FinanceTalking Financial Glossary

Generally Accepted Accounting Practices. Procedures and rules that define accounting practice. When the term 'GAAP' is used alone, it often refers to US generally accepted accounting practices. Otherwise, you could refer to UK GAAP or international GAAP.

Usually the ratio of debt to equity. Gearing is a measure of balance sheet risk - the higher the proportion of debt in the funding mix, the higher profits will be in good times and the lower they will be in bad times. Gearing is associated with risk because it increases the volatility of profits ? and because the lenders have first call on profits. The gearing ratio shows the amount of money borrowed in relation to the equity (or the shareholders' funds). Gearing can also be calculated as the ratio of debt to debt plus equity or the ratio of equity to total assets or debt to EBITDA. In the US, gearing is referred to as leverage.

Gilt Edged Market Makers. GEMMs are market makers in the gilts market.

Gilt edged securities are government bonds. They are a way that the government borrows money and are usually known as gilts (because they used to have gold edges to the certificates).

Gilts are government bonds. They are a way that the government borrows money and are known as gilts because they used to have gold edges to the certificates.

The market for UK government bonds.

The process that has enabled investment in financial markets to be carried out on an international basis.

Gesellschaft mit beschrankter Haftung - the German equivalent of 'limited'.

A company goes public or floats by applying to a local listing authority and stock exchange to have its shares listed, so that they can be bought by the public.

The accounting model assumes that a business is a going concern, unless circumstances indicate otherwise. This concept underpins asset values, which would otherwise be lower, liquidation values.

Financial arrangements to lock key people into their jobs.

Lump sum payment to compensate for loss of office.

A lump sum inducement paid to entice new staff.

Arrangements made in advance by directors to provide themselves with a sum of money if they are ousted in a hostile take-over.

A share in a company that controls at least 51% of the voting rights and can therefore prevent the company from being taken over.

The acquisition cost of a company reflects what the business is worth. The balance sheet value of the company reflects the historical cost of the net assets. Goodwill is the difference between the two and it arises when a new company is incorporated into an existing group's balance sheet. Goodwill will be most significant in industries which are not assets-based, such as service businesses. Goodwill will be of much less significance to property companies. Goodwill is included in the balance sheet as an intangible asset and reviewed annually for impairment.

The purchase of a large block of shares in a company which is the subject of a takeover bid, which are then sold back to the company at a premium over the market price to prevent the takeover.

A second unsolicited bidder which enters the scene in order to take advantage of problems between the first bidder (the black knight) and the target.

An unofficial market in a good or service. Grey markets are particularly common in share trading where the term refers to share sales not made on the official stock exchanges.

The sales revenue less the direct cost of the goods sold but before other operating expenses such as distribution costs and administrative expenses.

The yield on a security (income as a percentage of capital value) calculated before tax is deducted.

The consolidated accounts of the holding company, subsidiaries and associates.

A holding company together with its subsidiaries and associated companies.

An industry that is expected to grow faster than others.

A company whose earnings and/or revenues are expected to grow at a rate that exceeds the industry average or the overall market.

A promise made by a third party that he or she will be liable if one of the parties to a contract fails to fulfil the contractual obligations.

Information provided by the company giving insight into the future performance of the company. Generally focused on earnings. It may also be called an outlook statement.