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Glossary of Financial Terms

A | B | C | D | F | G | H | I | J | K | L | M | N | Ñ | O | P | Q | R | S | T | U | V | W | X | Y | Z
A

Accelerated amortization

This refers to the accounting method that allows the cost of assets to be expensed more quickly than with the traditional straight-line method. See also: Asset, Amortization, Straight-line Amortization

Accounts payable

Money owed by a company for goods or services it has acquired on credit. This constitutes a short-term liability on the balance sheet. Maturity is normally less than one year. See also: Service, Goods, Credit, Short-term liability, Balance Sheet

Accounts receivable

Money owed to a company for goods or services it has provided on credit. This constitutes current assets on the balance sheet. Maturity is normally less than one year. See also: Service, Goods, Credit, Current Assets, Balance Sheet

Accrued Interest

Interest earned, to be received or paid from the date of the last interest payment. Appears in the balance sheet as a short term asset or liability. See also: Interest, Balance Sheet, Liability, Assets

Acquisition

This refers to the purchase of controlling rights over another company.

Adjusted earnings per share

Earnings per share adjusted without regard for exceptional items such as losses/gains on disposal, cancellation or sale of fixed assets (non-current assets), one-off cost re-organization operations, amortization for goodwill, etc. See also: Earnings per share, Exceptional items, Fixed assets, Goodwill, Amortization

Adjusted net earnings

Net earnings excluding extraordinary income and expenditure and, often, amortization for goodwill. See also: Net earnings, Goodwill, Amortization

Adjusted Present Value

Version of valuation by discounted cash flow. Using this method a company is appraised at unleveraged equity cost to which the attributed value of a financial structure is added, this is mainly compounded by the present value of fiscal savings that generates an interest payment (financial leverage). See also: Discounted Cash Flow, Equity Cost, Tax Rate, Debt.

Administrative Costs

Costs that are not directly related to the sale or distribution of goods and services. These expenses can include administrative and overhead costs, amortization of non-specific assets, salaries and wages, etc. See also: Sales Costs, Indirect Costs

Advance Refund

In general, early repayments of loans.

Advertising Inventory

Total number of different advertisements used by a company.

Alpha

Measurement of an investment fund's risk compared to the market. A positive alpha is the extra return investors earn for assuming a risk instead of accepting market rates.

American Auction

Type of auction in which a number of items are offered at the same price. Those who bid for a greater number of items win the auction. See also: Auction, English Auction, American Auction, Direct Auction, Dutch Auction

American Depository Receipt

Certificate issued by an American bank that represents foreign shares owned by the bank, generally subsidiaries of the country that issues the shares. In short, it is a foreign corporation's shares, share portion or share package. See also: Shares

American Option

Option that can be exercised throughout the entire life of the option. The majority of options traded are American. See also: Option, European Option

Amortization

Gradual adjustment of assets' worth over a specified period of time.

Analyst

Employee of an investment bank who studies companies and makes recommendations on whether to buy or sell their shares. Many analysts specialize in a particular industry. See also: Broker, Enterprise, Share

Annualization

Procedure consisting in adjusting a rate applicable to a period of more or less than a year so that it can be applied to a year.

APV

Acronym for Adjusted Present Value. See: Adjusted Present Value

Arbitrage

Action consisting in taking advantage of the difference between the price of a security quoted on more than one market. See also: Security

Asset

Anything that belongs to or is owed by a company or an individual as a result of past transactions or events. Total assets include "fixed assets" plus current assets. See also: Fixed Assets, Current Assets

Assets not related to the company's usual activities

Those assets deducted from the total company value to obtain the company value. They represent the company's peripheral assets, i.e. those not directly included in the company's activities. See also: Enterprise Value, Asset

Auction

1. Physical or virtual place where an offerer first announces an item for sale. Generally, potential buyers, called bidders, make their bid or offer and the highest offer buys the item. 2. Alternate publicity channel that offers bargains for sale, and surplus inventory in one or various locations. See also: Dutch Auction, American Auction, English Auction, Indirect Auction

Audit

Report drawn up by an independent institution authorized to accredit the authenticity and accuracy of a company's Financial Statements.

Authorized capital

The maximum amount of capital a company is able to subscribe. See also: Share capital B

BAC

See: Bricks and Clicks

Back Office

Department of supervision, registry, control, and legal advice for clients of banks and stock brokers, responsible for following securities trading. See also: Broker, Security, Share

Balance sheet

Financial document reflecting the items making up the assets and liabilities of a company at any given moment. See also: Asset, Liability

BAM Consortia

See: Industry Sponsored Exchanges

BAM

See: Bricks and Mortar

Bankruptcy

Legal status of an individual or company that is unable to pay its creditors and whose assets are, therefore, administered by its creditors. See also: Creditor, Assets

Basis Point

Term used to designate level differences. For example, each return percentage point of bonds is equal to one hundred basis points. See also: Bond

Beta

This measures the non-diversifiable systematic risk of a share, i.e. the risk of a particular share with respect to the market as a whole. A beta of 0.7 means that the share is likely to rise 0.7 units when the market rises by one unit. The beta factor is used in the capital asset pricing model (CAPM). See also: Share

Bid

Price offered by a potential buyer or seller in an auction. See also: Auction

Billing

See: Sales

Bond

Certificate evidencing a debt on which the issuer promises to pay the holder interest at a fixed rate for a specified period of time, as well as to return the loan at maturity. See also: Debt, Interest

Bonus Share Issue to Shareholders

A change in the number of shares in circulation of a company that does not affect the total market value of the company. See also: Share

Book Value Per Share

Reached by dividing results by the number of shares in circulation on that date. The net worth at the end of the fiscal year is calculated by subtracting assets from liabilities. See also: Assets, Liability

Book Value

Amount of money recorded on the balance sheet for a corporation's assets or liability. See also: Assets, Liability

Borrower

Individual or legal entity that obtains credit from another institution.

Brick and Clicks

A company using online and offline sales and distribution methods. In general, they are businesses that start as pure "BAM" (Bricks and Mortar) and have later integrated Internet services into their portfolio. See also: BAM

Bricks and Mortar

A company using conventional sales and distribution methods, not Web-based.

Broker

Financial intermediary acting on behalf of a client as the seller or buyer of securities. A full-service broker provides recommendations and has a team of analysts following specific industries. Free agents or brokers simply carry out client orders and, in general, do not provide an opinion. See also: Security

Brokerage fees

Remuneration received by stockbrokers for their services.

Butterfly Market

See: Virtual market

Buy/Sell Volume Ratio

Business volume in put options divided by total call options for a security or index. See also: Option, Put Option, Call Option, and Security

Buyback agreement

Agreement between an investor and a bank for the investor to lend money to the bank for a short period of time, normally less than 90 days. C

CAC40

French stock exchange index comprising a capitalization-weighted measure of its 40 most significant securities. See also: IBEX, Dow Jones, FTSE, NIKKEI, Hang Seng

Call Option

Contract that grants its bearer the right to buy underlying assets on the commodities market or foreign exchange market at a given price, until the option's expiration date. There are two types of option: American options and European options. See also: American Option, European Option

CAPEX

Acronym for Capital Expenditure. See: Investment in fixed assets

Capital

1. In Economics, this refers to machinery, factories and inventory required to produce other goods. 2. In Finance, it refers to the share capital subscribed. See also: Share capital

CAPM

Acronym for Capital Asset Pricing Model.

Cash Dividend

A dividend that is paid in cash to the shareholders of a company. In general, the amount depends on the earnings and a tax rate is applied. See also: Tax rate

Cash Flow Statement

Financial statement that shows cash transactions between two accounting periods.

Cash Flow

The net earnings of a corporation during a specific period of time, including depreciation and expenditures and excluding cash movements. See also: Earnings, Amortization

Commission

Charge collected by a financial intermediary (broker) for buying or selling securities on behalf of third parties. Free agents charge lower commissions than those providing a full service. See also: Broker

Company Free Cash Flow

Usually referred to as Free Cash Flow and the basis of the majority of discounted cash flow valuations. See also: Company Discounted Cash Flow

Company Value Multiples

Company value divided by profit, cash flow, assets or other statistics that can be related to value. Relative value measurement. See also: Company Value, Profit, Cash Flow, Assets

Composite Stock Index

Index that includes all shares listed on the Buenos Aires' stock exchange. See also: Share

Concentrated Market

Market structure with few sellers and/or buyers.

Confidential Information

Specific information about a company that has not yet been made public.

Consortium

This refers to the accumulation of many small buyers' individual purchasing power in order to negotiate prices and discounts with suppliers and so provide savings for the buyers, too.

Corporation

Official partnership or other entity, generally incorporated under public law but independent of the national administration, set up for public utility purposes.

Cost of capital

Cost of obtaining financing for a company. It generally reflects the return required by investors.

Cost of debt

Interest rate paid on debt.

Cost of equity

Return required by investors. It reflects the market risk, the risk of the shares themselves and a general risk premium. See also: Equity, Market risk, Share risk

Cost-Repair Coverage

Home insurance that covers cost of repair of the house and possessions up to a maximum specified amount. See also: Home Insurance

Credit

Money borrowed from a lender.

Cross-Selling

Company's ability to sell various products to current clients.

Currency

Official exchange unit of a country.

Current Assets

Cash and assets that, in the normal course of business, would normally be expected to become cash in the space of one year, such as inventory, tradable securities, accounts receivable, temporary financial investments and other assets. See also: Accounts Receivable, Asset, Inventory, Security D

DAX

German stock exchange index comprising the 30 largest German companies by market capitalization. See also: Market capitalization, FTSE100, Dow Jones, Nikkei, Hang Seng, Stock Exchange

DCF

Acronym for Discounted Cash Flow See: Discounted Cash Flow

DDM

Acronym for Discounted Dividend Model See: Discounted Dividend Model

Debt/Equity Ratio

Indicator of financial leverage. Compares assets provided by borrowers with assets provided by shareholders. Calculated by dividing long-term debt by equity. See also: Financial Leverage, Assets, Shareholder, Debt, Equity

Debt

Securities such as bonds, obligation bonds, mortgages or other type of security where the borrower is required to pay face value by a specific deadline. See also: Bonds, Mortgage, Interest, Borrower

Deferred Tax

Generally refers to future taxes owed on current transactions. However, there are various ways to view deferred tax depending on the accounting criteria used. See also: Tax Rate

Deflation

Sustained downward trend of prices in an Economy. See also: Inflation

Degree of Liquidity

The ease with which assets can be made liquid or the volume of a market transaction.

Depreciation

Expense not requiring any cash movements and representing a source of free cash flow through the write down of assets' costs during their working life or obsolescence. See also: Asset

Derivatives

These may be futures, options, or securities backed by a mortgage guarantee. In general, they are complex investments with a value that derives from or is related to underlying financial assets such as shares, bonds or mortgages. See also: Share, Bond, Mortgage, Future, Option

Dilution

Reducing current or potential EPS or Earnings Per Share by issuing new shares or providing options to obtain them. See also: Share, Option, Earnings Per Share

Direct Auction

Auction in which the buyers begin bidding at a high price that progressively drops until the item is claimed. In this type of auction, each buyer pays the price offered. See also: Auction

Discount

Amount by which preference shares or bonds are sold below their face value. See also: Face value

Discounted Cash Flow of Equity

A modified version of DDM (Dividend Discount Model) based on all of the cash flow that can potentially be distributed. The discount rate is the cost of equity. See also: Dividend Discount Model, Cost of Equity

Discounted Cash Flow of the Company

The most often used technique of Discounted Cash Flow (DCF). The cash flow of the company is before financing and after taxes. The Net Operating Profit Less Adjusted Taxes (NOPLAT) minus additional investments in working capital and fixed assets. The discount rate is the WACC (Weighted Average Cost of Capital). The valuation gives an estimate of the value of the company that should then be adjusted in order to identify the implicit capital value. See also: DCF, NOPLAT, Fixed Assets, Discount, WACC, Enterprise Value

Discounted Cash Flow

This is one of the methods used to calculate the current value of a company. With this technique, the free cash flows for a future period (normally 5 10 years) are discounted at current value. The discount rate for this calculation is normally the WACC (weighted average cost of capital). See also: WACC, Free cash flow

Distribution costs

Costs associated with the storage, distribution and sale of goods, including storage costs (depreciation, wages, etc.); distribution (depreciation, maintenance of trucks, fuel, wages); sales commissions, etc. See also: Depreciation

Diversifiable Risk

Risk that affects a specific company and, therefore, can be eliminated by diversifying the stock portfolio. A portfolio with more that twenty different stocks is considered of diversifiable risk. See Also: Non-diversifiable Risk

Diversification

Consists in distributing the risk of an investment by purchasing different securities in various companies and in different types of businesses and/or locations. See also: Security

Dividend Discount Model

Direct valuation method of equities. The predicted dividends are deducted from the cost of equities to reach an estimate of deserved share price. See also: Cost of Equity, Share Price

Dividend

Part of the earnings of a company that is paid to shareholders in proportion to the number of shares they own. See also: Earnings, Shareholder, Share

Dividends Per Share

Dividends distributed per share issued. See also: Dividend, Share

Dow Jones

New York stock exchange index comprising quotation of the thirty securities with the highest value by market capitalization. See also: Stock Exchange Capitalization

Dutch Auction

An auction in which the initial price is high and drops until the buyer gets the item, contrary to traditional auctions where the starting price is at a minimum and rises during bidding. See also: English Auction, American Auction, Direct Auction, Auction E

Earnings before interest and tax

Earnings that includes only income and expenses, except net interest and taxes. It is also normal to exclude extraordinary items, as well as the amortization of goodwill. See also: Income, Interest, Tax, Extraordinary items, Goodwill

Earnings before interest and tax

Earnings before paying interest and tax. This is calculated prior to including any extraordinary items, minority holdings, interest, investee companies and any over revenue derived from non-core assets. It is also adjusted to remove implicit interest on non-funded pensions, where these have been included as personnel costs. The acronym is EBIT. See also: Earnings, Interest, Tax, Asset

Earnings before interest, tax and amortization

This refers to the sum of the EBIT plus the amortization of intangibles. Goodwill adds to the confusion because EBIT is often given after deduction of the amortization for goodwill. See also: EBIT, Amortization, Goodwill

Earnings before interest, tax, depreciation and amortization

The American system distinguishes between depreciation (applied to tangible assets) and amortization (for intangible assets). Since the Spanish system does not, this term and the one before are equivalent. See also: EBIT, Depreciation, Amortization, Cash flow, Working Capital, Investment in fixed assets

Earnings before interest, taxes, depreciation and amortization

Earnings before interest, taxes, depreciation and amortization and expenses without cash flows for provisions. Exceptional items and investment income are excluded, as is any other revenue not coming from the company's core activities. The acronym is EBITDA. See also: Earnings, Interest, Tax, Amortization, Tax rate, Asset

Earnings leverage

Measurement used to analyze the impact of debt service on the variability of the net earnings. Greater debt means a higher initial burden on the earnings, thus increasing variability and the risk to net earnings. See also: Net earnings, Debt

Earnings per share

Net earnings in the last 12 months divided by the weighted mean number of ordinary shares in circulation as announced by the company. See also: Net earnings, Share

Earnings Yield

Earnings per share divided by share price. Reciprocal of PER (ratio of share price divided by earnings per share). See also: Earnings, Share, PER

Earnings

Amount obtained from an economic activity when the income received exceeds the expenses incurred. See also: Income, Expense

EBIAT: Earnings Before Interest After Taxes

Earnings that are calculated taking into account taxes to be paid for the fiscal year, but not considering interest on loans, etc. See also: Loan

EBIT Margin

EBIT divided by sales. See also: Sales, EBIT

EBIT

Acronym for Earnings Before Interest and Taxes. See: Earnings Before Interest and Taxes

EBITA

Acronym for Earnings Before Interest, Taxes and Amortization. See: Earnings Before Interest, Taxes and Amortization

EBITDA

Earnings Before Interest, Taxes, Depreciation and Amortization. See: Earnings Before Interest, Tax, Depreciation and Amortization

Economic Value Created

Measure of value generated during a period of time. It is the cash flow generated plus the value generated by investments plus the value generated by franchises. The value generated by investments is the net present value of additional investments made in a year. The value generated by franchises is the added value obtained by improved sales, efficiency, etc. in the existing business. See also: Cash Flow, Franchise

Effective Tax Rate

Calculated by dividing the tax burden on the balance sheet by earnings before taxes. It can be modified as a pre- extraordinary items tax rate, which excludes extraordinary items and taxes therein derived. It can also be modified as a cash-basis tax rate in which the tax burden deferral is excluded. See also: Tax Rate

English Auction

An auction that guarantees buyers with the highest bidding price for an item. The bid begins with the lowest acceptable price and asks for higher and higher bids until the auction closes or bidding ends.

Enterprise Resource Planning

ERP systems permit managing resources and integrating systems throughout the company. An ERP system may include industry applications, order input, accounts receivable and accounts payable, procurement, storage, transportation and human resources. See also: Enterprise

Enterprise Valuation

Cost of purchasing rights over total company cash flow. Company valuation is essentially market capitalization plus net debt plus the value of any other company claim. See also: Market Capitalization, Debt, Cash Flow

Enterprise

"Refers to an entire corporation. Usually corporations with offices in more than one location. See also: Corporation"

EPS

Acronym for Earnings Per Share. See: Earnings Per Share

Equity market capitalization

This comes from multiplying the price of the share by the number of shares currently in circulation. See also: Market capitalization, Share

Equity Options

Stocks that grant the holder the right to buy or sell a specific number of shares at a set price during a limited time period. Normally one option is equal to 100 shares. See also: Option, Derivative, Share

Equity Statement

Statements showing all transactions of all shareholders' equity. Also known as reconciliation of movements in shareholder's funds. See also: Shareholder's Equity

Equity Valuation

Determining the justified share price, which should be equal to the company's net worth. In a perfect market, share price is always the justified price. In reality, this is not always the case.

Equity

The value of the company's ordinary shareholders capital as it appears on the balance sheet. It is the difference between the assets and liabilities of a company, also referred to as its net worth. See also: Shareholders, Balance Sheet, Liability

ERP

Acronym for Enterprise Resource Planning. See: Enterprise Resource Planning, Equity Risk Premium

European Option

Option contract that can only be exercised upon its expiration. See also: Option

EV/ Invested Capital

Enterprise Value divided by the Invested Capital. This is important in sectors where the value of tangible assets is crucial. It is not based on earnings or cash flow. See also: EV, Tangible Fixed Assets

EV/ Sales

Enterprise Value divided by Sales (primary sales are total sales minus sales that are not related to the main business of the company). It's a rough measurement, however, it is the least susceptible to accounting differences. See also: EV, Sales

EV/Cash Flow

Enterprise Value divided by the company cash flow. Since it is actual cash flow, multiples calculated using historical measurements can be volatile - the estimated information is immediately tempered. The cash flow can be negative for some companies, in which case their multiples are useless. See also: EV, Cash Flow

EV/EBIT

Enterprise Value divided by EBIT. The EBIT multiples are more comparable than those based on EBITDA, which is affected by the various accounting methods as far as amortization and depreciation are concerned. See also: EV, EBIT, Multiples, EBITDA, Depreciation, Amortization

EV/EBITDA

Enterprise Value divided by EBITDA. Commonly used for comparisons within the industry where the intensity (dependence) of capital is similar. It is useful in valuations involving diverse accounting practices. See also: EV/EBITDA

EV/NOPLAT

Enterprise Value divided by NOPLAT (acronym for Net Operating Profit Less Adjusted Taxes). NOPLAT is EBIT after taxes. This formula allows differentiating between tax efficiency and effective tax rate. If the company is financed wholly with corporate equity, NOPLAT is equal to earnings. See also: EV, NOPLAT, EBIT, Tax Rate

EV/OpFCF

Enterprise Value divided by Operating Free Cash Flow. OpFCF (Operating Free Cash Flow) is a more standardized and comparable version of EBIT. It is more comparable and less susceptible to accounting distortion and, therefore, it is a stronger foundation for valuation multiples. See also: OpFCF, EV, EBIT

EV

Acronym for Enterprise Value See: Enterprise Value

EVC

See: Economic Value Created

Exceptional Items

The resulting items of normal activities treated separately due to their significant size or impact in order to maintain a realistic and fair perspective. See also: Extraordinary Items

Exercise Price

A given price at which an investor can trade a stock option. See also: Security

Expenditure

These are the resources that are delivered or pledged (financial sacrifices) in exchange for a good or service. The

Exports

Goods and services that a country produces to sell to other countries.

Extraordinary items

Profits and losses derived from activities outside the company's ordinary course of business. F

FCF

Acronym for Free Cash Flow. See: Free Cash Flow

Financial Exchange

Agreement by which the return of a stock is exchanged for another. See also: Security

Fiscal year

A company's accounting period, i.e. an interval of 12 months that a company or government uses for its records.

Fixed Asset Investment (as a sales percentage)

Fixed asset investment as expressed by the cash flow statement as a sales percentage. See also: Sales, Cash Flow Statement

Fixed assets

Part of the assets that includes all items that have been acquired for use in the company's operations and with no intention to sell them on or to put them into circulation. They comprise tangible fixed assets, intangible fixed assets and financial fixed assets. They are also called non-current assets as they generally remain in the company for more than one year. See also: Asset

Fixed Income Securities

See: Preference Shares, Share

Floating Debt

Short-term debt, that is, debt that expires within a year's time.

Fragmentation

Situation in which there are many buyers and sellers and in which they have difficulty finding each other in order to carry out transactions.

Franchise

System of collaboration between two legally independent parties, who are bound by a contract stipulating that one of the parties (the franchising company) transfers the right to use its brand name and business "know-how" for a limited period of time and in a specific territory, in exchange for specific financial compensation.

Free Cash Flow

The sum of earnings before interest and taxes, minus taxes, plus depreciation minus investment in fixed assets and plus or minus the increase or decrease of working capital. See also: Company Free Cash Flow

Free Market

Business governed by the laws of supply and demand, and not restricted by government regulation, interference or subsidies.

Front-Office

Departments of a business directly involved in transactions with clients. Normally, they are: sales, marketing and customer services. See also: Back-Office

FTSE 100

London Stock Exchange index comprising the value of the most important British companies by market capitalization. See also: Dow Jones, DAX, NIKKEI, Hang Seng

Futures

A contract to buy or sell a specific amount of commodities, shares or currency by a specific date in future. Futures differ from options in that options offer the right, not the obligation, to buy or sell, while futures are a pledge to go through with the transaction. See also: Commodities, Share, Currency G

Goods

Physical, tangible products. See also: Services

Goodwill

A concept that brings together and quantifies aspects of a company that have no value when the company is just starting off, but which over time should be appraised, and at some point may enjoy a very high valuation. It is comprised of many different elements that should be given an economic value: a company's reputation, its geographical location, clients, human capital, personnel qualifications, etc.

Granting rights

This involves allowing a company's existing shareholders to obtain additional shares at a price that is normally lower than market price. See also: Share

Gross Cash Flow

See: Earnings Before Interest, Tax, Depreciation and Amortization H

Holding Company

A company that owns enough shares in another company to be able to control it. I

IBEX

Spanish stock exchange index that collects the stocks of the most important Spanish corporations according to their market capitalization. See also: Share, Index, Market Capitalization

Indirect or Overhead costs

Those associated with supporting the general infrastructure.

Industry

Category that describes the primary activity of a company. This is determined by the greatest profit contribution. See also: Profit

Inflation

Sustained trend of price increases in an Economy.

Initial Public Offer

The first time a corporation issues shares to the public.

Insider

Person with privileged information, that is, all directors and senior executives of a corporation and those who have access to company information. Also those with more than 10% of shares with voting rights in the corporation. See also: Shares

Intangible fixed assets

Non-physical or immaterial asset intended to remain in the company for more than one year, including goodwill, research and development expenses, patents, trade marks, licenses, franchises, copyrights, etc. See also: Asset, Goodwill, Franchise

Interest cover

Result of dividing EBIT by the net interest applied on the profit and loss statement. A measure of the earnings leverage. See also: Earnings leverage

Interest Rate

Monetary cost that the lender applies to the borrower. See also: Lender, Borrower

Interest Rate

Interest rate that a bank charges its most reliable borrowers.

Interest

Profit, financial gain, value, earnings or lucre produced by capital.

Intermediary

Person or organization between the producer and the buyer of a product or service.

Internal Rate of Return

Accounting term that indicates an asset's profitability. It is the discount rate of an investment that compares the present value of cash inflows with that of cash outflows.

Inventory Turnover

Ratio of annual sales to inventory. Low turnover is a bad symptom that indicates overstock and/or poor sales. See also: Sales, Inventory, Labor Turnover

Inventory

Goods owned by a company for sale during the ordinary course of business, or for transformation or incorporation into the production process.

Invested Capital Turnover

Sales divided by average capital invested. See also: Sales

Investment bank

Brokerage agency or financial institution specializing in launching the shares of a public corporation on the stock exchange, brokerage of listed securities and the placement of securities issues. See also: Security, Stockbroker, Broker

Investment in Fixed Assets

Cash flow in reference to the yearly investment in tangible or intangible fixed assets. See also: Cash Flow, Capital, Tangible Fixed Assets

Investment

The use of money to obtain more money, earn profit or increase capital, or both. See also: Capital, Revenue

Investor

Person who trades in shares See also: Option

IPO

Acronym for Initial Public Offering See: Initial Public Offering

IRR

Acronym for Internal Rate of Return See: Internal Rate of Return

Issue Premium

Difference between the issue value of a new share and its face value, minus certain amounts based on jurisdiction. A component of Net. See also: Net

Issue Premium

Issue price of new shares minus their face value, minus those amounts that depend on jurisdiction. A component of net worth. See also: Shares, Net Worth

Issue Prospectus

Legal document that describes the securities offered to the public. See also: Security J K

Knowledge Management

Involves collecting and sharing individual information and experience in order to present it in a way that is understandable and easy-to-use. L

Labor Turnover

Number of employees who have left the company or whom the company has let go during a time period. Generally expressed as a percentage over the total number of employees.

Lack of Capitalization

Lack of sufficient capital for a business to continue normal operations.

Lender

Individual or legal entity that provides credit to a borrower.

Liability

Company debts or obligations. Normally divided into short-term liability (to be repaid in less than one year) and long-term liability (over one year).

Life Insurance

Type of life insurance policy that grants its holders the flexibility to skip a payment or vary the amounts paid.

Limit Order

When an investor orders a broker to buy or sell when the price reaches a certain level. See also: Broker, Stock

Liquid Assets

Assets that can be considered equal to cash. See also: Cash, Assets

Liquidation

Period of time characterized by intensive sales in a market that causes a sharp drop in prices.

Long-Term Liability

Elements of liability to be paid in a time period greater than one year.

Loss

When expenses are greater than revenue. M

M&A

Mergers and Acquisitions See also: Merger, Acquisition

Main Enterprise Value

Total company value minus the estimated value non-core assets.

Managed care

Health plans that seek to eliminate unnecessary costs. The most commonly used form of these plans is a Health Maintenance Organization or HMO, that restricts the patients of doctors in the HMO. In addition, the costs are lower than for traditional care plans.

Margin account

Credit account with a guaranteed margin allowing the purchase of securities using money borrowed from brokerage fees. See also: Brokerage fees

Margin call

Request to replenish the guaranteed margin. The lender, usually the brokerage agency, demands repayment when the security falls below a specific price set in the brokerage agreement. See also: Security, Broker, Stockbroker

Margin

In stock markets, it is the amount of money that must be paid to buy stocks, which is the difference between bidding prices and the stock quotation. If the margin is at 40%, the buyer will have to spend 40% and borrow the remainder. See also: Stock

Marginal Tax Rate

Fixed value that is added to the index tax of an adjustable rate mortgage in order to calculate current interest rate.

Marginal Tax Rate

Tax rate that would be owed, if its taxable profit were at an additional dollar.

Market capitalization

This represents the total market value of a company's shares. It involves multiplying the number of shares by the current market price. See also: Share

Market maker

In the context of securities markets, this refers to a specialist who tries to maintain an orderly market in an individual exchange through buying and selling shares. See also: Share

Market Neutral or ITE (Independent Trading Exchange)

Market directed by a third party (that is neither a buyer nor a supplier) that normally charges a commission for transactions carried out by buyers and sellers. See also: Commission

Market Planning

Money variation between market investors in order to anticipate price rises and avoid recessions.

Market Risk

See: Non-diversifiable Risk

Market Value Added

The difference between the capital invested in a company and the company valuation. Equal to the present value of future financial earnings. See also: Enterprise Value

Match Trading

In a securities market, it refers to transactions made outside the bidding or negotiating process, which are carried out by computer. See also: Securities Market, Auction

Maturity Date

The date on which a contract terminates and the loan must be completely repaid. See also: Contract, Loan

Mean, Average

Value obtained by dividing the sum of elements in a population by the total number of elements. The result is known as an arithmetic mean.

Merchant bank

Physical location where the bank prepares the funding of loans but does not hold any credits until their maturity, in other words it assumes the market risk but not the long-term credit risk.

Merger

The integration of two or more firms resulting from the creation of a company through the centralization of ordinary shares, cash payment or a combination of both. See also: Share

Mezzanine Financing

The purchase of assets via obligation bond issue through subordinated debt (preference shares, convertible shares, etc.) See also: Acquisition

MIB 30

Index used in the Milan Stock Exchange. See also: Stock Exchange

Minority Interest - Balance Sheet

Shareholder funds that do not correspond to those of the parent company, namely, the proportion of net assets attributed to the minority shareholders in partially owned subsidiaries. See also: Shareholder funds, Assets

Minority Interests - Income Statement

Earnings after taxes related to minority shareholders, which means a deduction in the income statement. See also: Income Statement

Minority shareholders

Shareholders in a subsidiary rather than the parent company. See also: Shareholder

Mission Critical

Term used to refer to the characteristic of being vital for an organization

Monetary aggregates

These measure the money supply in a country. M1 represents the funds available for spending (cash accounts, currency, etc.). M2 is the sum of M1 plus savings or short-term deposits. M3 includes all the elements in M1 and M2 plus assets and debts with banks.

Monetary basis

Calculated from the reserve accounts of financial institutions at the banks in the federal reserve plus the money in circulation.

Monetary Market

In the monetary market, short term financial obligations are traded, for example: treasury bills, company promissory notes, etc. An essential part of capital markets.

Monetary Policy

Policy followed by governments in order to control their respective financial reserves. Money received by a company regardless of its origin.

Mortgage Bond

Entity that provides mortgage loans and sells them to investors through management of mortgage related services. See also: Mortgage

Mortgage Debentures

Debentures insured by a mortgage on the debtor's property (buildings, equipment, etc). See also: Mortgage

Multiple based on forward price

Comparison of forward price or CV (Company Value) with future profits. Used to research present value. See also: Forward price, CV

Multiples Over Historical Price

Comparison of historical price or CV (Company Value) with historical profit or cash flow. These multiples are used to establish a historical share value range. See also: Company Value, Profit, Cash Flow

Mutual Fund

Fund formed by a consortium of investors in order to buy securities. See also: Security N

Nasdaq

Electronic stock exchange led by the National Association of Securities Dealers in the United States. See also: Stock Exchange

NAV

Acronym for Net Asset Value. See: Net Asset Value

NDPS

See: Net Dividend Per Share

Net Asset Value

Total company assets minus its debts. See also: Assets, Debt

Net Asset Value

See: Book Value Per Share

Net Debt/ Total Net Worth

Leverage ratio in the balance sheet that involves dividing the Net Debt by the Total Net Worth (shareholder's equity plus minority interest). See also: Shareholder's Equity

Net Debt

Refers to long-term plus short-term debt (all of the return on interest) minus the cash balance and negotiable securities. See also: Security

Net Dividend Per Share

Net dividend received by each shareholder and per share. See also: Dividend, Share

Net earnings

This refers to the profit the company has made in a fiscal year after paying tax and all other expenses prior to the distribution of any net wealth to shareholders. See also: Fiscal year, Tax, Shareholder

Net maintenance working capital

Increase/reduction in the net working capital required in a fiscal year to maintain a company's competitive position. See also: Net working capital

Net operating profit less adjusted taxes

Abbreviated to NOPLAT, this is the EBIT figure minus taxes payable on the EBIT. It is also called taxed EBIT. See also: EBIT

Net Present Value

Method to calculate present value of future cash flow considering the money value over time. It is the difference between the present cash flow that an investment yields, and the initial payment necessary to carry it out. The investment is recommended if the NPV (Net Present Value) is positive.

Net Realizable Value

Market value of a share minus related sales expenses. See also: Assets

Net working capital

Sum of all assets not related with interest minus all current debts not related with interest, in other words, the inventory plus accounts receivable minus accounts payable. See also: Asset, Debt, Inventory

Net Worth Per Share

See: Book Value Per Share

Net Worth

See: Shareholders' funds

Net Worth

Difference between the value of shares and debts. See also: Assets, Debt

New York Stock Exchange

US Stock Market founded in 1972 and considered the largest in terms of capitalization. See also: Stock Exchange

Nikkei

Term that generally refers to the Nikkei index, which is the daily average of 225 stocks on the Tokyo Stock Exchange. See also: Shares

NMM

Acronym for Net Market Makers. See: Net Market Maker

Noise

Often refers to fluctuations that can lead to a misinterpretation of market direction.

Non-diversifiable Risk

Also called systematic or market risk. Risk that can not be avoided through stock portfolio diversification.

NOPLAT

See: Net Operating Profit Less Adjusted Taxes

NPV

Acronym for Net Present Value. See: Net Present Value

NWC

Acronym for Net Working Capital See: Net Social Capital

NYSE Composite Index

Index that reflects the price changes of all shares listed on the New York Stock Exchange or NYSE. See also: Share O

Open Interest

Amount of future contracts and options that have been opened but not closed, reflecting their liquidity. See also: Future, Option

Operating Cash Flow

The outcome of the operating profits plus depreciation and amortization, minus changes in net share capital for that period. See also: Net Share Capital, Operating Earnings, Depreciation, Amortization

Operating Costs

Money spent by a company or organization to undertake its activities. Operating costs include salaries, rental of premises, purchasing of supplies, etc.

Operating Free Cash Flow

The same as EBITDA minus capital expenditure maintenance costs and maintenance of net share capital. It is more important than the EBITDA, given that it is less affected by accounting differences. However, Operating Free Cash Flow is not directly available either from the accounts and it is not completely objective given that changes in maintenance share capital and maintenance capital expenditure must be estimated. See also: EBITDA, Capital Maintenance Costs, Net Maintenance Share Capital

Operating leverage

The ratio between fixed and variable operating costs. In other words, a high operating leverage occurs when most of the operating costs are fixed. See also: Operating cost

Operating profit before depreciation and amortization

Earnings before interest, tax, depreciation and amortization, abbreviated to EBITDA. See also: EBITDA

Operating profit

Difference between the revenue from sales and operating costs. Operating costs must not include financial items or earnings from investments. See also: Sales

OpFCF

See: Operating Free Cash Flow

Option Series

Series of options underlying the same option which has the same strike price and maturity month. See also: Option, Share

Option

Contract that allows a private investor to buy or sell during a set time period at a given price.

Ordinary shares

A type of share generally entitled to vote, receive dividends, and share in the surplus of a firm and in the distribution of what remains after it is wound up. See also: Share, Dividend

Original Equipment Manufacturer

A company that sells a product bought in bulk from a manufacturer, under its own brand.

Out of the Money

An option with no value if exercised immediately. See also: Option

Outsourcing

Transfer of the components of an internal IT infrastructure to an external source. An example would be ASP.

Overdraft

Investment strategy in which the buyer does not have the recommended collateral. See also: Collateral P

P/E (Price to Earnings) Ratio

Result of dividing the present value of market shares by earnings per share. The majority of P/E ratios are based on EPS (earnings per share) because they are often biased. See also: Share, Earnings per Share

Package Deal

Portion of the bond offer, which is restricted by expiry. See also: Bond

Packages of hundred shares

Increase of 100 Shares See also: Shares

Paid Dividends

An element of the Cash Flow Statement that relates the cash flow during a fiscal year with the paid dividend. This can differ from the total dividend announced if part of the dividends is not paid in cash (e.g. fully-paid share.) See also: Cash Flow Statement, Cash Flow, Dividend

Parity

Face value of a security. See also: Face Value

Payment Date

The date on which a share's dividend must be paid or payment of interest on an obligation bond. See also: Share, Dividend, Bond

Payment Ratio

Dividends divided by net earnings. Adjusted net revenue is often used to calculate ratio. See also: Equity, Dividend

PBT

Acronym for Profit Before Tax.

PEG Ratio

Price to Earnings Growth. See: PER Ratio

PER Ratio

Price Earnings Ratio. See: P/E Ratio

PER

Acronym for Price to Earnings Ratio. See: P/E Ratio

Pink Sheets

Recorded quotations for the bidding prices of shares on the OTC market. See also: Share

Points

Refers to security prices. For example, in shares the point implies $1.00 per share. See also: Security, Share

Poison Pill

Defensive tactic created with the intention of making a hostile takeover extremely costly.

Pooling of interests

Accounting method where there is no goodwill in the consolidated accounts, similar in many aspects to the most commonly used purchasing accounts. This technique is also known as accounting merger or joint interest billing. See also: Goodwill

Portfolio

Accumulation of securities by an individual or an entity. A portfolio may contain many types of securities, such as debt securities or shares. See also: Security, Share

Preference shares

Shares generally entitled to receive a fixed dividend. However, the rest of the rights attached to these shares are limited (for example, the entitlement to share in dividends, voting rights, etc.). These shares are also referred to as fixed income shares. See also: Dividend

Premium

Amount of money that reflects the difference between the share price and the price of another share. See also: Security

Price Fixing

The task of the subscriber to indicate the price a company will pay for a security. See also: Subscriber, Security

Price to Book Value (P/BV)

Share price divided by net asset value per share (for example, book value per share). See also: Share, Net Asset Value

Price to Cash Earnings (P/CE)

Price of shares divided by earnings per share. See also: Share, Earnings per Share

Price to Earnings Ratio

See: P/E Ratio

Priority Security

Preference shares that are above other stocks. See also: Security

Private / Closed Market

Market where access is limited to a group of specific buyers and sellers. Furthermore, public markets often direct private sub-sectors of the market.

Private placement of securities

This involves subscribing a security and then selling it on to a few buyers in large amounts. See also: Security

Pro Forma Results

Projection that explains how a financial condition would be under certain circumstances.

Profit and loss statement

Financial statements reflecting a company's revenue and expenses in the course of a fiscal year and summed up as a profit or a loss. See also: Earnings, Fiscal year, Revenue, Loss

Profit Margin

Measure of profit divided by sales. Reflects profitability, cost structure and efficiency. Given that profits can be measured in various ways, several revenue calculations are possible. See also: Profit

Promissory Notes

Stocks issued by the American Government such as bonds or notes. See also: Stock, Bond

Provisions

Debts with doubtful future repayment in terms of amount and length of time. See also: Debt

Public / Open Market

Market where any buyer or supplier can trade goods and services. See also: Goods, Services

Purchase, Acquisition

Acquisition of a controlling stake in a company. Leveraged acquisition is the use of debt to purchase a company's shares.

Put Option

Agreement that the investor has the right but not the obligation to sell a security at a given price during a given period of time. See also: Security Q

Qualitative analysis

Research method dealing with intangible factors that cannot be measured precisely, such as the employees' morale or experience.

Quant

An analyst who uses quantitative analysis.

Quantitative analysis

Research method consisting in the analysis of assets that can be measured, such as, for example, the value of goods, the cost of capital, etc. See also: Asset

Quotation

Highest bid to buy a stock, and the lowest offer to sell it at a given price. See also: Bid, Security R

Ranking

Position of an advertiser compared with that of another advertiser according to the number of clicks per graph. Ranking gives advertisers information about the performance of their advertising by sites.

Recession

Drop in a nation's economic activity. Also defined as at least two consecutive quarters of GNP drop. See also: GNP

Recovery shares

Publicly traded shares whose market value falls dramatically. See also: Shares

Recovery

Time period after a recession in which economic activity increases and GNP rises. See also: Gross National Product

Regulators

Term referring to the regulatory authorities.

Reimbursement System

Internal company system that processes orders, inventory and accounts receivable management, among others.

Reporting Date

The date on which a shareholder should have a company's share in his/her possession in order to be entitled to receive a dividend. See also: Dividend, Share

Representative, Financial Agent

See: Broker

Repurchase Rate

Repurchase of securities business rate used by Central Bank with the intention of influencing domestic monetary markets. See also: Security, Central Bank, Monetary Market

Request for Proposals

Transaction in which buyers express a need for a product or service and the sellers compete among each other, bidding in order to achieve their objective. Suppliers may attempt to offer the most competitive prices, delivery times and conditions for the product or service they provide.

Request for Quote

Transaction in which buyers express a need for a product or service and the sellers compete among each other, bidding in order to achieve their objective.

Reserves

Shareholders' funds minus share capital, such as revenue withheld (profit and loss reserve) and revaluation reserve. See also: Shareholders' funds, Share capital

Residual Risk

See: Alpha

Return on Capital Employed

EBIT divided by average capital invested. The capital invested reflects the book value of an investment in fixed assets conducted by the company. See also: EBIT, Book Value, Fixed Assets

Return on Dividend

Net dividend per share divided by share price. See also: Dividend per Share, Share

Return on Equity

Net earnings divided by shareholders' equity. Reflects return after taxes on investment by the parent company's shareholders. See also: Net Earnings, Shareholders' Equity

Return on Investment

Measures company revenue generated by the money that the firm itself has invested. Calculated by dividing the firm's net earnings by its net assets. Also known as ROI. See also: Earnings, Net earnings

Return on Margin

Difference in return between various stocks. See also: Stock

Revenue

Money received by a company regardless of its origin.

Reverse Auction

Transaction in which the need is expressed for a product or service and buyers compete against one another trying to provide the best price, delivery time, and conditions to secure the bid. See also: Services

Revolving credit

Credit line that can be used several times up to a specified amount with regular repayments.

RFP

See: Request for Proposal

RFQ

See: Request for Quotation

ROCE

See: Return on Capital Employed

ROE

See: Return on Equity

ROI

See: Return on Investment S

Share appreciation rights

Compensation plan giving recipients the opportunity to take advantage of an increase in the company's share price without exercising any option right. See also: Share

Share capital

All of the shares representing ownership of a company with their corresponding face value, including both preference and ordinary shares, and listed on the Balance Sheet under shareholders' funds. When new shares are issued at a price above their face value, the difference is recorded as share premium. See also: Shareholders' funds, Share

Share consolidation

Phenomenon whereby the face value of each share goes up and the number of shares issued goes down. See also: Share

Share Price

Current price that must be paid for a specific share in a stock exchange.

Share Risk

See: Diversifiable Risk

Share with issue premium

See: Issue premium

Shareholder's Equity Multiples

Obtained by dividing share price by earnings per share, by cash flow, by assets or any other statistics related to value. It is a relative value measurement. See also: Share, Assets, Cash Flow

Shareholder

Individual or legal entity owning shares in a company. See also: Shares

Shareholders' Funds

Share capital plus reserves, excluding minority interests. Shareholders' funds are equal to the accounting value of the net assets attributable to shareholders. See also: Share Capital

Shareware

Software distributed to users free of charge, so that users can share software with other users without having to pay licensing rights. Normally this type of software is only free for use and for a set time period.

Shell Merger

Technique through which a company that cannot be listed on the stock exchange is able to do so. With this aim, the company merges with a fictitious corporation (a public company that has no relevant operations). See also: Merger

Short Positions

Total number of a specific market's shares that have recently been sold but not yet paid for. See also: Shares

Short Sale

Sale of a stock in ownership. Speculative practice conducted in the expectation that a determined stock price will fall, with the possibility of buying back the stock later at a lower price. See also: Security

Short-Term Debt

Loans from a company that must be repaid within a year's time, such as short-term liabilities. See also: Debt

Short-Term Liability

All liability to be repaid in less than one year from the date on the balance sheet, including elements such as salaries, interest, and accounts payable. See also: Liability, Balance Sheet, Interest, Accounts Payable

Single Risk

A company's specific risk that should be eliminated through diversification. Influenced by market trends. See also: Diversifiable Risk

Small / Medium Enterprise

Generally, a company is considered small or medium sized when it has less than 500 employees.

Small-cap shares

Shares in relatively small companies. See also: Shares

SME

Acronym for Small and Medium Enterprise See: Small / Medium Enterprise

Solvency Ratio

Ratio measuring the ability to pay short-term obligations, obtained by dividing current assets by short term liabilities. The higher the ratio, the more liquid the company. See also: Current Assets, Short-Term Liability

Specialist/ Market Maker at New York Stock Exchange

Person employed to buy and sell on their own behalf a specific stock in order to offset any temporary imbalances in the supply and demand of a given market. See also: Security

Spot Delivery Price

The value of goods or the currency in which it is available for immediate sale and delivery.

Spot Market

Market for buying or selling foreign currency or goods through immediate cash payment and delivery.

Stagflation

A combination of high inflation and slow economic growth. See also: Inflation

Stake of revenue

In a business, the percentage of profit (or loss) that corresponds to sleeping partners or silent partners. See also: Earnings

Stake

Investment that represents the part owned of a company. Also called share. See also: Shares, Inventory

Stock Exchange Index Futures

An agreement to buy or sell the cash value of a securities index by a given date. See also: Share

Stock Exchange Index Options

A contract that grants its holder the right (not the obligation) to buy or sell a set amount of an underlying investment on a specific date at a set price.

Stock Exchange

Place where shares are traded.

Stock Options

Agreement that allows an investor to buy or sell something within a set time period and for a set price. Also a mode of compensation for employees.

Stockbroker

Individuals professionally engaged in the sale and purchase of shares, bonds and securities in general, and charging a commission for their services. Sometimes abbreviated to broker.

Straight-line amortization

Amortization method in which a fixed amount of the obligation is discounted in each period. It is calculated by dividing the asset's acquisition value by an estimate of its working life. See also: Amortization

Straight-line depreciation

Accounting method allowing the cost of assets to be written down by the same amount each year.

Subscriber

Person who partially or totally subscribes an issue's stock.

Subsidiary

A company in which at least 50% of its shares belong to another corporation. See also: Share

Supply chain management

This refers to the optimization of deliveries from the supplier to the end clients.

CAGR

Acronym for Compound Annual Growth Rate.

Systematic Risk of a Portfolio or Security

See: Non-diversifiable Risk T

Tangible asset

Physical asset held in the company for more than one year, such as land, buildings, premises, property, machinery, etc. Also called tangible fixed asset. See also: Asset

Tax Rate

The cost of taxes in an income statement expressed as a percentage of earnings before taxes. See also: Income Statement

Tax

Levy required depending on the financial capacity of those it applies to.

TCO

Acronym of Total Cost of Ownership. See: Total Cost of Ownership

Technical analysis

Procedure studying the attitudes of investors in order to predict the future price of a share. See also: Share

Third market trading

Buying or selling, on the secondary market, shares listed on an exchange. See also: Share

Total Capital Investment

Amount of net fixed assets plus social capital. See also: Fixed Assets

Total cost of ownership

Method designed to help IT professionals to administer the direct and indirect costs attributed to the acquisition, maintenance and use of data processing applications and systems.

Total Return

An investment's profit and loss for one year. Reflects dividends, interest, and price fluctuations. See also: Dividends

Total Shareholder Return

Measures the present value that an investor receives in a certain time period, keeping in mind all the dividends obtained and all share price variations. See also: Equity, Dividend, Share Price

Trader

Person exchanging money for shares in a trade. See also: Share

Transparency

Situation in which buyers and sellers can view the prices of transactions in a given market.

TSR

See: Total Shareholder Return U

Umbrella insurance coverage

Additional debt insurance providing greater protection against losses for which there is legal liability. See also: Insurance

Unconsolidated Pension Plan

Employees must make contributions in order to establish a pension plan for the future. When they have not made regular contributions, the money to be paid must be taken out of current income. See also: Revenue

Underlying asset

Asset arising from a contract between related parties agreeing to exchange, buy or sell the asset. See also: Asset

Undervalued

Asset price which is perceived to be lower than that indicated by one or more valuation models. See also: Assets

Underwriter

In the context of a securities underwriter, the party (generally the bank) guaranteeing the issue at a specified price. See also: Security

Unemployment Rate

Percentage of a country's population of working age that is unemployed and is seeking employment.

Unlevered beta

Term applied to the beta associated with an investment funded entirely with equity (for instance, debt). See also: Equity, Beta

Unlisted Security

Stock that is unlisted in organized markets but which is traded in a secondary market. See also: Security

Unprofitable

Term used for a stock or index that sells at a lower price than its market reference or average. See also: Stock V

Vale Added Selling

Process in which someone buys products and adds value to them in order to sell them to the end consumer.

Valuation Multiples

Also called Price/Earnings (P/E) ratio. See also: P/E Ratio

Valuation

In a financial context, the term valuation refers to the value established of revenue and asset market value. See also: Share, Revenue, Assets

Value Investor

Investor that looks for negotiation in stock exchange and often buys shares that are trading at a low P/E ratio. See also: Share, P/E Ratio

VAR

Acronym for Value Added Reseller See: Value Added Reseller

Variable cost

Direct costs are directly proportional to production volume. When there is no production, variable costs are zero.

Variance

Measures the range of a data series around its average value. The square root of the variance is the standard deviation.

Variation in net working capital

Item in the Cash Flow Statement equal to the difference between the net working capitals for the current year and the previous year. See also: Working capital

Variation

Price variations in a stock or index. See also: Security

Venture capital

Type of investment often used by firms in an initial phase from which excellent growth results are expected but they cannot obtain funding on traditional capital markets. It is the kind of funding used by start-ups seeking to grow quickly.

Virtual market maker

This refers to the intermediary running the e Market.

Virtual Market

Also known as an e-hub or "butterfly market," it is a web site where various entities can buy and sell items and services among themselves. The term e-hub also implies a many-to-many relationship. See also: Services

Volatility

If this appears in the calculation option formula, it indicates the volatility of underlying asset yield from the present to the option's maturity date. Also, a risk measurement based on standard deviation of asset yield.

Volume

Number of shares, either by trade order or general business activity, for a set time period.

Voucher

Security that permits its holder to buy a certain amount of shares in future at a given price. Therefore, it is traded just as shares given that the price reflects the value of the underlying share. W

Weighted average cost of capital

Capital investment rate, representing the expected return from the company's securities portfolio.

Will

Document that indicates how assets should be distributed after someone's death. See also: Assets

World Trade Organization

Organization created by the General Agreement On Tariffs and Trade, which resolves international trade disputes and reinforces GATT trade pacts.

Wrap account

Simple investment putting an end to money management and brokerage services. See also: Broker X Y

Yankee bonds

Bonds sold in the United States through foreign firms and denominated in dollars. See also: Bond

Yield Ratio

Quotient of two bond yields. See also: Bond Z

Zero-coupon certificate of deposit

A bond that is sold at a considerable discount as it does not offer any regular payment of interest. However, on its maturity, investors receive a return equal to the price of the bond on delivery minus the face value. See also: Bond