Moneyterms: A-B

ABC1
A demographic group defined by occupation that is commonly targeted by media and advertising companies.…
Abnormal return
The excess of actual return over the level of return that would be expected given the riskiness of a portfolio.…
Absolute return
An absolute return is the actual amount of money made by an investment ; the actual gain as a percentage of the amount invested.…
Acceptances
Agreements by the shareholders of a company subject to a bid to sell their shares to the bidder.…
Accepting house
A financial institution that accepts (guarantees) bills of exchange in return for a fee.…
Accounting Rate of Return
Average operating profit ÷ average book value of assets, as a percentage.…
Accounting Standards
Sets of rules governing how accounts are drawn up.…
Accrual principle
The accounting principle of matching of costs to the revenues they generate.…
Accruals
A balance sheet item for expenses for which invoices have not been received at the end of an accounting period.…
Accrued interest
The amount of interest accumulated on a bond but not yet paid.…
Acid test ratio
(current assets - stocks) ÷ current liabilities. A measure of a company's ability to pay short term debt.…
Acquisition
The purchase, by a company, of another company, a business, product lines or brands.…
Acquisitive growth
Growth that is the result of takeovers, as opposed to organic growth.…
Active investing
Attempting to outperform the markets.…
Activist shareholder
Investors who intervene in the running of a company.…
Actuary
Actuaries assess financial risk, calculate insurance premiums and value pension funds.…
Ad driven media
The parts of the media that are dependent on advertising for their revenues, which therefore tend to be cyclical.…
Adjusted EPS
EPS adjusted for non-cash or one-off items such as amortisation and exceptional costs to give a better indication of underlying trends.…
Adjusted operating profit
Operating profit adjusted for non-cash or one-off items to give a better indication of underlying trends.…
Adjusted present value
An alternative to NPV. Cash flows are discounted using the cost of equity (instead of the WACC) and a separate adjustment is made for financing (i.e, the tax savings.…
Administrative receivership
The running of a company, or management of particular assets, is handed over to a receiver appointed by creditors in order to recover debts.…
ADR
A security issued in the US which bundles together a number of shares in a non-US company.…
Adverse opinion
An auditor's warning that a company's reported accounts do not show a true and fair view.…
Adverse selection
The tendency for those most at risk to be those most likely to buy insurance.…
Advertising elasticity
The change in sales that results from a change in ad spend.…
Advisory broking
Stockbroking services that offer investors advice from a stockbroker but where trades are only made on the client's instructions.…
AER
Annual effective rate; a number that can be used to compare different fixed interest investments taking into account the effects of compounding.…
Affinity fraud
A fraud targeting members of a particular group who are likely to trust each other.…
Agency cross
A trade that a broker matches directly between two of its clients, bypassing the market.…
Agency theory
The economic analysis of the conflicts of interest between owners and managers of assets.…
Aggressive accounting
Manipulation of financial numbers, usually within the letter of accounting rules.…
AGM (annual general meeting)
A annual meeting at which shareholders vote on the appointment of directors and other important decisions.…
Agreed takeover bid
A take-over bid backed by the directors of the target company.…
AIM
A market run by the London Stock Exchange for trading in companies too small to list on their main market.…
Algorithmic trading
Automated trading used to find the best prices and to disguise buying or selling interest.…
All or nothing order
An all or nothing order is either executed in full or not at all.…
Allotment
The allocation of a new issue of securities to applicants.…
Alpha
The alpha of a security or fund is its out-performance over the risk adjusted return, with risk measured by beta.…
Alpha fund
Usually simply a label for funds that attempt to significantly out-perform their benchmark.…
Alternative investments
Investments other than conventional investments in equities, bonds and cash.…
Altman Z-score
The Altman z-score is a measure of a company's financial strength that uses a weighted sum of several factors.…
American Depositary Receipt
A security issued in the US which bundles together a number of shares in a non-US company.…
American option
An option which can be exercised at the strike price at anytime before the expiry date.…
Amortisation
Amortisation is the equivalent of depreciation for intangible assets.…
Angel investor
An individual investor who invests in a start-up that is unable to raise venture capital.…
Annual effective rate
A number that can be used to compare different fixed interest investments taking into account the effects of compounding.…
Annual premium equivalent
A measure that allows the calculation of new business numbers for an insurer that combines single premium and regular premium business.…
Annual report
The most important single regular release of information from the to investors.…
Annuity
A stream of regular fixed payments, or a financial product that offers them.…
AON order
An all or nothing order is either executed in full or not at all.…
API gravity
A measure of the density of crude oil.…
APT
Arbitrage pricing theory; a valuation method which is theoretically sound but which is difficult to apply in practice.…
APV
Adjusted present value; an alternative to NPV. Cash flows are discounted using the cost of equity with a separate adjustment for financing.…
Arbitrage
Making a gain through trading securities without committing or risking money.…
Arbitrage pricing theory
A valuation method which is theoretically sound but which is difficult to apply in practice.…
Arbitrageur
A securities trader who specialises in arbitrage and arbitrage like strategies.…
Argus Sour Crude Index
An index of the price of high sulphur crude oil produced in the Gulf of Mexico.…
Arithmetic mean
The total divided by the number of numbers summed.…
ARPU
The revenues from the services divided by the number of clients buying those services.…
ARR
Accounting rate of return: average operating profit ÷average book value of assets, as a percentage.…
Asian option
An option that has an exercise price that is based on the average price of the underlying security over a period.…
ASK (Available Seat Kilometres)
A measure of airline capacity: seats available ×distance flown.…
Asset allocation
Deciding the proportion of a portfolio that should be invested in each security type, market and sector.…
Asset backed securities
Debt securities secured against specific cash flows.…
Asset stripping
The purchase of a company, followed by its breakup.…
Assets under management
The amount of clients’ funds a fund manager manages. A measure of size and used for valuation.…
Asset turnover
Sales ÷ assets. Measures how effectively the assets invested in a business are at generating sales.…
Associate company
A company in which a group of companies has a substantial stake (typically 20%-50%) but not outright control.…
Assurance
Insurance against an inevitable event such as death.…
ATK (Available Tonne Kilometres)
Aircraft weight carrying capacity in tonnes × km flown over period.…
ATS (automated trading system)
A computer system for matching orders in securities.…
At the money
An option is at-the-money if the strike price equals the exercise price.…
Audit
The independent checking of a company's accounts by external accounts.…
Auditors' opinion
The auditor's opinion on the whether a company's accounts give a true view of its finances.…
Average
A generic term which can refer to one several types of average.…
Average cost
A book value for stocks (inventory) calculated using a moving average of the price of stocks received.…
Average down
Buying more of a security which has fallen in price in order to lower the average price paid.…
Average Revenue Per User
The revenues from services divided by the number of clients buying those services.…
Backfill bias
The distortion caused by the inclusion of historical of historical data of new index constituents.…
Back office
Administrative functions such as processing orders.…
Back-testing
The testing of a financial model by using it on past date and then comparing the 'predictions' to what actually happened.…
Backwardation
Backwardation is the opposite of forwardation; it occurs when the price of the future is less than the spot price of underlying commodity.…
Backward integration
Increasing vertical integration by acquiring suppliers or otherwise increasing level of self supply.…
Bad debt
Debt that is unlikely to be recoverable.…
Balance sheet
The balance sheet shows what assets and liabilities the company has, and how the business is funded.…
Bancassurance
The sale of insurance and banking products through the same channel, most commonly bank branches selling insurance.…
Banking covenants
Agreements between a company and its creditors that it should that the company should operate within certain limits, typically on debt levels, asset sales or gearing.…
Bankruptcy
A person who is insolvent (unable to pay their debts) can be declared bankrupt. This means their assets and income become, for a period, by a trustee who attempts to clear what debts they can.…
Barrel of oil
In the oil industry, a barrel is 42 US gallons, approximately equal to 159 litres.…
Barrier options
A type of exotic option whose value depends on the underlying passing (or not) a particular price point.…
Barriers to entry
Anything that makes it difficult for a new entrant to break into a market.…
Basic EPS
Earnings per share without any adjustments.…
Basis points
A basis point is to one hundredth of a percentage point (i.e. 0.01%).…
Basis risk
A basis risk is the risk that the value of a hedge may not move in perfect opposition to the position it hedges.…
bboe
Billions of barrels of oil equivalent. A single number combining the volumes of oil and gas production.…
Bear
An investor who is pessimistic about the prospects for a market, a sector or a particular security.…
Bearer securities
A security which gives the bearer of a paper certificate ownership, with no register of owners being maintained.…
Bear raid
An attempt by traders to force the price down of a security by heavy forward selling. Such market manipulation is illegal in most countries.…
Bear squeeze
A price rise that causes bears to buy to cover their positions. The demand this creates causes further price rises.…
Bear trap
A short term dip in the price of a security that tempts bears into positions that make a loss when the price then rises again.…
Behavioural finance
A branch of financial economics that models the behaviour of investors, rather than simply assuming that they are rational and risk averse.…
Benchmark
In an investment context most likely to mean a performance benchmark or a benchmark price.…
Benchmark index
The index or other measure against which the performance of a fund or portfolio is measured.…
Benchmark price
Prices of commodities in a particular well specified, widely traded, form.…
Beneficial ownership
The "real" owner of assets that are held by a trustee.…
Beta
Beta is a measure of the correlation between the value of a security and the market. Beta is used to calculate discount rates for CAPM.…
Bid-offer spread
The difference between the prices at which shares can be bought and sold.…
Bid price
The highest price at which a buyer is willing to buy a particular security. The buyer may be a market maker or an ordinary investor.…
BIMBO
Buy-in management buy-out. A partial management buy-in combined with an MBO.…
Binary options
Options that either pay a fixed amount or nothing.…
Black-Scholes
The most widely used method of option valuation. More complex models are sometimes necessary as it uses a number of simplifying assumptions.…
Black swan
An event that is highly improbable (and unforeseen and therefore omitted from models) that nonetheless occurs and has a significant impact.…
Blue chip
A large company. Blue chip shares are generally lower risk. FTSE 100 constituents are generally considered blue chips.…
Boe
Barrels of oil equivalent is a single measure combining oil and natural gas production.…
Bonds
A bond is a security that pays interest. The majority of bonds have a fixed life at the end of which the principal is returned.…
Bonus issue
The issue of new shares to existing shareholders at no charge in proportion to their existing shareholdings. It is basically a bookkeeping exercise.…
Book to bill ratio
The ratio of the orders taken in a period to the amount invoiced over the same period. Most commonly used in the semiconductor industry.…
Book value
The value of assets as shown on the balance sheet.…
Bottom fishing
Any investment strategy that relies on buying extremely cheap; an extreme form of value investing.…
Bottom-up stock selection
Picking individual stocks or securities rather than sectors or regions.…
Boutique
A small specialist financial institution such as a fund manager or broker.…
Brand
The identifying name and other distinguishing characteristics attached to a business and its products or services.…
Brand dilution
Brand dilution is the weakening of a brand though its overuse: often from ill judged brand extension.…
Brand extension
Brand extension is the widening of the range of products sold using a particular brand. If overdone it can risk diluting a brand.…
Break-even
The break-even point is the level of sales (revenues or volumes) needed to cover the fixed costs; the level of sales at which neither a profit or loss is made.…
Brent crude
The accepted world benchmark crude oil which is used to price two thirds of the world's internationally traded crude oil supplies.…
Bubble
Security prices far above the levels which can be justified by any rational assessment of the real value of future cash flows. Bubbles inevitably burst.…
Building society
A British financial mutual. In effect, a a bank owned by depositors and borrowers.…
Bulge bracket banks
The largest, mostly American, investment banks.…
Bull
An investor who expects the market, sector or security to rise in price. The expectation of rises is described as "bullish".…
Bulldog bond
A sterling bond issued by an non-British issuer.…
Bullet bond
A simple bond which pays fixed interest with repayment of the principal on a fixed date.…
Bull run
A period in which investors' optimism keeps the market moving strongly and consistently upwards.…
Bundling
The practice of supplying two separate products together, so buyer who only want one, must buy both.…
Business model
The overall strategy that defines how a business makes its money. Having the right business model is essential and investors often need to assess the business model to estimate the future potential of a company.…
Business to business
Sales to another business as opposed to consumers.…
Buy and hold
Any strategy that holds securities for long periods, avoiding frequent trading.…
Buy-in management buy-out
A partial management buy-in combined with an MBO. Often abbreviated to BIMBO.…
Buy-side analyst
An analyst who works for an institutional investor such as a fund management company, usually producing research for internal use rather than publication.…
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