EDRAVO LEARN · INVESTING GLOSSARY
137 investing terms, explained in plain English. Clear definitions, practical examples and connections that help you read UK company news.
137 terms
Explore the guides →Try a shorter name or another abbreviation, or clear the filters to browse all 137 terms.
Funds
Fund units whose income is retained and reinvested within the fund rather than paid out to the holder.
ILLUSTRATIVE EXAMPLE
An accumulating share class reinvests a dividend received from one of its holdings. Your number of units need not increase.
Company news
The purchase of a company, business or assets by another organisation.
ILLUSTRATIVE EXAMPLE
A company pays £12m for a competitor. Check how much is cash, how much is new shares and whether further payments depend on performance.
Accounts
A profit measure that excludes items selected by the company. The adjustments and their reasons must be read alongside the statutory figures.
ILLUSTRATIVE EXAMPLE
A company reports £8m statutory profit and £11m adjusted profit after excluding £3m of costs. Those costs may still have used cash.
UK markets
The London Stock Exchange market designed for growth companies. It has its own admission and continuing obligations, distinct from the Main Market.
ILLUSTRATIVE EXAMPLE
An AIM company can be small or established. Admission to AIM is not a guarantee of investment quality or easy trading.
Accounts
The allocation of the cost of an intangible asset over its useful life. The term is also used for gradual repayment of a loan.
ILLUSTRATIVE EXAMPLE
Software recognised as an intangible asset may be amortised over the years it is expected to be used.
Company news
A yearly shareholder meeting where matters such as directors, accounts and other resolutions are put to a vote.
ILLUSTRATIVE EXAMPLE
An AGM notice sets out resolutions and voting deadlines. It is not itself an update on current trading.
Accounts
A company's yearly report bringing together its financial statements, business review, risks and governance disclosures.
ILLUSTRATIVE EXAMPLE
Use the notes to understand a headline profit figure, including accounting policies and unusual items.
Accounts
Resources controlled by a business that are expected to produce economic benefits. They can include cash, stock, property and intangible assets.
ILLUSTRATIVE EXAMPLE
An unpaid customer invoice may be an asset even though the company has not yet received the cash.
Accounts
An independent examination of financial statements, giving an opinion under the applicable reporting framework. It is not a guarantee against all error or future failure.
ILLUSTRATIVE EXAMPLE
Read the auditor's opinion and any material uncertainty about going concern, as well as the financial figures.
Accounts
A snapshot of assets, liabilities and equity at a particular date. Assets equal liabilities plus equity.
ILLUSTRATIVE EXAMPLE
A business with £30m of assets and £18m of liabilities has £12m of accounting equity. That is not necessarily its market value.
Risk and returns
A sustained period of falling market prices. A fall of 20% from a recent peak is a widely used convention, not a universal rule.
ILLUSTRATIVE EXAMPLE
A bearish opinion expresses an expectation of weaker prices or prospects; it does not establish what will happen.
Funds
A reference used to assess investment performance, such as an index. A useful comparison should reflect the investment's market and risk.
ILLUSTRATIVE EXAMPLE
Compare a UK smaller-company fund with a relevant smaller-company benchmark, including income on a comparable basis.
Dealing
The price a buyer is currently willing to pay. It is usually the quoted side relevant when you sell a share.
ILLUSTRATIVE EXAMPLE
A quote of 98p bid and 102p offer means a sale may be available at 98p, subject to size and market conditions.
Dealing
The gap between the quoted buying and selling prices. It is a trading cost even when a broker charges no dealing commission.
ILLUSTRATIVE EXAMPLE
Buying at 102p and immediately selling at 98p loses 4p per share before other charges.
Funds
A debt security issued by a government or company. Its terms set out payments and repayment obligations; the issuer can still default.
ILLUSTRATIVE EXAMPLE
A bond promising £100 at maturity can trade above or below £100 before then. Selling early may produce a gain or loss.
Accounts
The value recorded in the accounts. For a company's equity, it usually refers to net assets attributable to shareholders.
ILLUSTRATIVE EXAMPLE
A property recorded at £4m might sell for more or less. Accounting values and market values answer different questions.
Risk and returns
A sustained period of rising market prices. A bullish view means expecting improving prices or prospects.
ILLUSTRATIVE EXAMPLE
A company's results may look encouraging while its share price falls because expectations were even higher.
Company news
A company buying its own shares. Shares may be cancelled or held in treasury, depending on the arrangements.
ILLUSTRATIVE EXAMPLE
A buyback can reduce shares outstanding and increase earnings per share without increasing total profit. The price paid matters.
Accounts
Spending recognised as an asset because it is expected to benefit more than the current period, rather than being expensed immediately.
ILLUSTRATIVE EXAMPLE
Buying a £2m machine uses cash now; its cost may affect profit gradually through depreciation.
Risk and returns
An increase in an investment's value relative to its cost. A gain becomes realised when the investment is sold or otherwise disposed of.
ILLUSTRATIVE EXAMPLE
Buying at 100p and selling at 125p gives a 25p gain per share before costs and any tax.
Accounts and tax
UK tax that may apply to gains when assets are disposed of. The treatment depends on the asset, account, allowances and personal circumstances.
ILLUSTRATIVE EXAMPLE
Selling shares outside an ISA may create a taxable gain. The sale proceeds alone are not the gain.
Accounts
Cash moving into and out of a business during a period. It differs from profit because the timing and treatment of transactions differ.
ILLUSTRATIVE EXAMPLE
A customer sale can be recorded this month while payment arrives next month. Profit can rise before cash arrives.
Accounts
An estimate of how long available cash could last at a stated rate of net cash spending. It depends on assumptions about future receipts and payments.
ILLUSTRATIVE EXAMPLE
£6m cash divided by £1m monthly net spending suggests six months. Changing sales, spending or restricted cash can invalidate that estimate.
Company news
What is given in return for a transaction, such as cash, shares or a combination. Some payments may be deferred or conditional.
ILLUSTRATIVE EXAMPLE
An acquisition described as £20m may involve £10m now, £5m in shares and up to £5m later if targets are met.
Accounts
A comparison that removes specified exchange-rate movements by translating figures using a consistent set of rates.
ILLUSTRATIVE EXAMPLE
Revenue might rise 8% as reported but 3% at constant currency. Read which rates and periods the company used.
Dealing
A derivative that settles the change in an underlying price between opening and closing a position. You do not own the underlying shares, and leverage can magnify losses.
ILLUSTRATIVE EXAMPLE
A small move in the underlying share can cause a much larger percentage change in the money committed to a leveraged CFD.
Company news
An event initiated by a company that can affect its securities or shareholders, such as a dividend, rights issue or share split.
ILLUSTRATIVE EXAMPLE
A broker's corporate-action notice may require a decision by a deadline earlier than the company's published deadline.
Funds
The interest payment specified for a bond, often expressed as a percentage of its face value. It is not the same as the return at today's purchase price.
ILLUSTRATIVE EXAMPLE
A £100 face-value bond with a 4% annual coupon pays £4 a year under its terms, even if you buy it for £90.
Risk and returns
An agency's opinion of creditworthiness. Ratings can change and do not guarantee repayment or a stable market price.
ILLUSTRATIVE EXAMPLE
A downgrade can make borrowing more expensive for an issuer and reduce the market value of its bonds.
Risk and returns
The risk that a borrower cannot meet promised interest or repayment obligations.
ILLUSTRATIVE EXAMPLE
A high bond yield may compensate for greater doubt about repayment. It is not free extra income.
Risk and returns
The risk that exchange-rate changes affect an investment's value or income in your own currency.
ILLUSTRATIVE EXAMPLE
A foreign share can rise in its local currency yet fall in sterling value if that currency weakens enough against the pound.
Accounts
Current assets divided by current liabilities. It gives one view of short-term balance-sheet cover, but not all current assets are readily spendable cash.
ILLUSTRATIVE EXAMPLE
£12m current assets divided by £8m current liabilities gives 1.5. Slow-paying customers or unsold stock may still cause cash pressure.
Accounts
A condition in a borrowing agreement, which may limit debt, require financial ratios or restrict certain actions.
ILLUSTRATIVE EXAMPLE
Falling profits can breach an interest-cover covenant even if interest payments have not yet been missed.
Accounts
The allocation of a tangible asset's depreciable cost over its useful life. It reduces reported profit without necessarily causing a cash payment in that period.
ILLUSTRATIVE EXAMPLE
A £100,000 machine with no residual value depreciated evenly over five years creates a £20,000 annual charge.
Dealing
A contract whose value depends on another price, rate, index or event. Derivatives can hedge a risk or create additional exposure.
ILLUSTRATIVE EXAMPLE
An option over a share derives value from that share and its contract terms; it is not the same as holding the share.
Company news
A reduction in an existing holder's percentage ownership when additional shares are issued and the holder does not buy proportionately more.
ILLUSTRATIVE EXAMPLE
100 shares out of 1,000 is 10%. After 250 new shares are issued, the same 100 shares represent 8%.
Funds
The amount by which an investment trust's share price is below its net asset value per share, usually expressed as a percentage of NAV.
ILLUSTRATIVE EXAMPLE
A 90p share price against 100p NAV is a 10% discount. The discount can widen and is not a guaranteed bargain.
Risk and returns
Spreading investments across different exposures to reduce dependence on any one outcome. It cannot remove all market risk.
ILLUSTRATIVE EXAMPLE
Ten companies in the same industry may be less diversified than the number of holdings suggests.
Income
A distribution by a company to its shareholders, usually in cash. Payments are subject to the company's decisions and can be reduced or stopped.
ILLUSTRATIVE EXAMPLE
A declared 5p dividend on 200 shares gives £10 before any applicable tax. Check the eligibility dates.
Income
A comparison of earnings with dividends, commonly earnings per share divided by dividend per share. The basis and period must match.
ILLUSTRATIVE EXAMPLE
20p earnings per share divided by a 10p dividend gives cover of two times. Cash availability still matters.
Income
Annual dividend per share divided by the share price, expressed as a percentage. The dividend may be historical or forecast.
ILLUSTRATIVE EXAMPLE
A 10p dividend on a 200p share gives 5%. If the price falls to 100p and the dividend is unchanged, the yield becomes 10%.
Company news
A future acquisition payment that depends on agreed conditions, often the acquired business's performance.
ILLUSTRATIVE EXAMPLE
A buyer pays £5m upfront and up to £2m if profit targets are met. The maximum payment is not necessarily the final cost.
Accounts
Profit attributable to ordinary shareholders divided by the relevant weighted average share count. Diluted EPS reflects qualifying potential additional shares.
ILLUSTRATIVE EXAMPLE
£10m earnings divided by 50m weighted average shares gives 20p EPS. Check whether the figure is basic, diluted or adjusted.
Accounts
Earnings before interest, tax, depreciation and amortisation. It is a performance measure, not cash flow; adjusted versions can exclude further items.
ILLUSTRATIVE EXAMPLE
A company can report positive EBITDA while spending heavily on assets, paying interest and using cash to fund stock.
Valuation
A measure of business value commonly calculated as equity market value plus debt less cash, with further adjustments where relevant.
ILLUSTRATIVE EXAMPLE
£80m market capitalisation plus £30m debt less £10m cash gives £100m enterprise value under that simplified calculation.
Accounts
Ownership in a business. In accounts, equity is the residual after liabilities are deducted from assets; its market value can be very different.
ILLUSTRATIVE EXAMPLE
A company can have £20m accounting equity but £50m stock-market value because investors value its future prospects differently.
Income
The date from which shares trade without entitlement to a particular upcoming dividend under the applicable market arrangements.
ILLUSTRATIVE EXAMPLE
Buying on the ex-dividend date normally does not qualify you for that payment. Check the company's timetable and your broker's terms.
Accounts
Items described separately because of their size or nature. Companies differ in what they exclude from adjusted performance measures.
ILLUSTRATIVE EXAMPLE
A restructuring charge may be called exceptional yet recur across several years. Check the history and cash cost.
Funds
A fund whose shares trade on an exchange. Many track an index, while others use active strategies or more complex exposures.
ILLUSTRATIVE EXAMPLE
An equity ETF can hold many companies, but a narrow sector ETF may still have concentrated risk.
Accounts
Cash remaining after specified investment spending, often operating cash flow less capital expenditure. Definitions vary between companies.
ILLUSTRATIVE EXAMPLE
£15m operating cash flow less £6m capital expenditure gives £9m free cash flow under that definition.
UK markets
Shares considered available for public trading rather than held in specified strategic or restricted holdings. Index providers apply their own rules.
ILLUSTRATIVE EXAMPLE
A founder's large long-term holding may be excluded from an index provider's free-float calculation.
UK markets
An index of 100 large eligible companies in the FTSE UK series. Membership follows the index rules, including reviews and eligibility criteria.
ILLUSTRATIVE EXAMPLE
A company trading on the LSE is not automatically in the FTSE 100. The index is also not a list of exclusively domestic businesses.
UK markets
The mid-cap index in the FTSE UK series, covering 250 eligible companies below the FTSE 100 under the index rules.
ILLUSTRATIVE EXAMPLE
The FTSE 250 includes businesses with overseas earnings as well as UK-focused companies.
UK markets
An index combining the FTSE 100 and FTSE 250 constituents.
ILLUSTRATIVE EXAMPLE
Holding funds tracking both the FTSE 100 and FTSE 350 creates overlapping exposure to the largest companies.
UK markets
An index combining the FTSE 100, FTSE 250 and FTSE SmallCap indices. It does not include every security quoted in London.
ILLUSTRATIVE EXAMPLE
AIM companies are not included simply because they trade on a London Stock Exchange market.
UK markets
The index of eligible smaller companies in the FTSE UK series below the FTSE 350. General descriptions such as small-cap can use different size cut-offs.
ILLUSTRATIVE EXAMPLE
An AIM company may be described as a small-cap business without being a FTSE SmallCap constituent.
Funds
A pool of investors' money managed under a stated investment policy. Structure, holdings, costs and access arrangements vary.
ILLUSTRATIVE EXAMPLE
A fund holding 60 shares gives exposure to those investments, but its name alone does not reveal its concentration or risk.
Risk and returns
A measure of borrowing relative to a stated financial base, such as equity or net assets. Different definitions produce different percentages.
ILLUSTRATIVE EXAMPLE
An investment trust with £100m net assets and £10m borrowing has 10% gearing on that simple basis; borrowing can magnify gains and losses.
Funds
A UK government debt security. Conventional gilts have specified interest payments; index-linked gilts adjust payments under their terms.
ILLUSTRATIVE EXAMPLE
A conventional gilt's market price can fall when yields rise, even though its contractual payments have not changed.
Accounts
The basis of preparing accounts on the assumption that a business will continue operating for the foreseeable future rather than liquidating or ceasing trade.
ILLUSTRATIVE EXAMPLE
A material uncertainty about going concern highlights a serious condition, such as reliance on refinancing, that needs careful reading.
Accounts
An acquisition-related accounting asset arising when the purchase price exceeds the value of identifiable net assets recognised in the transaction.
ILLUSTRATIVE EXAMPLE
If an acquired business disappoints, a goodwill impairment can reduce reported profit without a new cash payment that day.
Accounts
Gross profit divided by revenue, expressed as a percentage. Gross profit deducts the costs classified as cost of sales.
ILLUSTRATIVE EXAMPLE
£20m gross profit on £80m revenue gives a 25% gross margin. Compare companies' cost classifications before comparing margins.
Company news
Management's indication of expected future performance, which may be a number, range or qualitative statement. It is not an achieved result.
ILLUSTRATIVE EXAMPLE
A forecast of £15m to £17m annual profit depends on assumptions that may change during the year.
Risk and returns
Taking an offsetting position to reduce exposure to a particular risk. Hedging may have costs and may not remove all of the risk.
ILLUSTRATIVE EXAMPLE
A company expecting dollar receipts might hedge part of that currency exposure while still facing sales and customer risks.
Accounts
A reduction in an asset's recorded value when the applicable accounting test shows it cannot support that value.
ILLUSTRATIVE EXAMPLE
Writing down goodwill reduces accounting profit and net assets, but does not itself mean cash left the business in that period.
Funds
Fund units that distribute available income to holders rather than retaining it within the fund, according to the share class's policy.
ILLUSTRATIVE EXAMPLE
A fund can pay income while its unit price falls. Look at total return rather than distributions alone.
UK markets
A rules-based measure tracking a selected group of securities. Membership and weighting determine what its movements represent.
ILLUSTRATIVE EXAMPLE
A capitalisation-weighted index can rise mainly because its largest constituents rise, even if many smaller constituents fall.
Accounts and tax
A UK tax-advantaged account wrapper. Eligible income and gains within an ISA are sheltered from UK income tax and Capital Gains Tax, subject to the rules.
ILLUSTRATIVE EXAMPLE
A stocks and shares ISA can hold investments whose values fall. The tax wrapper does not protect against investment losses.
Risk and returns
An increase in the general level of prices over time, reducing what a given amount of money can buy.
ILLUSTRATIVE EXAMPLE
If your investment rises 3% while prices rise 4%, its purchasing power has fallen before considering tax and charges.
Company news
A company's first public offering of shares. It may raise new money for the business, allow existing owners to sell, or both.
ILLUSTRATIVE EXAMPLE
Read how much of an IPO's proceeds goes to the company and how much goes to selling shareholders.
Accounts
Identifiable non-physical assets such as patents, licences and some software. Their accounting values depend on recognition and measurement rules.
ILLUSTRATIVE EXAMPLE
A licence may support future sales, but its recorded value is not cash available to pay bills.
Accounts
A ratio comparing an earnings measure with interest costs. The precise numerator and treatment of interest vary.
ILLUSTRATIVE EXAMPLE
£12m operating profit divided by £3m interest gives four times cover. Check the lender's definition when reviewing covenants.
Risk and returns
The cost of borrowing or reward for lending, expressed as a percentage over a period. Bank Rate influences UK rates but is not every borrower's rate.
ILLUSTRATIVE EXAMPLE
A floating-rate loan can become more expensive when its reference rate rises, even if the amount borrowed is unchanged.
Funds
A listed investment company whose shares can trade at a discount or premium to the value of its underlying net assets.
ILLUSTRATIVE EXAMPLE
A trust's portfolio can rise while its share price lags if the discount to NAV widens.
UK markets
An international identifier for a specific security. It helps distinguish instruments that may share similar names or ticker codes.
ILLUSTRATIVE EXAMPLE
Different share classes issued by the same company can have different ISINs.
Risk and returns
Using borrowing or derivatives to create exposure larger than the capital committed. It can magnify both gains and losses.
ILLUSTRATIVE EXAMPLE
£1,000 supporting £5,000 of exposure means a 10% adverse move is £500 before costs, half the initial capital.
Accounts
Present obligations of a business, such as borrowings, unpaid suppliers and lease obligations, recognised under its accounting rules.
ILLUSTRATIVE EXAMPLE
A profitable company can still struggle when large liabilities become due before cash is received.
Dealing
An instruction to buy at no more than a specified price or sell at no less than a specified price. Execution is not guaranteed.
ILLUSTRATIVE EXAMPLE
A buy limit of 100p will not normally execute above 100p, but it may never fill if available sellers want more.
Dealing
For an investment, how readily it can be traded without materially moving its price. For a business, its ability to meet near-term cash obligations.
ILLUSTRATIVE EXAMPLE
A share may show a price but have too few buyers to sell a large holding near that quote.
UK markets
The London Stock Exchange market used by companies and other issuers under its admission standards. It is distinct from AIM.
ILLUSTRATIVE EXAMPLE
Main Market admission does not automatically make an issuer a member of a FTSE index.
Valuation
The market value of a company's equity, commonly calculated by multiplying shares outstanding by the current share price.
ILLUSTRATIVE EXAMPLE
200m shares at 50p give £100m market capitalisation. A low price per share does not necessarily mean a small or cheap company.
Company news
The forecasts or assumptions investors use when judging results, often represented by a stated set of analysts' estimates. There is no single universal consensus.
ILLUSTRATIVE EXAMPLE
Profit can rise on last year yet disappoint investors if they expected a larger increase.
Dealing
A firm that quotes buying and selling prices for securities under the rules of its market. Quotes can depend on trading size and conditions.
ILLUSTRATIVE EXAMPLE
The available price for a small sale can differ from the price offered for a much larger holding.
Dealing
An instruction to trade at available market prices. It prioritises execution rather than a specific price, and fills can occur at different prices.
ILLUSTRATIVE EXAMPLE
A fast-moving or illiquid market can produce a fill quite different from the last displayed trade.
Funds
The date when a debt security or other contract is due to end or be repaid under its terms.
ILLUSTRATIVE EXAMPLE
A five-year bond has five years until contractual repayment when issued, but its price can fluctuate during those years.
Funds
The value of a fund or company's assets less liabilities. NAV per share divides that value by the relevant shares or units.
ILLUSTRATIVE EXAMPLE
£100m net assets divided by 50m shares gives NAV of £2 per share. The quoted share price may differ.
Accounts
Assets less liabilities. In company accounts, this is an accounting measure rather than an estimate of the price investors would pay for the business.
ILLUSTRATIVE EXAMPLE
£40m assets less £25m liabilities equals £15m net assets.
Accounts
Borrowings less the cash and cash equivalents included in the company's definition. Treatment of leases, restricted cash and other items can differ.
ILLUSTRATIVE EXAMPLE
£25m borrowings less £8m qualifying cash gives £17m net debt. Check the reconciliation before comparing companies.
UK markets
An adviser approved by the London Stock Exchange that assesses an AIM company's suitability and advises it on AIM obligations.
ILLUSTRATIVE EXAMPLE
Having a Nomad is part of AIM's framework, not an endorsement that a company's shares will perform well.
Dealing
The price a seller is currently asking. It is usually the quoted side relevant when you buy a share.
ILLUSTRATIVE EXAMPLE
With a 98p bid and 102p offer, buying may cost 102p, subject to size and market conditions.
Funds
A measure of recurring fund expenses expressed as a percentage of assets. It may not include every cost, such as dealing costs or performance fees.
ILLUSTRATIVE EXAMPLE
A 0.6% annual charge is roughly £6 per £1,000 if the investment value stayed constant; other costs can apply.
Company news
An invitation to eligible existing holders to buy new shares, generally in proportion to their holdings. Unlike a conventional rights issue, entitlements are usually not tradable.
ILLUSTRATIVE EXAMPLE
A holder unable to fund an open offer should not assume they can sell the entitlement. Check the specific offer document.
Accounts
Cash generated or used by a business's operating activities during a period, as presented in its cash flow statement.
ILLUSTRATIVE EXAMPLE
Rising unpaid customer balances can hold operating cash flow below profit even when sales increase.
Accounts
Operating profit divided by revenue, expressed as a percentage. Use consistent statutory or adjusted figures.
ILLUSTRATIVE EXAMPLE
£6m operating profit on £60m revenue gives a 10% operating margin.
Accounts
Profit from operating activities before financing costs and tax, subject to the reporting presentation. EBIT is related but should not be assumed identical in every set of accounts.
ILLUSTRATIVE EXAMPLE
Operating profit may improve while profit before tax falls because interest costs increased.
Dealing
A contract giving its holder the right, but not the obligation, to buy or sell an underlying asset at specified terms. The buyer pays a premium.
ILLUSTRATIVE EXAMPLE
A call option may expire worthless if exercising the right to buy does not make economic sense. Selling options creates different obligations.
Dealing
A record of available buy and sell orders on a trading venue. It shows prices and quantities available under that venue's rules.
ILLUSTRATIVE EXAMPLE
A small order at the best price may be filled first, leaving the rest of a larger order to trade at other prices.
UK markets
Units of ownership that usually carry voting rights and a claim on residual value after higher-ranking obligations. Rights depend on the share class.
ILLUSTRATIVE EXAMPLE
Ordinary shareholders can receive dividends but are behind creditors if the business is wound up.
Accounts
Growth measured after removing specified changes such as acquisitions, disposals or currency effects. Companies' definitions differ.
ILLUSTRATIVE EXAMPLE
Reported revenue up 12% but organic growth of 2% suggests much of the increase came from effects excluded from the organic measure.
Valuation
Share price divided by earnings per share for a specified period, using the same currency units. Historical and forecast ratios use different earnings.
ILLUSTRATIVE EXAMPLE
A 200p price divided by 20p EPS gives a P/E of 10. A low ratio can reflect weak prospects rather than a bargain.
Income
The proportion of an earnings measure paid as dividends, often dividends per share divided by earnings per share.
ILLUSTRATIVE EXAMPLE
A 6p dividend against 10p EPS gives a 60% payout ratio. It does not by itself prove the dividend is affordable.
Company news
An issue or sale of shares to selected investors. A placing of new shares raises funds for the company and increases the share count.
ILLUSTRATIVE EXAMPLE
A company can announce a placing alongside a separate retail offer; existing holders should check whether either is open to them.
Risk and returns
The collection of investments held by an investor or fund. Its overall risk depends on the exposures and their sizes.
ILLUSTRATIVE EXAMPLE
One holding representing 40% of a portfolio can dominate results even when many other positions are present.
Company news
Rights that can give existing shareholders the opportunity to participate before specified new shares are offered elsewhere. Application and disapplication depend on law and the company's arrangements.
ILLUSTRATIVE EXAMPLE
Shareholders may be asked to approve disapplying pre-emption rights for a future fundraising.
UK markets
A class of shares with specified preferential rights, often over dividends or capital repayment. Voting, payment and redemption terms vary.
ILLUSTRATIVE EXAMPLE
A preference dividend is not automatically guaranteed; read whether it is cumulative and where the shares rank.
Funds
The amount by which an investment trust's share price exceeds its net asset value per share.
ILLUSTRATIVE EXAMPLE
A 110p price against 100p NAV is a 10% premium. The premium can shrink even if the portfolio is unchanged.
Valuation
Market value of equity divided by the comparable accounting book value, or price per share divided by book value per share.
ILLUSTRATIVE EXAMPLE
A 150p price against 100p book value per share gives a ratio of 1.5. Asset quality and accounting policies still matter.
Accounts
Profit after the costs included in the measure, including financing where applicable, but before the tax charge. Check whether it is statutory or adjusted.
ILLUSTRATIVE EXAMPLE
Higher interest expense can reduce profit before tax even when operating profit is unchanged.
Company news
An announcement that expected profit is below previous guidance or market expectations. It need not mean the company expects a loss.
ILLUSTRATIVE EXAMPLE
A forecast cut from £12m to £9m is a warning about expectations even if last year's profit was £8m.
Company news
A formal disclosure document for an offer or admission where required, setting out information such as the issuer, securities and risks. Requirements vary by transaction.
ILLUSTRATIVE EXAMPLE
A prospectus can explain how fundraising proceeds will be used and the risks to repayment or shareholder value.
UK markets
Central-bank asset purchases financed by creating reserves, used as a monetary-policy tool to influence financial conditions.
ILLUSTRATIVE EXAMPLE
Purchases of gilts can affect bond prices and yields; QE is not a direct instruction for investors to buy shares.
Risk and returns
An investment return adjusted for inflation, showing the change in purchasing power rather than just money value.
ILLUSTRATIVE EXAMPLE
A 5% nominal return with 3% inflation is about 1.94% in real terms: 1.05 divided by 1.03, minus one.
Accounts
Amounts owed to a business, commonly by customers for sales already made. Collection timing affects cash flow.
ILLUSTRATIVE EXAMPLE
A rise in receivables faster than revenue may warrant checking payment terms and overdue balances.
Income
The date used to determine registered holders for a corporate action or payment. It is distinct from the ex-dividend date and broker deadlines.
ILLUSTRATIVE EXAMPLE
Do not use the record date alone to decide when to buy for a dividend; settlement and ex-dividend arrangements matter.
Accounts
Income recognised from the business's activities before the related costs are deducted. It is not the same as cash receipts or profit.
ILLUSTRATIVE EXAMPLE
A company can grow sales yet earn less profit if costs rise faster.
Company news
An offer of new shares to qualifying existing holders in proportion to their holdings, usually with tradable rights for a limited period. Terms and eligibility matter.
ILLUSTRATIVE EXAMPLE
A one-for-four issue gives an eligible holder of 100 shares the right to buy 25 more at the issue price.
Company news
The London Stock Exchange's Regulatory News Service, which distributes company announcements and financial communications. Other information services also operate.
ILLUSTRATIVE EXAMPLE
A routine voting-rights notice and a profit warning can both arrive through RNS. The service name does not indicate importance.
Risk and returns
A grouping of companies with related business activities. Classification systems differ and a company may operate across several sectors.
ILLUSTRATIVE EXAMPLE
Owning several banks can leave a portfolio heavily exposed to similar economic and regulatory risks.
Dealing
The completion of a trade by transferring securities and payment under the relevant arrangements. The settlement date can differ from the trade date.
ILLUSTRATIVE EXAMPLE
Selling a share today does not necessarily make the proceeds immediately withdrawable. Check the market and broker timetable.
Company news
A change to the number of shares that proportionately changes each share's nominal interest. A consolidation does the reverse.
ILLUSTRATIVE EXAMPLE
A two-for-one split turns 100 shares into 200. Ignoring other changes, a 400p price would adjust to 200p, leaving value unchanged.
Valuation
Shares currently outstanding, usually excluding treasury shares when calculating shareholder measures. Use the count appropriate to the specific calculation.
ILLUSTRATIVE EXAMPLE
Market capitalisation uses a current count; EPS normally uses a weighted average over a period. They may differ.
Dealing
Taking a position intended to benefit from a price fall, often by selling borrowed shares to buy back later. Borrowing costs and potentially very large losses are risks.
ILLUSTRATIVE EXAMPLE
Selling borrowed shares at 100p and buying them back at 80p produces 20p before costs; a rise to 160p instead produces a loss.
Accounts
Profit reported under the applicable accounting framework, as distinct from a company's alternative adjusted measure.
ILLUSTRATIVE EXAMPLE
Read statutory profit alongside the reconciliation to adjusted profit to see which items have been removed.
UK markets
A short code used to identify a traded security on a particular market or data service. Codes can differ across providers.
ILLUSTRATIVE EXAMPLE
A short code alone can be ambiguous internationally. Confirm the company, exchange and share class.
Risk and returns
The combined effect of price changes and income over a period. Published measures may assume income is reinvested; costs and tax treatment must be checked.
ILLUSTRATIVE EXAMPLE
A share rising from 100p to 105p and paying 3p gives 8% before costs and tax if income is held as cash.
Funds
A measure of how variable an investment's return differences are relative to its benchmark. It differs from the average performance gap, called tracking difference.
ILLUSTRATIVE EXAMPLE
A tracker can consistently lag by its charges yet have low tracking error if the gap is stable.
Company news
An announcement about recent performance and often the outlook. It may provide selected figures rather than full financial statements.
ILLUSTRATIVE EXAMPLE
Sales growth can be accompanied by a profit forecast cut. Read the reporting period and outlook together.
Company news
A company's own shares held after repurchase rather than cancelled. They are treated differently from shares held by outside investors.
ILLUSTRATIVE EXAMPLE
Treasury shares may later be reissued. Check whether the quoted share count excludes them.
Company news
An arrangement under which another party commits, subject to terms, to take up securities not bought by other investors in an issue.
ILLUSTRATIVE EXAMPLE
An underwritten fundraising has contractual support, but conditions, termination rights and fees still matter.
Valuation
An assessment of what an asset or business is worth using stated methods and assumptions. It is not a guarantee of its future market price.
ILLUSTRATIVE EXAMPLE
Two analysts can reach different values because they assume different growth, margins or required returns.
Risk and returns
The extent of price or return fluctuations over a period. It measures variability, not every kind of investment risk.
ILLUSTRATIVE EXAMPLE
A stable-looking price in an illiquid share can conceal difficulty selling; low observed volatility does not prove low risk.
Dealing
The quantity traded during a stated period. Check whether the figure is shares, contracts or monetary turnover.
ILLUSTRATIVE EXAMPLE
Higher-than-usual volume indicates more trading activity, not whether future prices will rise.
Company news
Rights attached to shares to vote on company matters. Different classes, treasury holdings and other arrangements can affect totals.
ILLUSTRATIVE EXAMPLE
A company may publish total voting rights so shareholders can assess their proportionate interests.
Company news
A security giving the holder a right to subscribe for or buy shares at specified terms, often before an expiry date.
ILLUSTRATIVE EXAMPLE
A warrant exercisable at 100p may expire without value if the share stays below that price. Exercise of new-share warrants can dilute holders.
Accounts
A measure of short-term resources and obligations. It commonly means current assets less current liabilities, while operational definitions often focus on stock, receivables and payables.
ILLUSTRATIVE EXAMPLE
More money tied up in stock and unpaid invoices can consume cash even when the company reports a profit.
Funds
A bond return measure calculated from its price and promised payments to maturity. The realised return depends on payments being made and relevant reinvestment assumptions.
ILLUSTRATIVE EXAMPLE
A bond bought below its repayment value can have a yield to maturity above its coupon rate.
Funds
A bond with no periodic coupon payments, typically bought below its repayment amount. The price difference contributes to its return if repaid as promised.
ILLUSTRATIVE EXAMPLE
Paying £80 for a bond promising £100 at maturity does not mean a 25% annual return; the time to repayment matters.
Written and reviewed by Edravo · . We are building this library around the terms UK investors encounter. It is not an exhaustive dictionary. Examples are illustrative; definitions of company-reported measures can vary.
