bond represent little chunks of loan.

Bond holders are investors who lend money to a company by way of a bond (a debt security). A certificate representing a chunk of loan issued by a borrower to an investor (lender). Interest payments on bonds are made twice a year. Bonds which are traded are often referred to as fixed interest securities because the interest is paid at fixed six-monthly intervals.

The issue of new shares to existing shareholders free of charge. Also known as a scrip or capitalisation issue. This is a process for converting money from the company's reserves (retained profits) into issued capital.

Accounting value of an asset or liability. Frequently used in connection with non-current assets and usually calculated as historical cost less accumulated depreciation.

The process of canvassing institutional support for a share issue in advance.

Profit ? the bottom line of the income statement (profit and loss account).

A method of raising capital, for acquisitions or other purposes, used by quoted companies as an alternative to a rights issue or placing. The company invites brokers to bid for new shares, selling them to the highest bidder, who then sells them to the rest of the market in the expectation of making a profit. Bought deals are controversial as they violate the principle of pre-emption rights.

A stock exchange.

An organisation based in London representing the views of all the banks recognised in the UK. It was founded in 1919 and is regarded as the banks' trade association.

An agent who brings together two parties who wish to trade. The broker is not a principal to the arrangement, but will receive commission for setting up the deal.

A financial plan which sets targets for the revenues, expenditures, etc of an organisation for a specified period.

A dealer who expects prices to rise.

A sterling bond issued by a foreign borrower in the UK.

A view that the market prices or company shares are going to rise. Dealers are more likely to buy securities, currency and goods than to sell them.

The central bank in Germany.

A detailed plan setting out the objectives of a business, from both a market and financial point of view, over a stated period, often three, five or ten years.

Fund managers, who manage investment funds on behalf of pension funds, life insurance funds and private individuals.

Listed companies may wish to buy back their own shares, either on the market or by way of a tender offer if they have spare cash (or would like more debt) and if they believe their share price is too low. A share buy-back is often seen as an alternative to paying a one-off dividend, in terms of returning surplus cash to shareholders.

An analyst who works for an investing institution or fund management organisation as opposed to a sell-side analyst, who works for a securities house in support of institutional sales.