Jargon buster

Jargon buster

Accounting date

Also can be called the financial year, it's the date the company uses to define their year, and the date at which they prepare their financial statements and pay out dividends.

Adjusted Earnings

This clarifies the earnings from the normal aspects of business where the full result published in the official accounts contains an 'exceptional item' such as a sale of a part of the business or other unusual transactions.


A company in financial difficulty (bankruptcy- running out of money) may be put into administration. An administrator will be appointed to run the company so that its debt can be paid off in an orderly fashion.

Alternative Investment Market (AIM)

AIM opened in 1995 for small, growing companies and now plays hosts to over 1,000 firms. It’s less lightly regulated that the main market of the London Stock Exchange so shares listed on it tend to be higher risk and more difficult to buy and sell. Different tax rules can also apply to AIM shares. For example, some of them are exempted from Inheritance Tax.


A financial professional who analyses securities to determine a “fair” or “intrinsic” value for those securities. The term is generally applied to almost any professional investor who does research of some kind. There is not really any form of requirement for the person to be called this - like an official qualification.

Annual Management Charges

The annual fee charged by the investment managers to the investors to cover the cost of running the fund including items such as their salary, bonus and office costs.

Annual Percentage Rate (APR)

This is the rate, per year, that a loan will cost for charges including interest. It is shown as a percentage rather than a fixed amount as it relates to the amount of the loan and is most likely standardised for multiple loans from that provider or type.

Annual Report

A document produced every year, containing the company’s operating and financial results, along with any other information they want to make public such as future plans or discussion around results.


An annuity is a type of retirement income product that you buy with some or all of your pension pot. It pays a regular retirement income either for life or for a set period.

Asset type/class

Different types of assets that can be invested in. There are four main types: equities, bonds, property and cash, which are covered in detail here. Other asset types include commodities like oil and hedge funds.


Balance Sheet

Part of the financial statements issued by companies at least once a year. It details, at a particular moment in time, exactly what the company owns and what it owes. It provides a breakdown of the capital structure of the company between debt and equity and analyses what its assets actually are.

Bank of England

Set up in 1694, the Bank of England operates as the central bank for the UK. It has responsibility for regulating the banking industry and since 1997 has set interest rates to help the government meet its inflation targets.


When a company owes more than it can pay, or when its debts exceed its assets, it’s bankrupt. In this situation, the people who are owed money may try to request or force this to be paid, causing the company to essentially stop doing business and go through a process called administration where the debts are paid in order of importance. It is important to know in this situation, shareholders get paid last and there may be an order in which shareholders get paid due to the 'preference shares' which may exist. Bond holders get paid before shareholders, which is why some people think that bonds are more preferable.

Basis Point

Interest rate movements are often expressed in basis points, which are equivalent to one-hundredth of a per cent. So 25 basis points equals 0.25%.


Bears are investors with pessimistic outlooks, as opposed to Bulls. This can be applied to a market description also, with a negative and declining market being described as a "bear market".

Bid-Offer Spread

The difference between the bid price (at which the holder can sell shares) and the offer price (at which the purchaser can buy shares). On occasion this can be quite large and depends on the equity’s underlying price, liquidity, volatility and a number of other factors. Many unit trusts also have a bid-offer spread and effectively this amounts to an extra exit charge when the investor sells. This can also be seen in currency exchange, you might have noticed when you change money to go on holiday that there are two prices, one to buy and one to sell.

Blue Chip

A share in a large, widely recognised company, with a record of strong and stable performance. Generally these form the largest companies of each country - so for the UK these can be found in the FTSE 100.


More on this can be found here

Book Value

This is an accounting term and could also be called the net asset value of a company. It is calculated as total assets minus intangible assets (patents, goodwill) and liabilities. It does not necessarily link to the company value (share price) as it doesn't take into account future plans for the business or any other factor other than the accounting principles around assets and liabilities.


One who sells financial products. Be it in insurance, pensions or shares, most brokers work under compensation structures that are at direct odds with the greatest good of their clients.


Bulls are investors with optimistic outlooks, as opposed to bears. This can be applied to a market description also, with a positive and increasing market being described as a "bull market".

Building Society

A mutual organisation, owned by the people saving with and borrowing from it.



Another way of describing money

Capital Gains Tax (CGT)

You bought a share and later sold it. If you made a profit, that’s your capital gain. If you lost money, it’s a capital loss. If you make enough of a capital gain outside your tax-sheltered accounts (PEPs, ISAs), you’ll be liable for capital gains tax (CGT). The same applies for property in certain situations like if you have a buy to let property.

The City

London’s financial district, which encompasses the square mile of the old City of London, bounded on the South by the Thames, on the West by the Law Courts, on the East by the Tower of London and in the North by Islington. Currently lots of financial institutions are based in Canary Wharf, which is not in 'the City', but a more eastern part of London.

Close Period

Typically the time between the end of an accounting period and the day a company announces its results for that period. During this time, when the company is calculating its results, it does not normally communicate with investors and directors are not able to buy or sell their shares, which protects against insider trading.

Compound Interest

The investor’s best friend. This means you get interest on your interest! For example you invest £10 and after a year you receive 10% interest, which is £1, giving you a new total of £11. The following year you will receive another 10% interest, but this time you receive £1.10, because it is on your total savings of £11. Your new total will be £12.10 and you go on from there!

Contracts for Differences (CFDs)

This is a financial product that allows you to make a kind of bet on the movement of a share or asset. Unlike actually buying the share, with a CFD you don't own anything and often the bet is 'geared' or multiplied meaning you can lose more money than you originally invested. These products are generally very risky and unsuitable for most people.


“Cum” means “with” in Latin. If you buy shares cum-dividend, you are buying them at a time when you will be entitled to receive the next dividend. This is as opposed to ex-dividend. If restrictions on entitlement to dividends didn’t exist, people would simply buy shares the day before the dividend was due, collect it and then sell them the day after. When a share is Cum Dividend, expect it to be more expensive than Ex Dividend.



Opposite of inflation. A rise in the value of money.


People, or businesses, that owe you money.


This is an accounting term which means that the value of something decreases over time to reflect that assets have a useful lifespan. It doesn't effect cash.


While shares are actual assets, derivatives represent contracts to buy or sell a particular security at a given point in the future for a particular price. Options, warrants and futures are derivatives. Like CFD's they can be very high risk and are unsuitable for most investors.


A distribution from a company to a shareholder in the form of cash, shares, or other assets. The most common kind of dividend is a distribution of earnings (sometimes called profit).

Dividend Cover

A figure showing how many times dividends are covered by profits. For example, if a company’s earnings per share was 10p and it paid a dividend of 2p, its dividend cover would be 5 (10p/2p). Higher dividend cover usually means the company is keeping the profits within the company for use in growing the company.

Dividend Yield

The dividend divided by the current share price, expressed as a percentage. Different companies have different policies on the size of their dividend payouts. REIT's are legally required to pay out at least 90% of their profits in a dividend each year. Some pay this out as regularly as each month or each quarter.



Sometimes called profit. The amount a company says it added to shareholders’ funds after all the costs of delivering a product or service have been accounted for. See Earnings Per Share.

Earnings Per Share (EPS)

Net income (sometimes called profit) divided by the current number of shares outstanding. This is one of the principal elements used in determining at what value the shares should trade.


Earnings Before Interest, Tax, Depreciation and Amortisation.


EPIC stands for Exchange Price Information Code. It is a three or four character code, unique to every company listed on the London Stock Exchange, used as a shorthand method of identifying a company. They are sometimes referred to as Symbols or Tickers.


Sometimes called stocks or shares. Find out more here.


A share sold without the right to receive the dividend payment which is marked as due to those shareholders who are on the share register at a pre-announced date. These shares have “xd” next to their price listings in the papers.

Exceptional Items

These are features in the profit and loss statement that are not expected to occur regularly. They are typically profits or losses recorded by selling businesses, or charges incurred in closing activities down. They make interpreting of accounts, especially earnings per share, more difficult. It is one reason why companies also produce adjusted figures to show the underlying performance of the company.

Exchange Traded Funds (ETFs)

A fund that tracks an index but that can be bought and sold via a broker.

Execution-only Stockbroker

Stockbrokers who offer fewer of the services championed by advisory stockbrokers, but charge cheaper transaction fees. Basically, you tell them to buy or sell a particular share and they get on and do it with no frills and no hassles. Often they hold your shares in a nominee account. Execution-only brokers are ideal for do-it-yourself investors.


Financial Ombudsman Service

If you have a complaint that you cant resolve with the company or person about a financial product, you can go to this independent body to look into it for you.

Financial Conduct Authority (FCA)

The regulator for the financial services industry. Check out their web site here.

FTSE All-Share Index

An index containing the 600-700 largest companies on the London Stock Exchange. Like the FTSE 100 and FTSE 250, the index is named for the Financial Times (FT) and the London Stock Exchange (SE), who are its joint owners.

FTSE 100

An index containing the 100 largest companies by market capitalisation on the London Stock Exchange. Came into being in 1984 and largely superseded the FT 30.

FTSE 250

An index, created in 1992, containing the next 250 largest companies by market capitalisation on the London Stock Exchange after those in the FTSE 100. Together with those in the FTSE 100, the companies in this index make up the FTSE 350.


The category, by geography or industry, in which the fund will invest.


A type of derivative that allows you to bid for the right to pay a future value on either an index option or a commodity. Futures are generally a high-risk investment and are unsuitable for most investors.



Gearing is a term which means multiplying, or borrowing extra to increase the amount you invest. Similarly to a mortgage, where you might buy a house with a £10,000 deposit, and a £90,000 mortgage. You might sell this a year later for £150,000, pay back your mortgage and you are left with £60,000. That return is thanks to the effect of gearing. Similarly, it can cause losses higher than the money you have invested, and can put you in a difficult situation. Be very cautious of the negative effects of gearing.


When the government needs to borrow money, it sells bonds, which are called Gilts. Learn about bonds here.


Hedge Fund

This is an investment fund that is usually for the mega wealthy, charges high fees and hopes to get high returns.



Groups of shares which are ranked and then combined in order. An example of this is the FTSE 100 which is the largest 100 companies by total market capital.

Index Tracker

A fund follows a given stock market index such as the FTSE 100.

Individual Savings Account (ISA)

ISAs started in April 1999. ISAs are schemes to protect your investments (shares, bonds, cash or insurance funds) from tax. They can be cash, or stocks and shares, and you can even use them for buying property investment shares.

Its worth remembering, that cash ISA's might not offer the best return and your money in a savings account might pay higher interest and still be protected and tax free up to the limits.


A fall in the value of money caused by the increase in prices.

Initial Public Offering (IPO)

A company’s first sale of shares to the public on the stock exchange.

Investment Fund

A pooled collection of funds, owned by one or more investors, that is managed as one entity by one or more managers. The legal structure of the fund can take many forms and can include Unit Trusts, Investment Trusts and Open Ended Investment Company.

Investment Trust

A public limited company that makes investments into a variety of other companies. Notwithstanding several important differences to unit trusts, these are also pooled stock market investment funds. Unlike unit trusts they can take on debt that can amplify the underlying movements.




Listed Company

A Public Limited Company (plc), listed on a Stock Exchange.


The easier it is to turn an asset into cash, the more liquid it is. Shares are very liquid as they can be sold any weekday at any brokerage. Works of art, cars or homes are not nearly as liquid because you need to find an interested buyer.


Market Capitalisation

The total market value of all of a firm’s outstanding shares. Market capitalisation is calculated by multiplying a firm’s share price by the number of shares outstanding. Large cap, medium cap, small cap refer to shares in decreasing order of market capitalisation.


Net Asset Value

Also known as Shareholder’s Funds. This is the sum of all a company’s assets less all its liabilities. In principle it is the money that would be left if a company sold all its assets and paid all its debts.

Net Profit

The amount remaining after all costs and taxes have been paid, but this is an accounting term and includes non cash items like depreciation.




A collection of securities that provides a balance across several sections of the market. This provides maximum exposure to high returns while minimising risk.

Price/Earnings Ratio (P/E)

A measure of a share’s price in relation to its last twelve months’ earnings per share. Often, the higher the sustainable growth rate of a company, the higher its price-to-earnings ratio.

Profit and Loss Statement

The most important of the three key financial statements contained within the annual report the company must produce. It explains how the balance sheet has changed over the year and gives a figure for the profits reported. It does not necessarily reflect the cash has company has made or lost during the year, due to the inclusion of accounting adjustments like depreciation.



Retained Profits

The profits left in the business each year, if any, after all charges have been paid and dividends declared. This number is added, or subtracted if it is a loss, to shareholders’ funds at the end of the year.


Something it often pays to take, as long as you fully understand what you’re getting into and understand what the pros and cons are. Generally, we strongly encourage you not to take enough risk that it could cause you financial difficulty if it doesnt go as planned. By this we mean, if the investment goes wrong, you should still be able to manage to pay your day to day bills at least.


Scrip Dividend

Instead of paying a dividend out in cash, some companies will issue with new shares of the same value instead. This is known as a scrip dividend.


Sometimes called equity or stock. Read more here.


Every person who owns a share is a shareholder in that particular company. As a shareholder you get an invitation to the company’s annual meeting, and you have the right to vote on the members of the Board of Directors and other company matters.

Stamp Duty

A tax you pay on buying shares (0.5%) or buying properties.

Stock Exchange

A place where stocks and shares are bought and sold. The London Stock Exchange serves this function in the UK.


A middleman who buys and sells shares on your behalf and earns commission on the transactions.

Stop Loss

A sort of limit which you tell your broker, where if the share price falls to a certain level, then you would want to sell your shares to stop your loss.


Total Return

The change in price of the share plus the dividend. For example if you bought a share in January for £1.00 and by December the price had changed to £2.50 and you had received 25p in dividends, then the total return in £1.75. (£2.50 + 0.25 - 1)


Unit Trust

A large group of investors give their money to a company who will invest it and manage it. They can have significant fees associated with it and may lack transparency in what trades and research is done when investing your money.



The degree by which a share price tends to move. The more the price jumps about, the more volatile the share. Generally volatile shares should be carefully considered as they can move very quickly in value, and down as well as up.


The number of shares that have been traded in any defined period. It can give some indication of the validity of associated price movements. If there is not many shares traded during a period, then a big change in price might not be as meaningful as if the same happens with a share which has lots of shares traded.





The annual income provided by a fund expressed as a percentage. Normally calculated by dividing the current price of the fund into the dividend income. See also Dividend Yield.