Annual report

The financial statements and allied commentary concerning a corporation's business, given each year to investors and inquiring members of the public and business media.


Anything owned by a company that has a monetary value, for example 'fixed' assets such as buildings, plant and machinery, vehicles (these are not assets if rented and not owned) and, potentially, intangibles such as trademarks and brand names; and 'current' assets, such as stock, debtors and cash.

Angel investor

An affluent individual who provides financial support for start-ups or entrepreneurs in the form of a one-off investment or ongoing support.


Balance sheet

One of the three essential measurement reports for the performance and health of a company, along with the profit and loss account (P&L) and the cash flow statement. The balance sheet does not show how much profit the company is making (the P&L does) although previous years' retained profits will add to the company's reserves, which are shown in the balance sheet.


A measure of a stock's risk relative to the market. The market's beta is always 1.0. Based on past statistical records, a beta higher than 1.0 indicates that when the market rises the stock will rise to a greater extent than that of the market; likewise, when the market falls, the stock will fall to a greater extent. A beta lower than 1.0 indicates that the stock will usually change to a lesser extent than the market. The higher the beta, the greater the investment risk.

Bid price

The price one is willing to pay for a security.


An amount of money that is allocated for spending on a particular activity or resource, usually over a trading year but can also be for a shorter or longer period.

Buy and hold

A strategy by which the stock portion of an investor's portfolio is fully invested, including dividend reinvestments, at all times.

Buy and sell order

A declared (but not binding) intent to buy or sell a security.

Bear market

A market condition where prices are falling and negative sentiment is rising. A twenty-percent price decline over a two-month period is generally considered the beginnings of a bear market and as losses are anticipated, selling continues and pessimism prevails.

Black swan event

A rare event that has a significant impact on the world but is difficult to predict (i.e. world wars, natural disasters) and has very dramatic consequences for markets and investments.

Bull market

A market condition in which prices are rising or expected to rise, resulting in investor confidence and optimism. A bull market is the opposite of a bear market.


Callable bond

A bond that can be officially repaid by the issuer prior to its maturity date. Out of courtesy, a premium is usually paid to the bond owner when the bond is repaid

Call option

The right given to the owner of the option to buy a stock (or other security) at a predetermined price and volume at a specified time (or within a certain time period).

Capital gain

With common stock or any other capital asset, an increase from the purchase price to the selling price, such as profit from the sale of investments or property.

Capital loss

With common stock or any other capital asset, a decrease from the purchase price to the selling price, such as a loss from the sale of investments or property.

Cash flow

The movement of cash in and out of a business from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments.

Cash flow per share

One of the three essential reporting and measurement systems for any company. The cash flow statement provides a third perspective alongside the profit and loss account and balance sheet. It shows the movement and availability of cash through and to the business over a given period, certainly for a trading year and often also monthly and cumulatively.

Certificate of deposit (CD)

An interest-bearing bank receipt for a specified amount of money. A CD usually matures between three months and three years. The interest rate depends on the amount of money and length of time of the deposit.


The fee (typically derived transactionally) paid to a firm for assisting in the buying or selling of securities.


The paying of interest on the accrued interest as well as on the principal component.


An association of individuals, under authority of law, whose powers and liabilities are distinct from those of its individual members.

Cost of debt ratio

The interest expense over a given period as a percentage of the average outstanding debt over the same period, that is, the cost of interest divided by average outstanding debt. Also called average cost of debt ratio.

Cost of goods sold (COGS)

The directly attributable costs of products or services sold, usually materials, labour, and direct production costs. Sales less COGS = gross profit.

Current assets

Cash and anything that is expected to be converted into cash within 12 months of the balance sheet date.

Current ratio

The relationship between current assets and current liabilities, indicating the liquidity of a business, that is, its ability to meet its short-term obligations. Also referred to as the liquidity ratio.

Current liabilities

Money owed by a business that is generally due for payment within 12 months of balance sheet date. Examples include creditors, bank overdraft and taxation.

Current yield

The amount produced by dividing the annual income (both from interest and dividends) by the current price of the security. Stocks do not gain interest; the current yield for stocks is equal to the dividend yield.

Cyclical industry

An industry whose success is closely linked to the rise and fall of the general economy; for example, the automobile industry is a cyclical industry.


A reputable financial institution that specialises in safeguarding a customer’s physical and electronic securities to prevent theft or loss.


Debt-to-equity ratio

The ratio determined by dividing long-term debt by the equity (all assets minus debts) held in stock. This is a measure of financial risk.


A term denoting the failure to pay the principal or interest on a financial obligation, such as a bond.

Default risk

The risk that a company will default, or fail to meet its financial obligations, that is, fail to pay the interest or principal on its bonds.


The apportionment of cost of a (usually large) capital item over an agreed period, based on life expectancy or obsolescence. For example, a piece of equipment costing $10,000 having a life of five years might be depreciated over five years at a cost of $2000 per year.

Discount bond

A bond that has a value that is less than its face amount.


The process of reducing risk by investing in a variety of investments, industries, risk levels and companies.


A dividend is a payment per share made by a company to its shareholders, based on the profits of the year (but not necessarily all of the profits) arrived at by the directors and voted at the company's annual general meeting.

Dividend payout ratio

The ratio determined by dividing the annual dividends per share by the annual earnings per share.

Dividend yield

The yield determined by dividing the annual dividends per share by the price per share. It is an indication of the income from a share of stock. Given that the return on a stock is comprised of capital gain plus dividends, the total return is comprised of dividend yield plus the capital gains percentage for stock.

Dollar cost averaging (DCA)

A system of buying securities at regular intervals, using a fixed amount of cash over a considerable period of time, regardless of the prevailing prices of the securities. DCA protects against the risk of losing a sum of money invested all at once at an inopportune time, such as right before a price fall.

Dead cat bounce

A short recovery of a market downturn followed by the continuation of that downturn. They are typically identified after they occur and are the result of investors buying at what they believe is the new low.


The lowering of a country’s currency with respect to goods, services or other monetary units for which currency can be exchanged. It’s used by countries with fixed, semi-fixed or sometimes floating exchange rates to remain competitive on a global market by reducing the cost of exports.


Expressed in years and calculated using present value, yield, financial maturity and call features, duration measures the change in bond prices as a result of changing interest rates. The larger the duration, the larger the interest rate risk or reward for bond prices.



The amount of profit that a company produces during a specific period. It can be calculated as Earnings Before Interest and Taxes (EBIT); Earnings Before Interest, Taxes and Depreciation (EBITD); and Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA). Depreciation is the non-cash charge to the balance sheet made by writing off an asset over a period. Amortisation is the payment of a loan in instalments.

Earnings Per Share (EPS)

The amount of earnings each outstanding share of common stock would receive if all profits were distributed. EPS is a general indicator of a company’s profitability.


Face value

The value printed on the face of a stock, bond or other financial instrument or document.

Financial planner

An investment professional that helps with financial plans for specific goals and assists in the coordination of financial concerns.

Fixed assets

Assets held for use by a business rather than for sale or conversion into cash; for example fixtures and fittings, equipment and buildings.

Fixed costs

Costs that do not vary with changing sales or production volumes, for example building lease costs, permanent staff wages, rates and depreciation of capital items.

Fundamental analysis

An analysis of stocks based on fundamental factors, such as company earnings and growth potential, to determine a company's worth, strength and potential for growth.

Federal Reserve System

The central banking system of the United States of America. The Federal Reserve (or Fed for short) is made up of a governing agency and twelve Federal Reserve Banks and is responsible for regulating the country’s monetary and financial system.

Fiscal policy

The use of government spending, revenue and taxation to influence the nation’s economy and to help achieve specific economic goals.

Front running

The unethical practice of trading and dealing on behalf of a client using information that has not yet been provided to the client. This practice sees the broker pursuing profit at the expense of its clients.

Fund manager

A person who manages and implements a fund’s investment strategy. A fund manager is in charge of choosing when to buy and sell a portfolio’s assets.

Futures contract

A contract to buy or sell a particular commodity at a fixed price which will be delivered and paid for at a future date. This contract determines the quality and quantity of the asset to be bought or sold.



The ratio of debt to equity, which usually indicates the relationship between long-term borrowings and shareholders' funds.


Any surplus money paid to acquire a company over and above the value of its net tangible assets.

Gross domestic product (GDP)

The total value of goods and services produced by a nation.

Gross profit

Sales less cost of goods or services sold. Also referred to as gross profit margin or gross profit.


Hedge fund

An investment fund that uses pooled funds from a limited number of individuals or institutional investors with the intention of achieving higher returns through diverse strategies.


Income statement

The financial statement of a company that presents both revenues and expenses during a specified time period.

Inflation risk

The uncertainty of the future real value of an investment due to the impact of inflation.

Initial public offering (IPO)

The first sale of privately owned equity (stock or shares) in a company via the issue of shares to the public and other investing institutions. IPOs typically involve small, emerging companies that are raising capital to finance growth.

Investment advisor

A professional who, for a fee, manages an investment portfolio.


One who underwrites and distributes a company's securities.

Insider trading

The illegal trading of a public company’s stock or securities based on information that is not yet available to the public.


Junk bond

A weak bond, rated BB or lower, that has a high default risk and therefore carries a high interest rate.



General term for what a business owes, which includes long-term loans of the type used to finance the business and short-term debts, or monies owing as a result of trading activities to date.

Limit order

An order placed with a stockbroker to buy (or sell) stock at a specified price, or better, once the price has dropped below the price limit, and during a limited period of time.


The ability or ease with which assets can be converted into cash; also the degree to which one can obtain the full cash value of an investment.

Liquidity ratio

A company's ability to pay its short-term debts, determined by measuring the relationship between current assets (that is, those that can be turned into cash) against the short-term debt value (current assets/current liabilities). Also referred to as the current ratio.

London Inter-Bank Offered Rate (LIBOR)

The average of interest rates estimated by London’s top banks were they to be charged to borrow from other banks. LIBOR rates are calculated for five currencies and are a key reference point for futures contracts, variable rate mortgages and interest rate swaps.

Lump sum

A single, one-off payment rather than payment instalments over time. The value of a lump sum payment is generally less than the total of instalments on a payment plan.


Market capitalisation

The value determined by multiplying the number of outstanding common stock shares by the share price. It indicates the size of the company and the total value of equity held in the stock.

Market order

An order placed with a registered broker or agent to purchase or sell stock at the prevailing market price.

Market timing

The process of selecting the best time for leaving or re-entering the market in order to achieve the optimum result.


The date on which a note or bill of exchange falls due.

Money-market fund

A type of mutual fund that invests in short-term securities such as certificates of deposit and Treasury bills (also known as T-bills).


A branch of economics that looks at trends in the economy and how it behaves as a whole rather than as individual markets. Macroeconomics takes into account factors such as unemployment rates, national income, GDP, price indices and other various sectors of the economy.

Mark to market

An assessment of assets and liabilities based on their current market price, or an assessment of comparable assets and liabilities. It is used to provide an appraisal of a company’s current financial situation, as the fair value of their assets and liabilities can change over time.


A branch of economics that looks at the behaviour of individual firms and consumers and the factors that influence their choices. Microeconomics looks at supply and demand and how price is determined in individual markets.

Monetary policy

The economic strategy of a country’s monetary authority that is used when deciding to expand or contract a country’s supply of money. An effective monetary policy takes into account the change of credit restrictions, buying and selling, national debt and changing interest rates to help governments manage consumption, growth, inflation and liquidity. In the case of the USA, monetary policy is also used to minimise unemployment.


Net assets

Total assets (fixed and current) less current liabilities and long-term liabilities that have not been capitalised, for example short-term loans. Also called total net assets.

Net current assets

Current assets less current liabilities.

Net income

Profit after deduction of taxes.

Net present value (NPV)

A measurement of all future cash flow minus the cost of the investment.

Net profit

Profit after deduction of all operating expenses, notably after deduction of fixed costs or fixed overheads.

Net profit margin

A measure of a company's profitability and efficiency, calculated by dividing a measure of net profits (operating profit minus depreciation and income taxes) by sales.

Net sales

The amount of sales determined by subtracting returns and allowances from money collected for goods and services.

Net worth

Value determined by subtracting all liabilities from all assets (usually used to describe an individual or family).


Operating costs and expenses

The costs and expenses necessary for a company to function and including manufacturing, marketing, research and development and other operating costs.

Operating income

The income derived after subtracting operating costs and expenses from net sales.

Operating margin

A measure of a company's profitability and efficiency, calculated by dividing operating profit (sales minus cost of producing goods and operating expenses) by sales.

Open interest

The number of outstanding options or futures contracts that have not been closed at any given time.

Organisation of Petroleum Exporting Countries (OPEC)

An organisation made up of the world’s major oil-exporting nations. Founded to coordinate and unify the petroleum policies of its member countries, OPEC aims to ensure an efficient, economic and regular supply of petroleum to consumers.


Par value (of a bond)

The face value of a bond.

Payout ratio

The ratio determined by dividing the dividends per share by earnings per share (EPS). It shows how well earnings support dividends, or how secure the dividend is. The lower the ratio, the more secure the dividend.


The collection of securities held by an investor.

Preferred stock

Stock whose holders have precedence over common stock in claiming dividends and assets.

Premium bond

A bond with a market value that is greater than its face or nominal value.

Present value

The amount of money invested at a prevailing interest rate.

Price-earnings ratio (PER)

The ratio determined by dividing market price per share by earnings per share.

Price-earnings ratio to earnings per share growth (PER to EPS growth)

The ratio determined by dividing a stock's price-earnings ratio by its earnings per share growth rate, indicating the company's profits relative to investors' expectations.

Price-to-book ratio

The ratio determined by dividing a stock's market price per share by its book value per share. It measures the stock's value relative to its net assets. A high ratio, for instance, might suggest that a stock is overvalued.

Price-to-book ratio

The ratio determined by dividing a stock's market price per share by its book value per share. It measures the stock's value relative to its net assets. A high ratio, for instance, might suggest that a stock is overvalued.


The amount owed and invested, or the face value of a debt.

Private corporation

A corporation that does not offer stock for public sale. Unlike public corporations, private corporations are not required by law to provide information about their financial conditions.

Profit margin

The margin found by dividing a company's post-tax net earnings by sales. It is a measure of how well a company can earn money from sales relative to others.


A written statement that discloses the terms of a managed fund or the offering of securities.

Public corporation

A corporation that offers stock for public sale. Public corporations are required by law to provide information about their financial condition, operations and other such matters.

Put option

The right granted to the owner of the option to sell a stock (or other security) at a predetermined price and volume at a specified time (or within a specified period of time).

Ponzi scheme

A form of fraudulent investing in which high returns are promised to investors with little risk. These schemes generally yield the promised returns to initial investors when new investors are acquired – collapsing when new investors dry up.


A basic measure of output per unit of input, where inputs can include labour and capital while output is generally measured by revenue and other GDP factors. The productivity of economies as a whole or for individual industries can be measured, as to can trends in labour growth and wage levels. In other words, productivity is the efficiency of production.


Quantitative easing

When a central bank introduces new money into the money supply in order to lower interest rates. Quantitative easing aims to flood financial institutions with capital to promote lending and liquidity.


Real rate of return

The percentage of return on an investment over one year after adjustments for inflation or deflation.

Retention ratio

The proportion of a company's earnings retained for investment purposes.


The sum of the income from an investment plus capital gains.

Return on equity (ROE)

The value determined by dividing a company's net income by its net assets; it measures the amount a company earns on its investments.


The chance that an original investment might lose [relative] value, or the deviation of a return from a relevant benchmark.

Risk/return trade-off

The compromise made between high-risk and low-risk investments. High-risk investments typically generate greater earnings, while low-risk investments typically generate a lower rate of return.


The accumulated and retained difference between profits and losses, year on year since a company's formation.

Return on investment

Profits derived as a proportion of, and directly attributable to, the cost or 'book value' of an asset, liability or activity, net of depreciation.

Record date

The date defined by a company to find out which shareholders are eligible to receive a dividend or other entitlement. A record date helps determine who the company’s shareholders are as at a particular date.

Rights issue

An issue of shares offered to a company’s shareholders at a discounted price when the company needs to raise funds.


Security analyst

A person who specialises in researching and evaluating information regarding stocks and bonds.


The ownership certificates of a particular company.

Share capital

The nominal value reported on the balance sheet that has been paid into a company by shareholders at the time/s shares are issued.


A holder or owner of shares; also referred to as stockholder.

Shareholders' equity

The sum of preferred and common stock equity held by shareholders.

Shareholders' funds

A measure of the shareholders' total interest in a company, represented by the total share capital plus reserves.


The ownership certificates of any company or companies.

Stock dividend

A dividend paid in stock as a substitute for cash. Stock dividends allow dividends to generate recurrent earnings in their own right.


A holder or owner of shares; also referred to as stockholder.

Stock split

The splitting or dividing of shares to reduce the price needed to acquire the shares. To illustrate, in a two-for-one split, when one share is split into two, an investor would receive one additional share for each share formerly owned.

Stop-loss order

An order placed with a stockbroker to buy or sell specified shares once a specified price has been reached. This order limits the amount an investor can lose on that investment.[See also Limit order.]


Selling a security when it is borrowed or not owned. Shorting – or short selling – is a strategy used when a trader believes the price of a security will fall. They sell the borrowed security and then buy it back at a lower price to replace it.

Sovereign wealth fund

A state-owned investment fund consisting of money taken from a country's reserves. The funds come from the Treasury and are derived from budget and trade surpluses and revenue from exports.


A regular payment made into a fund by an employee to be paid out upon retirement. Superannuation will grow with implications until retirement or withdrawal.


Technical analysis

The analysis of historical trends of prices, volumes and other related market indicators to aid in predicting future trends; commonly includes tables and graphs.

Total assets

The sum determined by adding the value of a company’s property, plant and equipment to current asset values.

Total debt to total assets

The ratio determined by dividing short-term and long-term debts by the total assets of a company. This ratio measures a company's financial risk, showing how much of its assets/property has been financed by debt.

Total liabilities

The liabilities determined by adding current liabilities to long-term debts.

Trading range

The range of prices within which a stock is normally traded.

Transaction costs

The costs brought about by the buying or selling of shares, including broker commissions and the difference between dealer buying and selling prices (called a dealers' spread).

Treasury bill (T-bill)

A certificate representing a short-term loan to the Federal Government for a period not exceeding one year.

Treasury bond (T-bond)

A certificate representing a long-term loan to the Federal Government for a period 10 or more years.

Treasury note (T-note)

A certificate representing a medium-term loan to the Federal Government for a period of between two and 10 years.

Trading volume

The total number of futures contracts bought and sold during a given period of time and reported to help investors understand the liquidity of a market. Trading volume is generally higher when the price of a security is changing.


A person or firm that has control over, or the power to administer, property or assets for the benefit of another. A trustee has the legal obligation to act in the beneficiary's best interests.



The process investment banks use to package and sell securities for a client. This process includes assessing the risk and pricing the security appropriately.


When someone is actively seeking employment but is unable to find work, unemployment is used to gauge the health of an economy; the lower the unemployment rate, the healthier the economy.



The process of determining the current value of stock or other assets.

Variable cost

A cost that varies with sales or operational volumes, for example materials, fuel or commission payments.

Venture capital

Money provided to a company to stimulate growth. Venture capital funds manage money from investors seeking private equity stakes in certain businesses. They are generally high risk but high return opportunities.


The uncertainty or risk surrounding a change in a security’s value. High volatility means the price of a security can change drastically over a small period of time while low volatility means the price of a security will remain relatively stable over a longer period of time.


Working capital

Current assets less current liabilities, representing the required investment, continually circulating, to finance stock, debtors and work in progress.

Windfall gain

Usually a high capital gain that is sudden or unexpected. Windfall gains can be as a result of a spike in price or supply shortage, typically enjoyed by an entire industry.


Yield to maturity

The return expected on a bond that is held until the maturity date.


The value determined by dividing the amount of interest paid on a bond by the price, thus measuring the income from a bond. The term also refers to the dividend from a stock divided by its price. Yield, however, is not a measure of total return given that it does not include capital gains or losses.