Glossary of Terms
Glossary of Finance and Compliance Terms
ACA: Associate Chartered Accountant
ACCA: Association of Chartered Certified Accountants
Account: The location where financial entries are recorded. Different accounts exist for different financial transactions, e.g. for sales and profit, and loss.
Accountant: The individual responsible for organising financial data and dealing with financial statements, as well as tax calculations. Can also be referred to as bookkeeper.
Accounting: The act of entering and sorting financial data into the bookkeeping system used by the company or accountant.
Accounting period: The time during which the business’ financial information is being tracked, usually done on a monthly basis.
Accounts payable: (‘AP’ for short) Money owed by the business to another business that has provided goods or services, e.g. vendors, contractors, and consultants – this is filed under accounts payable.
Accounts receivable: (‘AR’ for short) Money owed to your business by a customer for products and services, typically provided on credit – this is filed under accounts receivable.
Accrual: An expense due but not yet recorded in books, e.g. wages being paid in arrears.
ADR – ADRs (American Depositary Receipts) allow US investors to get exposure to shares in foreign companies without the hassle of owning shares denominated in a foreign currency…
Agent – someone who acts on behalf of someone else. For example, a conveyancer who acts on behalf of a couple buying a house.
Aggregate: The total sum of everything added together or compiled into a single place.
Agreement – where two parties reach consensus on a set of facts or course of action. For example, when a formerly married couple agree the terms of their divorce.
AIFMD – Alternative Investment Fund Managers Directive – an EU framework for funds and investment firms
AIM – The Alternative Investment Market (Aim) was first established in 1995 by the London Stock Exchange as a way for newer firms to gain access to public funds…
Allegation – a claim made against someone, often without proof. Or a claim that someone has engaged in an unlawful act.
Alpha: Alpha (which is also known as the alpha coefficient) is a way of analysing the value that an active fund manager…
Alternative dispute resolution – arbitration and mediation are alternative ways in which a dispute can be resolved, without going to court.
Alternative business structures (ABS) – a firm that is managed, owned or controlled by a mix of lawyers and non-lawyers offering legal services. A non-lawyer is a person who is not authorised to carry out reserved legal activities.
Altman Z Score: Devised in the 1960s by Edward Altman, a Z score indicates the probability of a company entering bankruptcy within the next two years…
AML – Anti-Money Laundering
Amortisation: Amortisation has two slightly different meanings, depending on whether you’re in America or Britain…
Analyst: In investments; analysing markets, returns and investment structures
Ancillary relief – an application for financial support, following the presentation of a petition for divorce, nullity or judicial separation. The term arises because the financial application is ‘ancillary’ to the divorce petition.
Annuity: An annuity is a product that can provide you with a lifetime income, typically on retirement…
APAC: Asia Pacific Region
Appeal – An appeal is how you object to or dispute a government decision. Government departments’ decisions are not always right. If you think that a decision about your tax, tax credits or other benefits is wrong, you might be able to ‘appeal’ that decision.
Appointeeship – if a person is incapacitated and entitled to receive a retirement pension or other state benefits, the Department for Work and Pensions can choose an ‘appointee’ to receive those benefits on that person’s behalf. The appointee can be a relative, friend or someone from the caring professions (such as the local authority social services department).
Appreciation: When an asset’s value increases over time.
Arbitrage – Arbitrage is a technique used to take advantage of differences in price in substantially identical assets across different markets
Arbitration – a way of seeking to resolve a dispute without going to court: a third party (the arbitrator) looks at both sides of the dispute and makes a decision as to how it should be resolved. Those involved may agree to be bound by the decision of the arbitrator.
Arrears: Money that is overdue and unpaid.
Assets: All items owned by the company which helps them run, e.g. money, equipment, land, buildings, vehicles, etc.
Asset Management: The management of investments or assets on behalf of clients
Associate – a person, usually employed by a law firm, who may be in charge of handling your case: often a lawyer, they are considered by the firm employing them to be a ‘senior assistant’.
Assured shorthold tenancy – assured shorthold tenancy is normally for six months. You have no right to stay at the end of the tenancy period agreed if your landlord has given you valid notice to leave.
Assured tenancy – often used by public-sector landlords, assured tenancy gives you far greater rights to stay at the end of the tenancy period agreed.
Asylum – protection and immunity from extradition granted by a government to a political refugee from another country.
Auditor: The law requires an independent person to sign off that a firm’s financial statements are “true and fair” and have been prepared using the relevant legislation
AUM: Assets Under Management. The total value of assets/financials under the management of a fund, wealth manager or investment firm. Also used to describe the book size or amount of business that a private banker or asset manager has ownership of.
Average Net Worth: When speaking of clients or the book of a private banker, the average net worth of their clients. e.g. a private banker with 10 clients with a combined 200MM GBP in assets would have an average net worth of 20MM GBP.
Bad debts: Overdue payments that are unlikely to be received, even after an effort is made to retrieve the funds. It is written off as a loss in accounts.
Backwardation: If the current cash price for an asset slips above the price for forward delivery, that’s known as ‘backwardation’.
Balance of payments: The balance of payments refers to the accounts that sum up a country’s financial position relative to other countries.
Balance sheet: This is a report that summarises the business’ financial situation; it details the assets, liabilities, and capital of the business. It also shows the balance of income and expenditure as of the date specified. Balance sheets help highlight what the business owns and owes.
Baltic: Region surrounding the Baltic Sea: Denmark, Estonia, Latvia, Finland, Germany, Lithuania, Poland, Russia and Sweden
Baltic Dry Index: The Baltic Dry Index is a key barometer of global freight activity – measuring the cost of ferrying raw materials around the planet.
Bank of England: The Bank of England is the UK’s central bank. It started life in 1694 as a private bank set up by London merchants as a vehicle to lend money to the government and to deal with the national debt.
B/C share scheme: Companies occasionally hand cash back to shareholders by issuing new types of shares, typically called B shares and C shares
Bank reconciliation: This refers to comparing the business’ bank balance with a bank statement to spot differences.
Banking Platform: To describe the multitude of functions, suppliers and customers utilising the services of a bank, syncing up fintech/tech providers, banking services and customers in a packaged or ‘platformed’ service.
Bankrupt – the legal status of a person or organisation that is unable to repay debts owned to its creditors.
Barrister – a lawyer regulated by the Bar Standards Board, often specialising in court room representation, drafting pleadings and expert legal opinions.
Beneficiary – someone who is entitled to a benefit (eg under a will or trust).
Bequest – a gift of money or personal property made in someone’s will.
Bernanke put: There is a widespread belief that the US central bank can always rescue the economy by decreasing interest rates. Since the current chairman is Ben Bernanke this is known as the ‘Bernanke Put’
Beta: Beta (or the ‘beta coefficient’) is a way to measure the relative riskiness of a share.
Bid-offer spread: The bid-offer spread is simply the difference between the price at which you can buy a share and the price at which you can sell it.
Big Bang: The ‘Big Bang’ refers to the deregulation of the London Stock Exchange, which took place on 27 October 1986.
Billing: Sending invoices to customers who have purchased goods or services from your business.
Blind person’s allowance – This is a special allowance that blind people or people with very poor eyesight can claim on top of their personal allowance. If you are eligible for it, you might be able to earn extra income before paying income tax. If you are certified blind and are on a local authority register, or if you live in Scotland or Northern Ireland and are unable to perform any work for which eyesight is essential, you can claim blind person’s allowance.
Bond auction: When governments want to raise money, they do so by issuing bills (typically short-term) and bonds (longer term – maturities can reach 30 years or more).
Bond duration: Duration is a measure of how long it will take to reach a bond’s mid point in cash-flow terms.
Bond rating: The risk of default on bonds varies from issuer to issuer. Credit-rating agencies grade bonds to help you gauge their risks.
Bond vigilantes: “If the fiscal and monetary authorities won’t regulate the economy, the bond vigilantes will,” says economist Ed Yardeni on Bloomberg…
Bond yields: An investor buying a bond needs to know what return to expect.
Bonds: A bond is a type of IOU issued by a government, local authority or company to raise money.
Bonus issue: A bonus issue is common among British companies. In America the nearest equivalent is a stock split.
Book of Clients: Used to describe the clients that a candidate has under their management, often transferable to a new bank or platform.
Book value: Book value is the total value of the net assets of a company attributable to – or owned by – shareholders.
Bottom-up investing: Bottom-up investing is a strategy that overlooks the significance of industry or economic factors and instead focuses on the analyses of individual stocks and companies.
Bovespa: The Bovespa is the Brazilian stock market’s benchmark index.
Break-even: The break-even point on an option is the price that the underlying asset has to hit in order to enable the option buyer (holder) to recover their premium.
Budget: The financial plan that estimates what the business will earn in the coming year. It details what the estimated earnings will be spent on.
Bullet repayment loan: A ‘bullet repayment loan’ is one where the borrower repays the capital in one chunk at the end of the term of the loan.
Buyouts and buyins: A management buyout (MBO) occurs when the management of a company buys up a controlling interest (often by buying all outstanding shares).
BUY SIDE – Buy side firms are institutions concerned with the purchase of investment services including: hedge funds, pensions funds and mutual funds
CAC-40: The CAC-40 is France’s benchmark stockmarket index.
Capital: Money belonging to the business owner.
Capital adequacy: Central banks impose capital adequacy ratios (also known as solvency ratios) that set the amount of its own money a bank needs to have relative to its total loan portfolio.
Capital asset pricing model (CAPM): The capital asset pricing model has been widely used for many years by the global financial services industry to try and predict the returns you should expect from a stock.
Capital expenditure (Capex): Capex is short for capital expenditure. This is simply the purchase of fixed assets such as land, buildings and equipment for a business and it is often one of the biggest uses for a company’s cash flow.
Capital ratio: In an attempt to prevent organisations such as banks from going bust too easily, regulators impose minimum capital requirements on them…
Carry trade: Carry trades seek to make money from the fact that the interest rates set by central banks around the world vary considerably.
Cash book: The book in which all cash flow is recorded, including the following information: date, amount, description of transaction, bookkeeping account, and reference.
Cash conversion: Making profits is one thing – but you want to know how well a company converts these profits into cash.
Cash flow: The total amount of money going in and out of the business. As well as publishing yearly profit and loss accounts, companies also have to produce a cash-flow statement…
Cash flow forecast: This refers to planning the business’ future cash requirements. It involves predicting how much money will come in and out of the business at any given point.
CEE: Central Eastern Europe
Chapter 11: Chapter 11 of the American bankruptcy protection laws effectively puts a protective ring around a company, winning it time to renegotiate its debts and stopping creditors from claiming assets…
Chart of accounts: A list of all the accounts used in the general ledger of an organisation; it’s used to categorise financial transactions. The categories are: Assets, Liabilities, Equity, Income, Cost of Goods Sold, and Expenses.
Closing balance: The positive or negative amount that remains in an account at the end of the accounting period, e.g. a month or year.
Contra: When an entry into or withdrawal from a bookkeeping account is made to cancel out an earlier one, e.g. paying £200 into an account in error then withdrawing £200 to cancel it.
Conversion balances: This refers to transferring bookkeeping records between accounting software programs. It involves taking closing balances from the previous software and entering it into the new software as opening balances.
Chambers – a collection of independent, self-employed barristers who share employed clerks to administer work, and who share the expense of such clerks, office buildings and brand name.
Chattels – personal belongings that can be moved from one place to another.
CF1 – FCA Controlled Function: Director Function
CF10 – FCA Controlled Function: Compliance Oversight Function
CF10a – FCA Controlled Function: CASS Oversight Operation Function
CF11 – FCA Controlled Function: Money Laundering Reporting Function
CF12 – FCA Controlled Function: Actuarial Function
CF12a – FCA Controlled Function: With-profits Actuary Function
CF12b – FCA Controlled Function: Lloyd’s Actuary Function
CF2 – FCA Controlled Function: Non-executive Director Function
CF28 – FCA Controlled Function: System and Controls Function
CF29 – FCA Controlled Function: Significant Management Function
CF3 – FCA Controlled Function: Chief Executive Function
CF30 – FCA Controlled Function: Customer Function
CF4 – FCA Controlled Function: Partner Function
CF5 – FCA Controlled Function: Directors of an unincorporated association
CF6 – FCA Controlled Function: Small friendly society function
CF8 – FCA Controlled Function: Apportionment and oversight function (non-MiFID business only)
CIS: Commonwealth of Independent States
CIMA: Chartered Institute of Management Accountants
CIPFA: Chartered Institute of Public Finance Accountancy
Civil law – the area of law covering disputes you may have with a person or an organisation.
Civil partners – Civil partners are two people of the same sex who live together in a relationship similar to marriage. They form a civil partnership when they legally register their partnership in front of witnesses.
Claimant – a person making a claim.
Class 2 contributions – These are a type of National Insurance contribution paid by people who are self-employed. It is a fixed weekly amount.
Class 4 contributions – These are another type of National Insurance contribution paid by people who are self-employed. The amount depends on the taxable profit of your business.
Clearing house: A typical contract between two financial-market participants involves one agreeing to sell and later deliver a product (say, shares) and another agreeing to pay for it…
Client – someone who uses services provided by a lawyer or another legal professional.
Closet tracker funds: An active fund with a portfolio of stocks that is little different from the overall market is called a “closet tracker”.
Coco bonds: Could contingent convertible bonds, or Cocos, stop a bank failing? Some regulators believe so…
Coding notice – A coding notice is a letter which tells you what your tax code is and how it has been worked out. It is important you check to make sure it is right otherwise you might pay too much or too little tax. You should get help if you cannot understand your coding notices.Cognitive bias: We use mental shortcuts (heuristics) to make decisions rapidly. These work in many circumstances, but when it comes to investing, they can be a major handicap, giving rise to “cognitive biases”.
Cohabitation contracts – these set out, in advance, what each member of the relationship expects of the other, both during the relationship and if they separate or one of them dies. They are ‘honourable agreements’, which means that not all clauses may be enforced by the courts, but they do limit disagreements and certainly provide some peace of mind.
Commodity forwards: A ‘forward’ is a contract agreed between two parties whereby one agrees to deliver a specific quantity of an asset – say one ton of aluminium – on an agreed date and the other agrees to pay a fixed price for it on that date…
Compensation – recompense for loss, injury, or suffering.
Compliance checks – This means HM Revenue & Customs want to ask you questions about information or forms you have sent in such as a tax return or tax credits claim.
Compound interest: When you invest money, you earn interest on your capital. The next year, you earn interest on both your original investment plus the interest from the year before…
Compromise agreements – in a workplace dispute, if you can reach an agreement with your employer without going to a tribunal, this can be recorded in a ‘compromise agreement’. This is a legal document which confirms the terms of the settlement you have agreed, in exchange for which you give up your legal claim against your employer. You may be able to get your employer to make a contribution to your legal costs as part of the agreement.
Conciliation – an alternative to alternative dispute resolution where the parties to a dispute use a conciliator, who meets with the parties both separately and together in an attempt to resolve their differences.
Conditional Fee Agreement (CFA) – if a claim on a CFA is unsuccessful the solicitor typically receives no payment for their work (No Win No Fee). If the claim is successful the solicitor claims a higher than normal fee to reflect their risk in taking the case on.
Conditions – requirements, restriction or permission added onto a document.
Contagion: When used in financial markets, contagion is a term associated with the kind of market turmoil seen in 2007 as well as previous crises such as those of 2001 and 1998…
Contango: The price of an asset for forward delivery is usually above the price you would pay today…
Contingent liability: If a firm has received goods from a supplier, along with an invoice that remains unpaid when the balance sheet is drawn up at, say, 31 December…
Contract – an agreement signed by two or more parties setting out the terms of an arrangement – for example, between a buyer and a seller in a property transaction.
Continuation vote: An investment company’s articles of association often provide for shareholders to vote on whether the company should continue to exist. This is known as a continuation vote.
Continuing professional development (CPD) – the training that lawyers (and other professionals) are required to complete every year by the organisation regulating them. The Law Society’s PDC courses are available on the PDC Centre.
Contracts for difference: Entering into a contract for difference, or CFD, involves making a bet on the movement of share prices…
Convertible bonds: A convertible bond issued by a public company is one that starts as a bond but that can also be converted into ordinary shares in that company at any time before the bond matures, and at a previously specified price…
Convertible rights: Also known as ‘conversion rights’, these give the buyer of a preference share or bond the right to convert it into a set number of ordinary shares for a pre-agreed ‘strike’ price at an agreed point in the future…
Conveyancing – the processes involved in buying, selling or remortgaging a property to transfer its legal title from one person to another.
Coppock indicator: The Coppock Breadth Indicator, originally known as Trendex’s Timing Technique for Texas Traders, is used to identify buy signals from around the bottom of a bear market…
Correlation: Correlation simply refers to a relationship between two events…
Cost of capital: Making a business successful is simply down to ensuring you earn more than your costs…
Cost/income ratio: The cost-to-income ratio is a key financial measure, particularly important in valuing banks…
Cost of equity: A company’s cost of equity is the annual rate of return that an investor expects from a firm in exchange for bearing the risk of owning its shares…
Costs lawyers – a lawyer who settles the legal costs of court cases, and who is regulated by the Association of Costs Lawyers.
Council tax – Council tax is the local tax in England, Scotland and Wales. You pay it to your local council, and they use it to provide local services. In Northern Ireland you will pay rates instead of council tax.
Counsel – a term used to describe a barrister.
Country’s current account: A country’s balance of payments – its financial situation relative to the world – is made up of the current account and the capital account…
Court of protection – when someone is mentally incapable of making a particular decision at a particular time, and they haven’t made a lasting power of attorney, and the decision isn’t one that can be made on an informal basis, the matter can be referred to the Court of Protection. The court may either choose to make the decision itself on the person’s behalf, or choose someone else, known as a ‘deputy’, to make the decision for them.
Cov-lite: ‘Cov-lite’ is used to describe a loan where the lender, typically a bank, does not impose standard performance conditions on a borrower…
Covered bonds: A bond is an IOU issued by a company, typically offering a fixed rate of interest and a fixed date for repayment by the issuer…
Credit check: Examining a person’s credit history: their track record of paying back debts.
Credit default swap: Anyone who owns a bond faces two main risks. The first is that the price drops and the second is that the issuer goes bust…
Credit event: Credit events are a crucial aspect of a credit default swap, or CDS…
Credit notes: Issued to reimburse the buyer either partially or fully if a mistake has been made on an invoice, or if goods need to be returned.
Creditors: These are the persons or businesses to whom your business owes money.
Credit policy: The terms and conditions for providing goods on credit, qualification criteria, the collection procedures, and steps to be taken if customers do not repay the amount owed.
Credit rating: Most bonds are allocated a credit rating to indicate to an investor the likelihood of a subsequent default…
Credit spread: When governments borrow – by selling ‘gilts’ in the UK and ‘treasuries’ in the US – they offer the buyer a low annual return or ‘yield’, as the risk of default is virtually non-existent…
Crown Prosecution Service (CPS) – the CPS is the organisation that prosecutes criminal cases investigated by the police in England and Wales.
Crown prosecutor – a lawyer (generally a solicitor or a barrister) working for the Crown Prosecution Service.
Crown courts – Crown courts deal with more serious cases. If you plead not guilty, your case will be heard in front of a judge and jury of 12 people, who will decide whether you are guilty or innocent, after they have heard all the evidence.
Culpable – at fault or guilty of something.
Currency risk: This is the type of risk that comes from the change in price of one currency against another…
Current account surplus/deficit: This is a measure of the position of one country relative to the rest of the world in terms of imports and exports…
Cyclical stocks: The performance of cyclical stocks is heavily dependent on the economic cycle – they do well when the economy is booming but very badly when it falls off a cliff…
Cyclically adjusted p/e ratio (Cape): A classic price/earnings ratio is the relationship between the current share price and one year’s earnings, usually the last year, or a forecast for the year ahead…
Damages – an award, typically of money, paid to a person or organisation for loss or injury.
Daily repricing: Daily repricing is a feature of exchange-traded funds (ETF) and can affect your expected performance, especially on inverse products.
Dark liquidity pools: ‘Dark pools’ covers any share trade conducted directly between investing institutions, such as banks and hedge funds, rather than via a regulated exchange
DAX: The DAX is Germany’s blue-chip index, the most cyclical of the major western indices, with almost 80% of it comprised of economically sensitive industries.
Deal-for-equity swaps: In a debt-for-equity swap, some of a firm’s debt is cancelled and lenders are given shares.
Debtors: The persons or businesses who owe money to your business.
Debt swap: There are several possible ways in which a debt swap can be done. However, the aim is usually the same – to refinance a borrower and strengthen its balance sheet.
Debt to equity ratio: The debt to equity ratio of a company is simply its level of debt (any type of borrowed money) divided by equity (the shareholders’ money in the business).
Debtor and creditor days: Investors looking for an indication of a firm’s commercial power may look at how fast it pays customers and suppliers.
Defensive stocks: Defensive stocks are those that don’t tend to depend heavily on what’s going on in the wider economy for their growth.
Defined benefit & defined contribution pensions: In a defined benefit pension, you are guaranteed an income in retirement, calculated as a percentage of your final or average earnings.
Deflation: Deflation is the word used to describe falling prices. These are not necessarily a bad thing.
Deleveraging: Before the credit crunch, firms and households expanded through ‘leverage’ – borrowing to buy assets. ‘Deleveraging’ is this process in reverse.
Delta One: Delta One refers to the way a bank hedges its long and short exposures across a portfolio of investments.
Depositary receipt: A depository receipt allows investors to access overseas shares in their own market and currency.
Depreciation: If you buy an asset, it will wear out as it gets older and eventually need replacing. It is therefore ‘depreciating’ over time.
Derivative: A derivative is the collective term used for a wide variety of financial instruments whose price derives from or depends on the performance of other underlying investments.
Dilution: In the world of finance, dilution means something is being watered down, typically earnings per share.
Discount rate: The discount rate is used to calculate how much the expected future income from an investment over a given period of time is worth right now.
Discounted cash flow: Discounted cash flow is simply a method of working out how much a share is fundamentally worth based on the present or discounted value of expected future cash flows.
Discounting: Discounting is expressing cash received in the future in today’s money because inflation erodes the value of money over time.
Dividend: A dividend is the part of a company’s profits that are distributed to shareholders.
Disposition effect: Investors have a tendency to hold onto losing positions long after we know in our heart of hearts, the stock is never going to recover, and to take profits on winning positions too early.
Dividend cover: Dividend cover measures the number of times greater the net profits available for distribution are than the dividend payout.
Dividend yield: The dividend per share (total dividends paid out divided by total number of shares) expressed as a percentage is referred to as the dividend yield.
Diversification: Diversification is the process of dividing your wealth between different investments to avoid being too reliant on any single one doing well.
Dogs of the Dow: Fans of this theory say that bargains can be spotted by looking for high dividend yields – the annual dividend as a proportion of the current share price.
Dow Theory: Dow theory is often used as an indicator of when a bear market may be about to start.
Duration: Duration is the point at which a bond reaches the mid-point of its cash flows.
Deductible: Purchases that are claimed as business expenses are described as deductible; they reduce business profits but reduce the amount of income tax owed.
Deposit slip: A slip of paper that accompanies cash or cheque payment. It details the amount of the deposit, the bank account the funds should be paid into, and the date of deposit.
Depreciation: The reduction in value of an asset overtime.
Depreciation accounting: The process of recording how much an asset will depreciate in terms of monetary value over its estimated lifetime before it’s essentially written off.
Disbursement – fees that are paid to organisations as required as part of legal services. For example, this could be a payment made by your lawyer to a local authority for property information when buying a house.
Discrimination – being treated unfairly or differently because of factors, such as disability, race, religion or belief, sex or sexuality.
Domicile – Your place of domicile depends on a number of things like your family history and your longer-term plans. If you and your parents came from another country and you still think of that other country as your natural home, you will probably have a foreign or non-UK domicile.
Department for Social Development (DSP) – This is the government department that is responsible for most state benefits in Northern Ireland.
Drawings: Money withdrawn from the business account for personal use.
DWP – The Department of Work and Pensions (DWP) is the government department that is responsible for most state benefits in England, Scotland and Wales.
E.A.M / EAM: EAM’s are external asset managers, sometimes referred to as independant asset managers or IAMs, offer wealth management services but do not hold or manage the assets directly.
Earnings – Earnings are money or income in return for the work you do or profits from your business. Earnings can include other things like your employer allowing you to use a car for your private use, providing you with accommodation or paying for your meals.
Earnings per share: Earnings per share is seen as one of the best means of determining a share’s true price, as it shows how much of a firm’s profits (after tax) each shareholder owns.
Earnings yield: The earnings yield is a firm’s earnings per share for the most recent 12 months divided by the share price – effectively the opposite of the p/e ratio.
EBITDA: Earnings before interest, tax, depreciation and amortisation (EBITDA) takes operating profit and adds back two subjective costs: depreciation and amortisation.
Economic indicators: Economic indicators are statistical measures that reveal general trends in the economy.
Economic moat: Warren Buffett first coined the phrase ‘economic moat’ as a way of summing up how robust a firm is in the long term.
Elliott wave theory: According to Elliott wave theory, market movements conform to patterns – a series of waves reflecting the fact that people tend to think and behave in a herd-like way.
EMEA: Europe, Middle East, Africa
Employee – An employee is someone who works for somebody else (called an employer). An employer will often ask an employee to sign a contract of employment – a document that records the terms they will work on (for example: working hours, how much you will be paid, what happens if you are ill). There does not have to be a written contract for you to be legally counted as an employee.
Employer – An employer is a person or business that has to give work to someone and pay them for it under a contract of employment. The employer directs and controls the work that the employee does. You can be an employer even if you are self-employed, if you pay other people to do work for you.
Enterprise value: This measure’s the total value of a business by combining the market value of equity and net debt as an estimate of what a predator would pay for it.
Equity: The amount the business owner has contributed to the business from their personal funds (capital) and how much has been withdrawn for personal use (drawings).
Equity free cash-flow yield: Equity free cash-flow is the cash generated each year for shareholders after certain ‘non-discretionary’ expenses have been paid.
Equity risk premium: When buying a security such as a share, every investor should have an expected return in mind.
ESG investing: ESG stands for environmental, social and corporate governance, the areas in which good behaviour is particularly sought.
Estate – a person’s property, entitlements or obligations.
Eurobond: This describes any international corporate or government bond that is denominated in a currency held outside its country of origin.
Evidence – that which tends to prove or disprove something.
EV to sales ratio: Enterprise value is the sum of a firm’s market capitalisation and its net debt (short- and long-term debt minus cash).
EV/EBIT ratio: Enterprise value to earnings before interest and tax (EV/Ebit) is a way of deciding whether a share is cheap relative to its peers or the wider market.
EV/EBITA ratio: EV/EBITA is a valuation method often used by analysts, sometimes used instead of the p/e ratio to compare growth between firms in heavy debt sectors
Exchange-traded fund (ETF): An exchange-traded fund (ETF) is an equity-based product combining the characteristics of an individual share with those of a collective fund.
Executor – someone named in a will who will carry out the directions of the will.
Exempt European lawyer (EEL) – a lawyer described by a European directive.
Expenses: Costs that are incurred for the purpose of keeping the business running, excluding fixed assets.
Factor: A factor is a characteristic that has been shown to contribute to market outperformance.
Factoring: This means receiving funds instantly without having to wait for payment from a customer. A factoring company pays a percentage of the invoice to the business being paid, as much as 95%, and takes a cut of the cost.
Family Office: A wealth management firm servicing an UHNW (Ultra High Net Worth) Family or individual specifically
Farmer: A farmer is a type of private banker or wealth manager who manages an existing portfolio, retaining and growing a book of clients with a private bank. Opposite to a Hunter (see Hunter)
FCA – Financial Conduct Authority. The independent regulatory body for all companies and organisations that provide services within the financial sector
FCF yield: The free cash flow (FCF) yield is a way to decide whether a firm is cheap or expensive based on its cash flows rather than, say, its earnings.
Fee earners – employees of firms who deliver legal services.
Fiduciary Services: A fiduciary is a person or organisation who has been entrusted with the management of another person or entities assets and has full control over their investment strategy or buy/sell orders.
Fibonacci theory: Some analysts use the Fibonacci sequence and its ratios to attempt to forecast and interpret the rhythms of markets.
Final salary and money purchase pensions: With a money purchase scheme, the size of your pension depends entirely on the value of your fund when you retire.
Financial statements: Reports made by a tax accountant at the end of the financial year, which indicate how well the business is doing and its value. They are used to calculate the income tax that needs to be paid.
FINTECH – Technology/computer programs that support and enable banking/financial services through the use of modern tech
Fiscal cliff: The phrase ‘fiscal cliff’ was coined to capture the large and predicted reduction in the US budget deficit expected as specific laws kicked into effect from 2013.
Fiscal policy: Fiscal policy includes any measure that the national government takes to influence the economy by budgetary means.
Fixed assets: The phrase ‘fixed assets’ covers all assets that the business intends to keep for more than a year.
Flipping: Flipping is when you make an offer on a property and then either look to secure a new buyer at a higher price before you close on the deal, or wait for it to rise in value, then sell on.
Floating rate note: A floating rate note is a form of security that carries a variable interest rate which is adjusted regularly by a margin against a benchmark rate such as LIBOR.
Foreign exchange reserves: Foreign exchange reserves are stockpiles of foreign currencies held by governments.
Forfeited (to the Crown) – where someone dies intestate, or their will is invalid, their estate might be passed on to the state if relatives cannot be traced.
Fraud – intentional misrepresentation or concealment of an important fact upon which the victim is meant to rely, and in fact does rely, to the harm of the victim.
Fraudster – someone who commits fraud.
Free cash flow: Free cash flow is a pure measure of the cash a company has left once it has met all its operating obligations.
Free cash flow per share: Free cash flow per share takes the annual cash flow available to pay dividends and divides by the number of ordinary shares in issue.
Free cash flow yield: Free cash flow yield (FCFY) is a ratio used to work out the cash flow return on a share as a percentage.
Free float: Free float refers to the percentage of a company’s total voting shares that are freely traded and could therefore be held by anyone.
FSCS: The Financial Services Compensation Scheme (FSCS) covers bank, building societies and investment accounts, and will pay compensation if the holding institution goes bust.
FTSE 100: The FTSE 100 is Britain’s ‘blue-chip’ stock index. But its makeup means it is more of a global index than a snapshot of UK plc.
FUND – A source of money to be used for investment purposes
Futures: A future is a tradeable contract that commits you to taking delivery (if you buy), or making delivery (if you sell), of an agreed amount of something at an agreed time.
Gains and losses: This typically refers to losses due to foreign currency transactions. The fluctuation of exchange rates between the time a payment is made and when the bank converts the currency may result in a gain or loss.
GCC: Gulf Cooperation Council / GCC
GDP: Gross domestic product (GDP) is a measure of the total amount of goods and services produced by a country in a specific period of time, usually a year or a quarter.
GDPR – General Data Protection Regulation, an EU Law governing the use of data within the European Union
Gearing: Gearing (or leverage) is the relationship between the debt and the equity in a business – between borrowed money and shareholders’ money.
Gilt: A gilt-edged security (gilt) is a government bond – a security or stock issued by the government paying a fixed rate of interest and redeemable on a set date for a set amount.
Gilt yield: Gilt yields express the return on a gilt as an annual percentage.
Global depository receipt (GDR): Global depositary receipts (or GDRs) offer a solution for investors wanting to buy shares listed in countries where there are government restrictions on who can own and trade them.
Going concern: A firm is seen as a ‘going concern’ if its auditors believe it will stay in business for the ‘foreseeable future’.
Goodwill: The simplest way to describe goodwill is as a company’s reputation.
Gordon’s growth model: Gordon’s growth model is a very simple but powerful way of valuing shares based on a company’s future dividends. It is sometimes called a “dividend discount” model.
GOV.UK – This is the main website for most of the UK government departments and includes information on benefits, student loans and tax.
Government Gateway – This is a central place where you can register to use online Government services.
Government-sponsored enterprises (GSEs): The term ‘government-sponsored enterprises’ (GSEs) refers to three US organisations – Freddie Mac, Fannie Mae and Ginnie Mae – which all play a crucial role in the US mortgage market.
Grants of representation – this includes grants of probate (when there is a will) and grants of letters of administration (when there is no will). Often people just refer to probate even if there is no will.Gross profit: A business’ total revenue minus the cost of sales.
Greenspan put: A ‘put’ is a type of option contract that increases in value as the price of the underlying asset falls.
Grounds (legal) – the basis or foundation of an action.
Gross margin: There are many ways to measure a firm’s profitability. One of the more important ones is the gross margin.
Handle: ‘Handle’ is traders’ jargon for the whole-dollar amount of a security quote.
Hang Seng index: Hang Seng is Hong Kong’s benchmark index of stocks.
Hearing (legal) – a legal proceeding where the facts of a particular issue are looked at, and evidence is presented to help decide what the outcome should be.
Hedonic accounting: When measuring inflation, some countries, such as the US, take into account changes in the quality of goods in a process known as ‘hedonic’ price adjustment.
Hire purchase: This refers to when equipment used by the business is paid off through a finance company. At the end of the lease period the company can pay a final fee to own it or start payments for a new piece of equipment.
HMRC – HM Revenue & Customs (HMRC) are the part of the government that deals with tax, National Insurance contributions, working tax credit, child tax credit and child benefit.
HNWI: High Net Worth Individual
UHNWI: Ultra High Net Worth Individual
Holistic Services: Full service private banking services, offering interconnected products to clients across a range of functions.
Hostile takeover: A company’s directors may feel that a takeover bid undervalues the shares, and so do not recommend the offer to shareholders. The bidding company can instead approach the shareholders directly.
Hunter: Opposite to Farmer (see Farmer). A private banker who has generated his own clients that are transferable and is tasked with growing a book of business or AUM (see AUM) through aggressive business development and networking.
ICAEW: Institute of Chartered Accountants England and Wales
Income – Income is money you get, for example from work you do or from interest on savings.
Income tax – Income tax is tax that you pay on most types of income.
Incorporated company – a type of private company with shares, but the shares cannot be traded publicly on the stock exchange. The shareholders have limited liability, which means that only the money invested in the company can be lost in case of insolvency.
Indemnity – compensation for – or protection against – loss or damages that might be given by one person to another within a contract or otherwise.
Independent person – someone free from outside control or influence to act in the way they choose.
Independent tribunal – An independent Tribunal is a group of people who look at appeal cases. In a tax context, they will look at your case if you are not happy with a decision about your tax or state benefits.
Index-linked gilts: Index-linked gilts are sterling bonds issued by the Bank of England and listed on the London Stock Exchange, introduced to act as a hedge against inflation for pension funds.
Index fund: Index funds (also known as passive funds or “trackers”) aim to track the performance of a particular index, such as the FTSE 100 or S&P 500.
Indices: There are indices for every sort of market, but retail investors are probably most familiar with those related to stock markets.
Individual savings account (Isa): Individual savings accounts (Isas) are a way of saving and investing without paying income tax or capital gains tax.
Individual Voluntary Arrangement (IVA): Individual Voluntary Arrangements are an alternative to bankruptcy, whereby a debtor in financial difficulty comes to an arrangement with his creditors on how the debt will be cleared.
Inheritance – parts of someone’s estate passing to someone on death.
In-house lawyer – lawyers working for organisations, such as banks or local authorities, to provide legal advice to the organisation.
Initial public offering (IPO): An initial public offering (IPO) is the process of launching a firm on to the stock exchange for the first time by inviting the general public and financial institutions to subscribe for shares.
Insolvent – being unable to pay debts when they are due or where liabilities exceed assets.
Institutional Clients: Large financial services firms, banks and other market participants
Instructing: authorising a lawyer to represent you. An instruction describes the type of work that you want them to do.
Integrity: acting with honesty and morality.
Intellectual property (IP) – IP refers to ideas you create and legally own as a result of owning its copyright, trademark or patent. Examples of IP can include inventions, literary and artistic works, designs, symbols, names and images.
Interest (legal) – a right, claim or privilege.
Interest cover: Interest cover is an affordability test. It compares the profit before tax (PBT) figure to interest charged in the profit and loss account
Interest rate swap: An interest rate swap is a deal between two investors.
Interim proceedings – in law, interim proceedings are hearings that take place between the first hearing and the final hearing.
Interim reports: Financial statements produced before the financial year has ended. They may be used to give banks or loan companies an indication of how well a business is doing before they approve a loan.
Internal rate of return: The internal rate of return of a bond is essentially the rate of return implied by its total cash flows.
Intervention – when a regulator takes control of the papers and monies of a legal practice in order to protect the public.
Intestate – any person who dies without leaving a will is said to have died intestate.
Inverted yield curve: A yield curve shows the relationship between the yield on securities and their maturities (how long it is until they can be redeemed at their face value).
Investments – These are things you buy because you think they might be profitable and earn you money in the future. Investments can include property, shares, savings in a bank account and paintings.
Investment trusts: An investment trust is a company whose business is to invest in other companies.
ISEQ: Few national indices have changed as much as Ireland’s ISEQ since the peak of the credit bubble.
Jobcentre Plus – Jobcentre Plus is part of the Department of Work and Pensions (DWP). They are responsible for some state benefits, including Jobseeker’s Allowance, Employment and Support Allowance and Universal Credit. In Northern Ireland these benefits are dealt with by the Jobs and Benefits Office.
Judge – a judge presides over court proceedings and hears all witnesses and evidence presented by the parties of the case, assesses the credibility and arguments of the parties, and then issues a ruling on the matter at hand, based on his or her interpretation of the law and his or her own personal judgment.
Junk bonds: Junk bonds are also known as ‘high yield’, ‘non-investment grade’, or ‘speculative’ bonds.
Jury – a sworn body of people in court who listen to the evidence in a trial in order to make an impartial decision (verdict). They tend to be found in criminal courts.
Keynesian economics: Named after economist John Maynard Keynes, who believed the best way to ensure economic growth and stability is via government intervention in the economy.
Kospi: The Kospi is South Korea’s benchmark stockmarket index. It is typical of emerging markets, in that it is highly exposed to the global economic cycle.
KYC – Know your client/Know your customer
Land & Property services – Land & Property Services is the department responsible for collecting rates in Northern Ireland.
Lasting power of attorney – a lasting power of attorney goes one step further than an ordinary power of attorney, because it carries on, or ‘lasts’, even after you have become unable to manage your affairs, whether temporarily or permanently, or because of an illness, disability or accident. Lasting powers of attorney have now replaced enduring powers of attorney, although valid enduring powers of attorney made before 1 October 2007 can still be used.
LATAM: Latin America
Law firm – organisations that employ lawyers to provide legal advice and legal services.
Law Society of England and Wales – the Law Society is the organisation that represents, supports and promotes solicitors and their interests in England and Wales. Learn more about what they do on their About us pages.
Lawyer – a member of one of the following professions, entitled to practise as such:
- the profession of solicitor, barrister or advocate of the UK
- a profession whose members are authorised to carry on legal activities by an approved regulator other than the Solicitors Regulation Authority (SRA)
- an Establishment Directive profession other than a UK profession
- a legal profession which has been approved by the SRA for the purpose of recognised bodies in England and Wales, and
- any other regulated legal profession specified by the SRA for the purpose of this definition.
- Learn more about the different types of legal professionals
Ledger: Books that contain all the details of financial accounts. There are three types of ledgers: the general ledger, the accounts receivable ledger, and the accounts payable ledger. The general ledger includes all the financial details from every business transaction, for each account listed in the charts of accounts. The other two include details relating to accounts receivable and accounts payable.
Legal aid – government funding that can help people meet the costs of legal services they require, if they are eligible to receive it. It is also used to support legal assistance being provided at police stations where someone is arrested. You can find more information on legal aid at GOV.UK. The Law Society has also provided information regarding recent cuts to legal aid and has a page devoted to the latest advice and articles on legal aid.
Legal disciplinary practice (LDP) – a type of law firm where solicitors work alongside other types of lawyer, such as licensed conveyancers, and a restricted number of non-lawyers.
Legal executive – a lawyer regulated by ILEX Professional Standards (IPS).
Legal Ombudsman – an independent body set up to deal with complaints of poor service about lawyers and law firms of England and Wales. See the Legal Ombudsman website for more details.
Legal professional privilege (LPP) – a protection that means information a client shares with his or her lawyer in confidence should never be revealed without the client’s consent. LPP only applies between a client and his or her solicitor or barrister. It does not apply to other legal professionals.
Legal services – services provided to clients, such as legal advice or representation in court.
Leverage: ‘Leverage’ is a US term that is also known as ‘gearing’. Both express the extent to which any transaction is financed by debt from lenders as opposed to capital provided by the investor.
Leveraged buyout: A leveraged buyout is where an investor group acquires a business using mainly borrowed money.
Liable – when someone is legally responsible for something.
Liability: This means the debts owed by the business to other businesses, including accounts payable, loans, and credit card balances.
Libor and the OIS: These are two of the most important interest rates in the world. Libor is the London Interbank offered rate. The overnight index swap (OIS) is a broadly comparable rate in the US.
Licensed conveyancer – a lawyer specialising in property law and in some cases other areas of law, and regulated by the Council for Licensed Conveyancers.
Like-for-like sales: One way of making meaningful year-on-year comparisons, especially with retail stocks, is by looking at ‘like-for-like’ sales growth.
Limited company: A limited company is one in which the liability of the shareholders is limited to what they have put in to the company.
Limited liability partnership (LLP) – a business partnership in which some or all of the partners have limited liability in terms of their legal and financial obligations
Liquidity: Liquidity refers to how easy it is to buy or sell an investment.
Litigation – the contest process before a court.
Litigant – a person involved in a lawsuit.
Litigant in person – someone who represents themselves in court proceedings
Lloyd’s: Lloyd’s of London is an international insurance market, which controls and regulates the activities of the groups offering insurance service
Loan-to-value ratio: The loan-to-value (LTV) ratio is one of the main risk assessment measures used by lenders to assess a person’s suitability for a mortgage.
Local authorities – Local authorities (also know as councils) are responsible for the services in the area where you live. They also collect council tax.
Local taxes – Local taxes are taxes you pay to your Local Authority or Land & Property Services (in Northern Ireland). They pay for local services in your community.
Long / short equity: Long / short equity is becoming increasingly popular as a hedge fund strategy.
Long-term refinancing operations (LTRO): The Long-term refinancing operations (LTRO) of the European Central Bank (ECB) are designed to provide stability to Europe’s banking sector.
Low volatility: Low volatility – or “low vol” – investing means buying shares (or bonds) that tend to go up or down in price by less than the overall market (in other words, they’re less volatile).
M&A: Mergers and Acquisitions
M&A arbitrage: M&A arbitrage is a way to profit from one company taking over another, or two firms deciding to merge.
Management Fee: The fee chargeable to individuals and organisations for managing their assets
Margin: When buying a derivative like a spread bet, an investor will only have to pay a small initial deposit, or ‘margin’, of say 10% of the value of the shares.
Margin account: A margin account is one that an investor holds with a broker, effectively allowing him to buy securities on credit.
Margin of safety: The margin of safety itself is the gap between the price you pay and what you think a stock might be worth.
Margin trading: Margin trading is when, typically US, investors put up only a percentage of the cost of an asset they buy.
Mark to model: In normal circumstances, securities such as shares or bonds are valued by using market prices: this valuation method is called ‘mark to market’.
Market cap weighting: If an index is weighted by market cap (market capitalisation – the number of shares outstanding multiplied by the share price), it means the companies in the index are ranked by stockmarket value.
Market capitalisation: Market capitalisation, often abbreviated to market cap, is the total value of all outstanding shares in a company.
Market makers: Market makers are typically banks and brokers who commit to trade shares and bonds, often in larger quantities than most other investors.
Market neutral funds: Market neutral funds aim to deliver above market rates of return with lower risk by hedging bullish stock picks (buys) with an equivalent number of short bets (sells).
Marking to market: This is the process of updating a portfolio to reflect the latest available prices.
Maturity transformation: Maturity transformation is when banks take short-term sources of finance, such as deposits from savers, and turn them into long-term borrowings, such as mortgages.
MENA: Middle East and North Africa
Mean reversion: Mean reversion is the tendency for a number – say, the price of a house or a share – to return to its long-term average value after a period above or below it.
Mean, median and mode: There are several ways to calculate an average, the three most common being the mean, median and mode.
Mezzanine finance: Mezzanine refers to a layer that falls between two others. In the case of finance, it comes between debt and equity.
Minority interest: This is an accounting term for the amount of a balance sheet not owned by a firm’s shareholders.
Misery index: The misery index is constructed by adding the unemployment rate to the inflation rate.
Mixed Portfolio: A network of clients across numerous asset classes or in real estate; numerous property types or investment structures
Modified Altman Z score: Altman’s original five-ratio model was designed for manufacturers, or sectors with high capital intensity, such as mining…
Momentum investing: Momentum investing focuses on growth in the share price, buying shares that have gone up the most in the recent past, or are making new 52-week highs.
Monetary policy: Monetary policy is about exercising control over the money supply (the amount of money circulating in the economy) with the aim of influencing the economy.
Monetisation: A government can create an IOU for £1,000 and sell it to a central bank, which pays for it by printing £1,000.
Money laundering: Money laundering is a catch-all term for any activity that tries to convert the proceeds of crime into legitimate money.
Money markets: ‘Money markets’ is a generic term covering the vast market for short-term cash loans and deposits.
Money multiplier: This is one of the key principles underpinning the entire banking system. That’s because it’s the basis of ‘credit creation’.
Money supply: Money supply is simply the amount of money available in the economy.
Monoline: A monoline is any business that specialises in one particular financial services area, which could in theory be anything from mortgages to car insurance.
Moving average: A moving average of a share price is simply the average of the share prices of the last so many days.
Multiple compression: Multiple compression is when company’s price/earnings multiple falls as investors become wary of a company’s growth prospects. The share price may be static or falling, despite increasing earnings.
Mandatory reconsideration – The first stage of the appeal process for decisions on tax credits made on or after 6 April 2014. The mandatory reconsideration process asks HMRC to reconsider their original decision.
Magistrate – non-legal volunteer who hears cases in their community and administers the law, usually in a court that deals with minor offences and holds preliminary hearings for more serious ones.
Manager (of a law firm) – the SRA Code of Conduct 2011 defines this as:
- a member of an LLP
- a director of a company
- a partner in a partnership, or
- in relation to any other body, a member of its governing body.
Magna Carta – Latin for great charter, signed by King John in 1215, it promised the protection of rights and access to justice. Claimed as the foundation to civil liberties and starting point for human rights.
Margin: The percentage of the selling price that will be profit, generally calculated as percentages. It helps measure how much the company keeps in earnings. For example, a 20% profit margin means the company has a net income of £0.20 for each pound of total revenue earned.
Markup: When a business increases the price of an item before it is sold. For example: if a TV was bought for £500 and is sold for £650, the markup is £150.
Matter – an application, information or an issue that needs to be considered by the relevant authority.
Mediation – mediation and arbitration are alternative ways in which a dispute can be resolved, without going to court.
MiFID II – Markets in Financial Instruments Directive, an EU law unifying regulation across the 31 member states of the EEA
Misconduct – sometimes used to refer to the act in which a regulated professional, for example a solicitor, breaches a principle.
Money laundering – the process of concealing the source of illegally obtained money.
Multinational – a business that operates in different countries.
Naked option writing: There are two parties to an option contract – the buyer (holder) and the seller (writer). If you are an option writer, you can be covered or naked.
Naked shorting: A ‘naked’ short involves shorting shares that are not available to borrow.
Nation’s current account: A nation’s current account measures the flows of actual goods and services in and out of the country
National Insurance contributions – You pay National Insurance contributions to HM Revenue & Customs if you are aged 16 and over, and you are an employee or self-employed. You can also pay voluntary contributions. The contributions build up your entitlement to state benefits. You usually stop paying contributions once you reach State Pension age.
National Insurance number – Your National Insurance Number is your personal reference number for the whole UK system of National Insurance and state benefits. This number ensures the National Insurance contributions you pay are noted on your record with HM Revenue & Customs.
National Living Wage – This is a premium on the National Minimum Wage for employees aged 25 and over.
National Minimum Wage – The National Minimum Wage sets the minimum hourly rates that employers must pay their employees in the UK. HM Revenue & Customs enforce the rules.
NAV: The net asset value (NAV) of a firm is the amount of money that would be left if it closed, sold its assets and paid its debts.
Net working capital: Net working capital measures a firm’s ability to pay its way, or its liquidity. Subtract its current liabilities from its current assets.
Nikkei 225: The Nikkei 225 isJapan’s major stockmarket index.
Nil-paid rights: Nil-paid rights arise when a firm sells new shares for cash to existing shareholders via a rights issue.
Nominal value of a bond: Each bond has a fixed nominal value, often £100 for a sterling bond.
Nominee account: Usually, a broker records shares bought on behalf of clients using a general ‘nominee’ account on the register with a name chosen by the broker
Non-domicile: Non-domicile status is given to people who were either not born here or whose parents spent most of their lives in another country.
Non-Resident Indian: An individual of Indian descent (1 Indian grandparent or more) who conducts their business outside of India
NORAM: North America, Canada, Mexico
Nordic: Region covering Denmark, Finland, Iceland, Norway and Sweden
Net profit: The result of deducting business expenses from the gross profit.
Next-of-kin status – should your partner become ill or die, you may not be considered as their ‘next-of-kin’ for medical purposes unless you and your partner make a written agreement beforehand.
No win no fee – see ‘Conditional Fee Agreements (CFAs)’ above. If a claim on a CFA is unsuccessful, the solicitor receives no payment for their work under the CFA. If the claim is successful, the solicitor claims a higher than normal level of fees to reflect their risk in taking the case on a CFA.
Notary – a lawyer regulated by the Faculty Office of the Archbishop of Canterbury.
NPI: Nonperforming Loan is a loan where the borrower has not made the agreed payments in the agreed time frame.
NRI – See Non-Resident Indian
Obligation – a requirement to take a particular type of action, that may have a legal basis through a contract.
OCF (ongoing charges figure): Fund managers publish their ongoing charges figure (OCF) – previously known as the total expense ratio (TER) – to give an indication of the cost of investing in their funds.
Off Exchange (OFEX): The Off Exchange (OFEX) was started as a way for shareholders to deal in the shares of small companies that do not meet the requirements of Aim and the LSE’s official list.
Off-balance-sheet finance: This technique allows a borrower to legally raise finance (so improving its cash position) without showing any associated liability on the balance sheet.
Offshore: Holding assets or finances outside of the country of residence
Onshore: Holding assets or finances within the domestic country of residence. Also used to define clients within the same region as the private bank or asset manager.
Open & closed end funds: An investment or ‘closed end’ trust is a public company whose business is to invest in other companies.
Open-ended investment company (OEIC): An open-ended investment company, or OEIC (pronounced ‘oik’), is a modern and more flexible version of a unit trust.
Operating leverage: High operating leverage (also known as operating gearing) means that fixed costs (predominantly property and staff) are a high proportion of total costs in the profit and loss account.
Operational gearing: Operational gearing describes the relationship between a firm’s fixed and variable costs.
Opportunity cost: The opportunity cost of an investment is the return you could have got if you’d put your money elsewhere.
Option: An option is simply the right to buy (a ‘call’ option) or sell (a ‘put’ option) a quantity of any asset by an agreed expiry date for a fixed (‘strike’) price.
Optionality: An option gives the right to buy (‘call’) or sell (‘put’) shares at a fixed ‘strike’ price, but only before an agreed date when the option expires.
Out of the money: If an option is ‘out of the money’ it is usually not worth exercising given the current market price of the underlying asset.
Output gap: The output gap is the difference between an economy’s actual output, otherwise known as gross domestic product (GDP), and what it would be if that country’s industries were working flat out.
Omission – a failure to perform a particular act where there was a duty or a legal requirement for that act to be carried out.
Opening balance: The amount of funds in the company’s account on the first day of the financial period (usually the same as the closing balance the day before).
Origination: The process of identifying new clients or business. In investments: originating funding or investment products on behalf of clients, as well as onboarding clients
Ordinary power of attorney – a legal way of giving someone else the power to manage your financial affairs when it is difficult for you to manage them yourself, perhaps because of a physical disability. Nobody can ‘take’ a power of attorney; it has to be ‘donated’ willingly. The donor decides who to appoint as their ‘attorney’, which will be someone they trust, such as a close relative, friend, or solicitor, and can cancel the arrangement at any time.
Outcome(s) – this often means the final decision following an application or an investigation.
Outcomes-focused regulation (OFR) – this is the SRA’s approach to regulation. It allows firms to adopt their own approach, systems and management to best enable them to deliver a good service to client’s needs and to support their business.
Out-of-court settlement – an agreement between the two sides to settle the case privately before the court makes its decision.
Overheads: This refers to ongoing business expenses that help the company operate on a day to day basis, e.g. rent, wages, phone bills, etc.
Over the counter (OTC): Many transactions are done privately between counter parties and with no exchange involved. These are known as over the counter, or OTC.
Overweight and underweight: The terms overweight and underweight are used by brokers and fund managers to indicate their preference for stocks or markets relative to particular indices or benchmarks.
Pairs trade: Pairs traders aim to profit from the change in the price of, say, one share relative to another.
Paralegal – someone who supports lawyers in their work. Often paralegals have a law degree but do not have a practicing qualification.
Parental settlement – this is when your income is taxed as if it belongs to your parents (or step-parents) and not you. This occurs if you are under 18 years old, not married or in a civil partnership and your parents (or step-parents) have given you funds that produce an annual income of over £100.
Partner – members of a firm who equally share ownership and liability.
Partnership – two or more people working in business together.
Patent attorney/agent – a lawyer regulated by the Intellectual Property Regulation Board.
Pay As You Earn (PAYE)– This is a system of collecting and paying income tax and National Insurance contributions. If you are an employee, your employer deducts income tax and National Insurance contributions from your income, and pays them to HM Revenue & Customs for you.
Payroll: Lists the employees who receive a wage or salary. Managing payroll involves reporting the taxes to be paid on behalf of employees, unemployment taxes, and workman’s compensation.
Payslip – A payslip is a statement that contains details of your pay and any tax and National Insurance contributions deducted. Your employer might give you a paper payslip or send it to you electronically.
Payback period: The payback period measures how long a project or investment takes to repay any initial outlay.
PIK note: A “payment-in-kind” (PIK) note (or loan) is a way for companies to borrow money.
Piotroski score: The Piotroski score is designed to identify high-quality firms by looking at nine separate criteria.
Placing: Placing is where selected institutions are phoned by a firm’s advising investment bank and offered blocks of shares.
Plaza Accord: The Plaza Accord was an agreement signed between the US, Japan, West Germany, France and the UK at the Plaza Hotel in New York in 1985.
Ponzi scheme: Ponzi schemes are a type of illegal ‘rob Peter to pay Paul’ operation named after Charles Ponzi who took deposits from 40,000 US investors on the promise of fabulous returns
Pound cost averaging: Pound cost averaging is when you drip feed money into shares or units on a regular basis rather than committing a single larger lump sum.
Preference share: Preference or preferred shares are shares in a company that have a fixed rather than a variable dividend.
Price elasticity: In general, the higher the price of a product the lower the demand for it. The extent to which this is true for each product is referred to as price elasticity.
Price/book ratio: The price to book ratio (p/b ratio) is calculated by dividing the current share price by its book value per share.
Price to cash flow ratio: The price to cash flow ratio (PCF) is a measure of the market’s expectation of a firm’s future health.
Price to earnings growth (PEG) ratio: This key ratio compares the price to earnings ratio to a firm’s earnings growth rate to see whether a share is cheap or expensive.
Price to sales ratio: A company’s market cap divided by the company’s annual sales (or revenue) gives us the price to sales ratio.
Price/earnings (P/e) ratio: The price/earnings ratio is a quick way to establish a firm’s relative value.
Prime broker: Prime brokers are typically investment banks which are able to sell clients, often hedge funds, a ‘one-stop shop’ service.
Priority Clients: Clients that are not deemed HNW (see HNW) but have a large amount in assets/financials.
Private Bank: A bank specifically set up to service high/ultra high net worth clients, individuals and corporations across investment and financial advisory and management
Private Banker: A person working in a private bank or family office responsible for managing a portfolio of clients/wealth, offering wealth management services
Private Client: HNW (see HNW) and UHNW (see UHNW) individuals or families utilising the services of a private bank or wealth management firm.
Private Equity: Private equity covers the many ways of raising finance ‘off exchange’.
Private finance initiative (PFI) / public-private partnership (PPP): The private finance initiative (PFI) is a way of getting private sector involved in financing public sector projects like schools, hospitals and prisons.
Profit warning: A profit warning is when a listed company announces that its profits are going to be significantly lower than the market currently expects.
Prop trading: Proprietary (‘prop’) trading involves banks risking their own capital to make money.
Public sector net cash requirement (PSNCR): Government spending usually exceeds its income, and the difference is known as a ‘public sector net cash requirement’ (PSNCR).
Purchasing power parity: Purchasing power parity (PPP) is a theory that tries to work out how over- or undervalued one currency is in relation to another.
Put option: A put option gives someone the right to sell something (often shares, but they can be used in connection with other financial assets) for an agreed price on or before a certain date.
Puts and calls: A ‘put’ give you the right to sell a share at a pre-determined price, a ‘call’ gives you the right to buy them.
Pension age – This is the age at which you can claim your pension. Find out when you will reach state pension age using the calculator on GOV.UK.
Personal allowance – Most people who live in the UK can claim a personal allowance. This is the amount of income you can have each tax year before having to pay income tax.
Personal representatives (PRs) – Executors or administrators. If there is more than one personal representative, they must work together to decide matters between them. Disagreements between personal representatives can cause expensive delays.
Personal tax account – this is an on-line system operated by HM Revenue & Customs on the GOV.UK website. It allows you to manage some of your tax affairs online.
Petty cash: A small amount of cash withdrawn from the bank used to buy miscellaneous items, e.g. stationary, stamps, milk, etc.
Petty cash voucher: This is used whenever cash is withdrawn from the petty cash fund. It includes a unique number, the date the money was withdrawn, details of the transaction, and total amount withdrawn.
Petty cash reconciliation: The act of reviewing cash records to see if there are any undocumented transactions, and to ensure petty cash funds are being used appropriately.
Practising certificate (PC) – a document issued to solicitors by the SRA which allows a solicitor to carry out certain legal work such as advocacy, litigation, probate and conveyancing. The SRA can impose conditions on a practising certificate, restricting the types of work that solicitors can do, and in what circumstances.
Prima facie – Latin term used to describe something that appears on the face of it to be true.
Probate – a legal permission provided by a Probate Registry for someone to deal with someone else’s estate after they die. A Probate Registry is an office where someone can be interviewed in order to be provided with a probate permission. To find your nearest registry or for more information, visit GOV.UK.
Pro bono – Latin term for professional work undertaken voluntarily and without payment or at a reduced fee. Find out more on the Law Society’s pro bono pages.
Public interest – the overall welfare of the general public.
Pursuant – when something is related to, or comes out of, something else. For example, the powers of the SRA to regulate the legal profession stem from (‘are pursuant to’) various acts of parliament.
Q ratio: The Q ratio, or Tobin’s Q, can be a reliable measure of stockmarket value.
Quantitative easing (QE): Quantitative easing (QE) involves electronically expanding a central bank’s balance sheet.
Rates – Rates are a local tax in Northern Ireland, which you pay to Land & Property Services. Councils use your rates to provide local services.
Real and nominal: In a monetary context, ‘real’ and ‘nominal’ are used to describe whether or not a price has been adjusted for inflation.
Real interest rate: A “real” interest rate accounts for the impact of inflation on a given rate of interest. It’s very important to your returns.
Recession: The most common definition of a recession is a fall in real (inflation-adjusted) gross domestic product for two or more quarters in a row.
Redemption yield: When investors buy different securities, they want to be able to compare expected annual returns. For bonds this is the ‘redemption yield’ or ‘yield to maturity’.
Repo: A ‘repo’ is standard sale and repurchase agreement.
Resistance points: Shares can often trade in channels, rarely breaking below or above consistent minimum and maximum prices. Those are a stock’s resistance points.
Return on capital: Return on capital is one of the most useful ratios when it comes to measuring the performance of a company.
Return on capital employed (ROCE): This key ratio measures the profitability of a firm taking account of the amount of money it deploys.
Return on equity: Return on equity measures a year’s worth of earnings against shareholders’ equity (the difference between a group’s assets and its liabilities).
Return on invested capital (ROIC): This is a ratio that can be used to assess how effectively a company squeezes profits from the assets it controls and owns.
Rights issue: A rights issue gives investors who already hold shares in a company the right to buy additional shares in a fixed proportion to their existing holding.
Risk-free rate: One way to think about the size of return you should be aiming for is to consider the return you could get if you took absolutely no risk at all – the “risk-free rate of return”.
Risk premium: The risk premium is the difference between the highest risk-free return available and the rate of return investors expect from another asset over the same period
Recognised body/sole practitioner – according to the SRA Code of Conduct 2011, a recognised body is a body recognised by the SRA under section 9 of the Administration of Justice Act 1985. A recognised sole practitioner is a solicitor or Registered European lawyer (REL) authorised by the SRA under section 1B of the Solicitors Act 1974 to practise as a sole practitioner.
Reconciliation: The process of comparing two sets of records to make sure they correspond with one another, e.g. comparing the bank account with the cash book to make sure there are no inconsistencies.
Registered European lawyer (REL) – a lawyer from a European state who registers with the SRA to practise law in England and Wales.
Registered Foreign lawyer (RFL) – a lawyer from overseas who registers with the SRA to practice law in England and Wales.
Regulated individual – an individual who is authorised by, and is therefore regulated by, a regulatory body, like the SRA.
Relationship Manager: similar to a private banker, managing relationships with HNW/UHNW individuals and organisations for a private bank or wealth management firm
Remittance advice: A document sent to a supplier or received from a customer which states that their invoice has been paid, and includes information such as a text note, invoice number, invoice amount, etc.
Remunerate – to pay or reward someone for something they have done or a service they have provided, such as a company paying an employee.
Residence – The Statutory Residence Test took effect from 6 April 2013. What country you are resident in for tax purposes partly depends on the number of days you spend there. To decide your residence position, you must follow the Statutory Residence Test.
Revocation – when something is cancelled or taken away, such as the SRA revoking an individual’s permission to practise as a solicitor.
Rights of audience – generally a right of a lawyer to appear and conduct proceedings in court on behalf of their client.
Risk – the likelihood that a particular choice or action might lead to a loss or damage.
ROI: Return on Investments
Roll of solicitors – a list of all admitted solicitors held by the Law Society.
Salary – Your salary is the regular payment of your wages from an employer. Your salary might include items other than just money. For example, your employer might also pay for private medical insurance, accommodation for you or other things which have value.
S&P 500 index: America’s S&P 500 index is among the Western world’s most cyclical indices.
Sale and leaseback: A sale and leaseback arrangement can be a useful way for a company to generate cash from its property portfolio without having to vacate.
Secular trend: A secular trend is a long-term phenomenon, whereas a cyclical trend is short-term and will eventually reverse.
Securitisation: A mortgage is secured on the borrower’s home, which can be seized later and sold should things go wrong. By extension, the mortgage itself can be securitised.
Segregated fund: A segregated fund is a managed pot of assets belonging to just one client, managed alongside – but separately from – other investments under a manager’s control.
Shadow banking: Shadow banking refers mainly to methods by which credit is created outside of the traditional banking system and beyond the oversight of regulators
Share buyback: As well as issuing new shares, companies sometimes buy back existing ones.
Share options: Share options give you the right to buy (or to sell) shares in a given company at a previously set price regardless of the current market price.
Short squeeze: When a large number of short sellers target the same stock, the price can rise in a self-perpetuating circle known as a ‘short squeeze’.
Short sterling future: The ‘short term interest rate future’ (or STIR) is also known as the ‘short sterling’ future. In essence, it facilitates bets on where interest rates will be.
Short selling: If a trader believes that the price of an asset will not rise but fall, he can still make money on it by ‘shorting’ it.
SIPP: A self-invested personal pension, or SIPP, is a type of DIY pension.
SIV (structured investment vehicle): Structured investment vehicles (or SIVs) are typically created by investment banks and can be a way to raise capital without having to record an associated obligation to repay it.
Smart beta: Smart beta funds aim to combine the best aspects of passive and active management, aiming to beat the index by eliminating any element of discretionary human judgement.
Sovereign wealth fund: A sovereign wealth fund is a state-owned fund of the accumulated reserves that arise from running a trade surplus with other countries.
Special drawing rights: A special drawing right allows a member country of the IMF to obtain surplus currency held by another member country.
Spread: A spread is simply a gap, or difference; so the ‘spread’ between two and five is three.
Spread betting: Spread betting is a straightforward and tax-efficient way of leveraging the financial markets.
Stability and growth pact: The stability and growth pact, or SGP, played a key role in the establishment of the euro.
Stagflation: Stagflation is a nasty mix of rising prices (based on high demand, production capacity constraints, or both) and falling growth.
Stamp duty: Stamp duty is a re-registration tax. That means you pay it whenever you buy (but not sell) a registered asset.
Standard deviation: Standard deviation is still the most widely used measure of dispersion, or in financial markets, risk.
Stock overhang: Stock overhang is a phrase used to describe a sizeable block of shares which, if it were to be released in the market in one go, would flood it, and so depress prices.
Stock splitting: A stock split increases the number of a corporation’s issued shares by dividing each existing share.
Stop-loss: A stop-loss is an instruction given to a broker to by or sell a stock to limit losses if it moves beyond a certain level.
Subordinated debt: Holders of subordinated debt rank below most other bondholders when it comes to paying them back if the company goes backrupt.
Swap rate: A company has an existing ten-year loan from a bank on which it pays a floating rate of interest…
Swaps: Company A issues its fixed-interest bond and Company B issues a floating-rate loan. They then agree to swap their interest payment liabilities…
Synthetics: A synthetic is a combination of financial instruments – often two, sometimes more – designed to mimic another single security.
Scam – any scheme that cheats people out of their property or money, or causes them damage for the benefit of others.
Scottish income tax – From 6 April 2017 the Scottish Parliament has had the power to set its own bands and rates of income tax for Scottish taxpayers on non-savings income. This income tax is collected and administrated by HM Revenue & Customs.
Self assessment – This is the system for giving details of your income and gains to HM Revenue & Customs. It involves completing tax returns.
Self-employed – If you set up your own business and take responsibility for its success or failure, you might be self-employed.
SELL SIDE – Firms in the financial industry creating instruments, stocks, bonds and foreign exchange that are used by the Buy Side industry. These firms include investment banks, brokerages and market makers
Settlement discount: Discounts offered to buyers on the condition that the funds be paid within a specified period of time.
Sole practitioner – a lawyer who runs his or her own law firm without other partners, directors or members.
Solicitor – a lawyer who has been admitted as a solicitor by the SRA and whose name appears on the roll of solicitors.
Solicitors Regulation Authority (SRA) – the SRA regulates solicitors in England and Wales. Their purpose is to protect the public by ensuring that solicitors meet high standards, and by acting when risks are identified.
State benefits – State benefits are paid by the UK Government to people who meet certain conditions, for example people with children, or people with a low income.
Striking-off/struck-off – an example is where a solicitor is struck from the roll of solicitors.
Student loans – These are loans from the Student Loan Company, a Government-owned organisation that provides loans and grants to students at Universities and colleges in the UK.
Taiex: The TAIEX is Taiwan’s benchmark index, with technology companies accounting for just over a third of the market. Semiconductors are the main subsector.
Tangible common equity: Tangible common equity is a measure used to gauge how big a hit a bank can take before its shareholders’ equity is wiped out.
Tangible book value per share: Book value (also known as equity, shareholders’ funds, or net asset value) is the value of all a company’s assets, minus its liabilities.
Target 2: Target is a payment system used by Europe’s central banks for urgent real-time electronic transfers.
Tax – Tax is money paid to the Government to pay for services and to run the state. HM Revenue & Customs collect most taxes, but some taxes (such as tax on vehicles) are collected by other bodies. There are also local taxes for the area where you live.
Tax-free – If something is tax-free, it means you do not need to pay any tax on it. Something which is tax-free might also be described as ‘exempt from tax’, ‘not taxable’ or ‘non-taxable’.
Tax residence status – Your tax residence status is one factor in deciding whether or not you have to pay UK tax on your income and gains.
Tax return – If you are within self assessment, you have to complete a tax return every year to tell HM Revenue & Customs about your income and gains. You can also claim allowances and reliefs. Some people have to complete a tax return even if their tax is simple, for example, the self-employed and people who receive foreign income.
Tax year – The tax year is from 6 April in one year to the following 5 April. You might see the tax year written as ‘2018/2019 tax year’. This means 6 April 2018 to 5 April 2019.
Technical analysis: Technical analysts or ‘chartists’ attempt to predict future share price (or index) movements by looking at past movements.
Tenancy – a contract between a tenant and their landlord. This contract can be written or verbal. In England and Wales there is no law to say that landlords have to provide a written tenancy agreement, but it is always a good idea to ask for one, even if the landlord is a friend or family member.
Textphone – A textphone is something that can be used by people with hearing difficulties. A textphone, sometimes called a Minicom, is similar to a standard telephone. It plugs into your telephone socket at home, and has a keyboard and display that lets you type and read conversations.
Text relay – Text relay (previously called typetalk) is a service that allows textphone users to contact people who are using a standard telephone. It does this by using a ‘relay assistant’ who changes type to talk and talk to type.
Third party – a term used to describe someone other than the two sides in a particular situation. For example, it can be used in motor insurance policies to describe other people besides the person who is insured and the company that insures them.
Tier-one capital: Banks’ capital can be split into tiers. Tier one represents capital of the highest quality.
Time value of money: Money has a time value. If you are owed £10, you would rather it was paid back now than in, say, one year’s time.
Total expense ratio: The total expense ratio (TER), also known as the ‘expense ratio’ is a way to capture the annual costs associated with running a fund such as a unit trust.
Tracking error: Tracking error is defined as the standard deviation of the difference between the fund’s returns and the returns on the index.
Trademark attorney – a lawyer regulated by the Intellectual Property Regulation Board.
Trade deficit:When a country’s imports exceed its exports, it is said to have a negative balance of trade, or trade deficit.
Trade discount: Discounts given to regular customers, which are not usually recorded in books.
Trade surplus: When a country’s exports exceed its imports, it is said to have a positive balance of trade, or trade surplus.
Trailing stop-loss: A conventional stop-loss will ensure you get out of the market at a fixed price above or below your initial trading price. A trailing stop allows you to keep more of your profits.
Trainee solicitor – a person completing their training requirements in a law firm before applying to become a solicitor.
Transparent – being open and honest in a way that can be understood by others.
Treasuries: A government bond is an IOU issued by the central bank, which it guarantees to repay at a given date. In the US, these are referred to as Treasuries.
Treasury stock: Treasury stock are shares that have been issued by a firm, but are being kept ‘in treasury’ – i.e. they are being kept for possible subsequent reissue.
Trial balance: A report made at the end of an accounting period. It lists the balance in each of the accounts in the general ledger, which helps determine if any errors in recording transactions exist.
Tribunal – a person or group of people who collectively have authority to judge and/or determine claims or disputes.
True and fair value: There is quite a lot of misunderstanding about what auditors mean when they sign off accounts as “true and fair”.
Unadmitted – an individual who has not been admitted to the roll of solicitors.
Undeposited funds: Payments that have been received by cash, cheque, or credit card that have yet to be paid into the bank.
Underwriting: A common way to guarantee a minimum level of proceeds when a public company issues new shares is for the issuing firm to involve an underwriter.
Unfair dismissal – an employee is entitled to make a claim for unfair dismissal once they have been employed for two years, full or part-time, and they are dismissed for any of these reasons.
Universal Credit – Universal Credit is a new single benefit run by the Department of Work and Pensions (DWP) which combines benefits for in and out of work support, housing, and childcare costs, with additional payments for people who have disabilities or caring responsibilities. It is currently being rolled-out to different geographical areas.
Unlawful – illegal or contrary to social convention.
Unpresented: Cheques that have not yet been deposited to the bank.
Utilities: Utilities are companies involved in providing electricity, gas, water and similar services to consumers and businesses.
VAT – Value Added Tax is a tax on expenditure that is charged by registered traders. If turnover in a 12-month period is more than £85,000, the trader will most likely be obliged to register for and charge VAT on their invoices.
Value at risk (VAR): VAR attempts to assess the odds of losing money on a portfolio of, say, shares.
Velocity of money: The health of an economy can be measured by capturing the speed at which the money available in it (the money supply) is being spent.
Vendor finance: Vendor finance is a creative way for a firm to fight falling sales. If a customer cannot afford to pay up front, it borrows the funds from the manufacturer.
Verify – Verify is the government’s new gateway to using online digital services, it can be used to make claims for example for the marriage allowance and tax refunds.
Vertical integration: Vertical integration is when two businesses at different stages of production join to form one bigger company.
Vix (volatility index): The Chicago Board Options Exchange (CBOE) Volatility index (Vix for short) reflects how volatile traders expect the market to be over the coming year.
Volatility: Volatility refers to the fluctuations in the price of a security, commodity, currency, or index.
WACC: WACC stands for the weighted average cost of capital. It represents the rate of return a company must make on the money it has invested to stop investors putting their money elsewhere.
Wages – Wages are the money your employer pays you in return for the work you do for them. Wages can also include other things, such as your employer giving you something other than cash that has a value or benefit to you.
Warrants: Warrants are a type of security issued by companies and traded in the market, much in the way that shares are.
Wholesale money markets: The term ‘money market’ covers the vast network of deals involving the lending and borrowing of cash in a range of currencies. ‘Wholesale’ means funds borrowed or lent in large quantities.
Will – a legal document that declares a person’s wishes about the way their estate should be handled when they die.
Withholding tax: A withholding tax requires a person or company making a payment to someone else to withhold part of the payment and pay it to the government.
Working capital: Also known as ‘net current assets’, working capital is the total of a firm’s current, or short term, balance sheet assets minus all current liabilities.
Year-end: The end of the financial year. During this period, the accountant calculates how much tax a business owes to the government. Bookkeepers need to ensure that reconciliations are completed, transaction entries are correctly coded, supporting paperwork is readily available, and that sales taxes and PAYE taxes have been processed.
Yield curve: A yield curve shows the relationship between the yield on securities and their maturities (how long it is until they can be redeemed at their face value).
Yield on cost: The yield on cost tells you a company’s dividend return as a percentage of the price that you paid for the shares.
Yield spread: Bonds that are not government securities are evaluated by the market on the basis of the difference between their yield and the yield of a comparable government bond. That difference is called a spread
Z score: The Z score indicates the probability of a company entering bankruptcy within the next two years.
Zero: A zero is a type of share or bond. Its key feature is that it pays no annual dividend, or coupon.