Education

Ask price
The lowest price at which someone will sell a security to you  at a given moment.
Balance sheet
The balance sheet forms part of a company’s annual report and accounts. It lists everything the company owns and owes.
Bid/offer spread
If you want to buy a security, you pay the offer price, and if you want to sell, you recieve at the bid price. The offer price is higher than the bid price and the difference between the two is known as the spread.  With shares, the spread varies depending on a number of factors such as its liquidity and current market conditions. In fact,  so-called ‘penny shares’ that are priced at just a few pence per share, may look cheap, but they can often have bid/offer spreads of 50% or more. So watch out.
Bonus issue
Sometimes a company will give its shareholders a number of extra shares for each share they hold. This is often done when the share price has risen so high that smaller investors think of it as being too expensive to buy. For example, if you owned 100 shares priced at £50 each and the company offered you a five-for-one bonus issue (also called a ‘scrip’ or ‘capitalization’ issue),you would end up with 500 shares priced at around £10 each.
Book value
This a theoretical figure representing how much a company is actually worth once all its debts and other liabilities have been subtracted from its assets. It does not necessarily bear any relation to its stock market value.
Broker
Usually short for stockbroker, but can refer to any intermediary selling financial products, from insurance to advice. Whatever they sell, you usually pay for their services somewhere along the line.
Buy-back
This is when a company buys back its own shares on the open market and then deletes them. This reduction in the overall number of shares on the market usually has the effect of increasing the share price. It is another way companies can reward their shareholders, especially if there’s been criticism that the share price has being performing badly.
Commission
The charge made by a stockbroker for dealing on your behalf, or the fee a financial adviser gets from a product provider for selling you one of its products.
Contract note
This is written Confirmation of your share transactions. With the rise of share trading over the internet, contract notes are increasingly being sent electronically.
Cum dividend
This means that if you buy this share you will also be entitled to receive the dividend. If the share is ex-dividend, it means the dividend has already been paid out. ‘Cum’ is just the Latin word for ‘with’.
Dead Cat Bounce
A rebound in a market that sees prices recover and come back down somewhat.
Derivatives
A security whose price is dependent upon or derived from one or more underlying assets. The derivatives itself is merely a contract between two or more parties and its value is determined by fluctuations in the underlying asset.
Dividend
The income from a share investment. Most companies pay dividends out of their profits twice a year, but they do not have to. The mid-year payment is known as the interim dividend, and the end-of-year payment is called the final dividend. Dividends may be quoted gross – before tax has been deducted – or net – after tax has been deducted, but they are paid out net.
EPS
Earnings per share the amount of profit a company manages to make per ordinary share, expressed in pence. The figure is reached by dividing pre-tax profits by the average number of shares in issue. It is one of the most obvious and important measures of how well a company are performing for its shareholders. A company may be growing its profits fast by acquiring other companies, but if it is issuing lots of new shares in the process, these increased profits are being spread over a much larger number of shares. The earnings per share may actually be falling. This is why it is such an important indicator of true value for investors.
Equities
Another name for ordinary company shares.
Ex-dividend
A share sold without the right to receive the next dividend payment that has already been allocated to the existing shareholders. In the financial pages this is abbreviated to ‘ex div’ or ‘xd’.
Execution only
A type of share-dealing service where the stockbroker does not give any advice to the investor but simply carries out the transaction. In theory, dealing costs should be lower to account for the lack of additional service. The rise of online investment research and ‘real-time’ dealing facilities has made execution-only dealing a lot more popular in recent years.
Forward Contracts
A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. Although the delivery is made in the future, the price is determined on the initial trade date.
Fundamentals
The theory that holds that stock market activity may be predicted by looking at the relative data and statistics of a stock as well as the management of the company in question and its earnings.
Fill ot Kill
Letting a share order lapse because the price the investor wanted to buy or sell at couldn’t be achieved at the time of the order. Part of the phrase ‘Fill or kill’, which means to carry out the transaction at the investor’s chosen price, or not at all. See limit order.
Futures
A financial contract obligating the buyer to purchase an asset at a pre-determined future date and price.
GTC
Good till Cancelled. An order to buy or sell a stock at a specific price that remains in effect until it is executed or the investor cancels the order. Also called an Open Order
Inflation
This is a general rise in price level. In an inflationary economy, over time, this erodes the true (real) value of your assets.
Insider dealing
The illegal use of privileged information that, if it were made public, would significantly affect the share price. For example, if someone knows that a company is about to make a price sensitive announcement and buys or sells shares in advance of that.
Limit order
An order to buy or sell a share at a specific price. The order will only be carried out by the broker at that price, or a better one. If the broker cannot fulfill the limit order, it lapses.
Market capitalisation
The value of a company reached by multiplying the number of shares in issue by the current price of the shares.
Net Asset Value
The market value of an investment trust’s underlying assets investments it has made in other companies. This is usually different from the share price which can trade at a discount or premium to NAV, according to the level of investor demand for those shares.
New Issue
A company that is floated on the stock market for the first time. Offering shares to the investment public is a way of raising capital for further expansion.
Profit taking
Selling securities that have appreciated invalue since initial purchase in order to take advantage of a stock proce rise.
Rights issue
When a company issues more shares to existing shareholders – usually at a discount as a way of raising more funds.
Secondary market
When a company floats on the stock market the initial scrabble for its shares is known as the primary market. After all the shares have been allocated to the investors who applied for shares, they can then be traded on the secondary market like the London Stock Exchange .
Trading range
Ranges of prices over which market action has been taking place during the time frame under study.
Volume
The number of shares bought and sold on a stock exchange. A useful measure of the popularity of a share on a given day.
Xd
Short for ‘ex dividend’ which means that when you buy the share you will not get the next dividend payment because it has already been allocated. Ex is Latin for ‘without’.
Yield
The annual dividend or income on an investment expressed as a percentage of the purchase price.
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