Investor's glossary: financial terms in plain English
Stock market terms with the formula, the calculation method and a list of pitfalls. Every multiple is explained once and surfaces as a tooltip.
- Dividend gapThe drop in a share price on the trading day after the record date, roughly equal to the payout.
- Dividend growthThe change in the payment per share from one period to the next.
- Dividend in kindA distribution made in property rather than cash, where the articles expressly allow it.
- Dividend investingChoosing securities for a regular cash flow from payouts: what matters is not the price move but how steady and predictable the dividend itself is.
- Dividend omissionA period passing with no payment: no resolution was taken, the recommendation was nil, or distribution is prohibited by statute.
- Dividend payment dateThe deadline by which a company must remit the declared amounts to the holders of its shares.
- Dividend policyA company's internal document setting out what share of profit or cash flow goes to shareholders.
- Dividend recommendationThe board's proposal on the size of a payout, subject to approval by the shareholders meeting.
- Dividend record dateThe date on which the list of holders entitled to a payout is fixed.
- Dividend reinvestmentDirecting payments received into buying the same or other securities instead of withdrawing the cash.
- Dividend restrictionsThe cases in which a company may not distribute profit: insufficient net assets, signs of insolvency, share capital not paid up.
- Dividend taxThe tax withheld from a dividend payment.
- Dividend track recordThe series of dividends a company has actually paid, by date and amount.
- Dividend trapA situation in which a high dividend yield is caused by a falling price rather than a rising payout.
- Dividend yieldThe annual dividend divided by the current share price.
- Dividends from subsidiariesThe cash a holding company receives from the businesses it controls, out of which it usually pays its own distribution.
- Dividends in futures pricingHow an expected payment is embedded in the price of a futures contract on a share: the futures holder receives no dividend himself.
- Dividends on depositary receiptsPayment to the holder of a depositary receipt: the money passes through the depositary bank and is converted at its rate.
- DojiA candle whose open and close practically coincide, leaving the body collapsed into a line.
- Donchian channelBoundaries built from the highest high and the lowest low over a chosen number of recent intervals.
- Dot-com crashThe collapse of internet company shares in 2000 after several years of headlong growth.
- Double tax treatyAn international agreement setting out which country taxes an income and at what rate.
- Double topTwo roughly equal highs separated by a decline; the mirror case is called a double bottom.
- Dow Jones Industrial AverageThe oldest US index: a narrow set of large companies weighted by share price rather than by capitalisation.
- DrawdownThe fall in value from a previous peak to the subsequent trough.
- DuPont analysisBreaking return on equity into three factors: margin, asset turnover and leverage.
- Dual-class sharesA capital structure in which different classes of ordinary shares carry unequal numbers of votes per share.
- DurationThe weighted average time to recover a bond investment, and the measure of its sensitivity to interest rates.
- EBITProfit before interest and tax.
- EBITDAEarnings before interest, taxes, depreciation and amortisation — a rough measure of what the core business earns.
- EBITDA marginThe share of revenue that remains at the EBITDA level.
- ECB policy rateThe reference price of money in euro, set by the European Central Bank.
- EV/EBITEnterprise value divided by profit before interest and tax: a valuation that keeps depreciation in, unlike the ratio to profit before it.
- EV/EBITDAThe value of the whole business, debt included, relative to its EBITDA.
- EV/SalesEnterprise value divided by revenue.
- Early redemptionReturn of the principal before the stated date — by the issuer's decision, at the holders' demand, or because of circumstances described in the documentation.
- Earnings per share (EPS)Profit attributable to a single share.
- Earnings qualityA measure of how far reported profit is backed by actual cash.
- Earnings yieldEarnings per share divided by the share price — the inverse of the price to earnings ratio.
- Economic value addedProfit above the charge for all the capital used: what the business earned after settling with both lenders and shareholders.
- Effective durationA measure of price sensitivity to rates obtained by revaluing the bond up and down; it works where the cash flow itself depends on the rate.
- Effective tax rateThe share of pre-tax profit taken by tax according to the accounts — after reliefs, carried-forward losses and deferred amounts.
- Efficient frontierThe set of portfolios each of which offers the highest expected return for its own level of dispersion. Anything below the line loses on both dimensions at once.
- Efficient market hypothesisThe proposition that available information is already reflected in the price, so it cannot be used to beat the market systematically.
- Elliott wavesAn approach describing market movement as a repeating sequence of waves at several scales.
- Emerging marketsCountries with functioning exchanges but greater dependence on foreign capital and thinner trading.
- Endowment effectThe tendency to value an asset you own more highly than an identical one you do not.
- Engulfing patternA two-interval candle formation in which the body of the second candle completely covers the body of the first.
- Enterprise value (EV)Market capitalisation plus net debt — the price of the whole business regardless of how it is financed.
- Equal weightingA rule giving every holding the same weight regardless of company size or valuation: the simplest way to avoid concentrating a bet.
- EquityThe share of assets that belongs to shareholders: assets minus liabilities.
- Equity bridgeThe move from the value of the whole business to the value of the shareholders' share: debt and obligations to others are deducted, cash and non-operating assets added.
- Equity instrumentA security certifying a share in a company's capital.
- Equity methodHow a stake the group influences but does not control is reported: not that company's revenue, but the group's share of its profit, as a single line.
- Equity ratioThe share of equity in assets: how far the company belongs to itself rather than to its creditors.
- Equity risk premiumThe addition to the risk-free rate for holding equities at all: what the market on average pays for the risk taken above government bonds.
- EurobondA bond issued in a currency other than that of the issuer's home country.
- European debt crisisThe crisis of confidence in the government debt of several euro-area countries that unfolded after 2009.
- European-style optionAn option that can only be exercised on the expiry date.
- Evening clearing sessionThe trading break in which the exchange settles the day on the derivatives market.
- Evening sessionAn additional trading period after the main session closes.
- Ex-dividend dateThe first day on which a purchase no longer carries the right to the declared payout.
- ExchangeThe organiser of trading: it matches buy and sell orders under one set of rules.
- Exchange bondAn issue registered under a simplified procedure by the exchange rather than the regulator, with fewer requirements placed on the issuer.
- Exchange feeThe payment to the exchange for executing a trade, part of the investor's total costs.
- Exchange gatewayThe software entry point through which a participant's orders reach the exchange trading system.
- Exchange rateThe price of one currency expressed in another.
- Exchange ratioThe ratio at which shares in a company being reorganised are exchanged for securities of the successor.
- Exchange-traded fund (BPIF)A basket of assets traded as a single security; the Russian domestic form is known as a BPIF.
- Exit multiple methodValuing the business beyond the forecast through a multiple: the final forecast year's metric is multiplied by an exit coefficient.
- Exit ruleA condition for closing a position, defined in advance.
- Expected credit loss allowanceAn amount charged in advance against expected losses on loans and receivables — before the borrower has stopped paying.
- Expense ratioThe management company's fee, deducted from fund assets every day.
- ExpirationThe date on which a contract ceases to trade.
- Exponential moving averageAn average in which the weight of an observation decays as it recedes into the past, so recent intervals count for more.
- ExposureThe extent to which a portfolio depends on a particular risk factor.
- Extraordinary general meetingA meeting held outside the annual cycle, called by the board, the audit commission, the auditor or large holders.
- FIFO for tax purposesThe rule that a partial sale draws down the earliest purchases first: the cost is taken from the first parcel bought rather than from an average price.
- FTSE 100The index of the largest companies listed in London.
- FX forwardAn agreement to buy or sell currency at a rate agreed today for a date in the future.
- FX interventionCentral bank operations in the currency market that influence the exchange rate.
- FX swapAn exchange of currencies with an obligation to reverse the exchange on an agreed date.
- Face valueThe amount an issuer returns to the holder at maturity.
- Factor investingBuilding a portfolio around characteristics that historically explained differences in returns: valuation, size, quality, momentum, calmness of price.
- Factor riskSeveral positions depending on one common cause.
- Fair futures priceThe price at which holding the contract and holding the underlying asset are equally attractive.
- Fair valueAn estimate of a business's worth based on expected future cash flows.
- Fair value hierarchyA ranking of valuations by how reliable their source is: an exchange price, the price of a similar asset, or the company's own model.
- False breakoutA brief move beyond a level followed by a return back inside it.
- Fat tailsThe property of market returns whereby very large moves happen far more often than the normal curve predicts.
- Fear of missing out (FOMO)The anxiety of watching someone else's profit, which prompts buying after a sharp rise.
- Federal funds rateThe reference price of money in dollars, set by the US Federal Reserve.
- FertilisersNitrogen, phosphate and potash fertilisers as a distinct group in world commodity trade.
- Fibonacci levelsMarking a retracement as fractions of the preceding move.
- Final dividendThe payment for a completed year, approved by the annual meeting, as opposed to interim payments made during the year.
- Financial leverageUsing borrowed capital to increase the return on equity.
- Financing cash flowCash moving between the company and those who fund it: debt raised and repaid, dividends, share buybacks and issues.
- FinenessThe measure of how much pure precious metal an alloy or a bar contains.
- Fiscal ruleA mechanism separating budget spending from the current commodity price by accumulating and drawing down reserves.
- Fisher effectThe rule that a nominal rate absorbs expected inflation, leaving the real rate roughly unchanged.
Showing 100 of 1109← Back to the startMore terms →