Glossary of terms Flashcards
Acquisition
Takeover or buying of another company.
Asset
Any item of economic or financial value owned by someone or a company.
Bank of England
The UK’s central bank.
Bankruptcy
When an individual or company is unable to pay its debts.
Bonds
Interest bearing securities which entitle holders to annual interest and repayment at maturity. Issued by companies and governments.
Capital
Cash and assets used to generate income or make an investment.
Capital gain
An increase in market value of a security. The difference between the price now and the price you bought the asset.
Central bank
Central banks typically have responsibility for setting a country’s short term interest rate, controlling the money supply, acting as a lender of last resort to banks and managing the country’s national debt.
Closing price
Price of a security, such as a share, at the end of the day.
Collective Incentive Scheme (CIS)
A fund run by professional managers that allow investors to pool their money. The manager selects the invest,ents and the investors share in any increase (or decrease) in their value.
Commission
Charges for citing as agent or broker.
Coupon
Amount of interest paid on a bond.
Credit rating
An assessment of a bond issuer’s ability to pay the interest and repay the capital on the bonds. The best rating is triple A or AAA.
Credit risk
The likelihood of a borrower being unable to pay the interest or repay the debt.
Currency
Any form of money that circulates in an economy as an accepted means of exchange for goods and services.
DAX
German shares index comprising the largest 30 largest companies in Germany.
Dealer
An individual or firm acting in order to buy or sell a security for its own account and risk.
Default
Situation wheee a borrower has failed to meet the requirements of their borrowing, for example by failing to pay the interest due.
Deposit
A sum of money held at a financial institution on behalf of an account holder for safekeeping.
Diversification
Investment strategy of spreading risks by investing in a range of investments.
Dividend
Distribution of profits by a company.
Dividend yield
Most recent dividend expressed as a percentage of current share price.
Dow Jones Industrial Average Index
Major share index in USAbased on the prices of 30 major company share prices.
Effective annual rate
The annualized compound rate of interest applied to a cash deposit or loan. Also known as the annual equivalent rate (AER).
Equity
Another name for stock or share of a company. It can also be used to describe how much the value of a house exceeds the mortgage.
Exchange
Marketplace for trading investments.
Exchange rate
Rate at which one currency can be exchanged for another.
Face value
Also known as the par or nominal value. It’s the amount that needs to be repaid on a bond .
Foreign exchange market
A market for trading of foreign currencies.
FTSE 100 (‘Footsie’)
Main UK share index of 100 leading shares.
Fund
A collective investment scheme wheee money is combined and invested in a portfolio of shares with a common investment purpose.
Fund manager
A firm that invests money on behalf of investors.
Index
A statistical measure of the changes in a selection of stocks representing a portion of the overall market.
Inflation
An increase in the general level of prices.
Initial public offering (IPO)
A new issue of ordinary shares. Also known as a new issue.
Interest
The price paid for borrowing money. Generally interest is expressed as a percentage rate over a period of time such as 5% per annum.
Investment bank
A business that specializes in raising debt and equity for companies.
Leverage
A measure of the extent to which a company finances itself from debt, relative to equity.
Liquidity
The ease with which an item can be traded on the market. Liquid markets are known as deep.
Listing
Companies whose securities are listed on the London Stock Exchange (LsE) and available to be traded.
Loan
A form of loan where a borrower receives money from a lender. The borrower agrees to pay a contracted rate of interest and also agrees the date when the load will be repaid.
LSE
Main UK market for securities.
Market
All exchanges are markets; electronic or physical meeting places where assets are bought or sold.
Market price
Price of a share as quoted on the exchange.
Maturity
Date when the capital on a bond is repaid.
Merger
The combining of two or more companies into one new entity.
Mortgage
A long term loan used to finance the purchase of real estate (Eg a house). Under the agreement the borrower agrees to make a series of payments back to the lender. The loan is secured against the value of the property.
NASDAQ
National Association of Securities Dealers Automated Quotations. US market specializing in share of technology companies.
National debt
A government’s total outstanding borrowing resulting from financing successive budget deficits mainly through the issue of government backed securities.
Nikkei 225
Main Japanese share index composed of shares in the largest 225 companies listed on the Japanese stock exchange.
Nominal value
the amount of a bond that will be repaid on maturity.
Overdraft
Form of borrowing from a bank where the lending bank can demand repayment at any time.
Over the counter (OTC)
Transactions not on an exchange.
Pawnbroker
A business that provides loans to individuals. The pawnbroker takes an item of security (e.g. Jewellery) in exchange for the loan. The loan needs to be repaid to reclaim the item.
Payday loan
Very short term loan that needs to be repaid on the borrower’s next payday. Usually very expensive.
Pension fund
A fund set up by a company or government to invest the pension contributions of members and employees to be paid out at retirement age.
Personal loan
A loan taken out where the purpose of the loan is not known.
Personal pension scheme
A retirement scheme set up by an individual rather than an individual’s employer.
portfolio
A selection of investments.
premium
The regular payment made to an insurance company.
Redemption date
The date at which a bond issuer has to repay the face value of the bond.
Reinsurance
The term for insurance taken out by an insurer on a policy they have underwritten.
Retail bank
Organisation that provides banking facilities to individuals and small companies.
Return
A measure of the financial reward. Always linked to risk.
Secured
Situation where a lender takes something of value. If the borrower fails to repay the debt then the lender is able to keep the item.
Security
A bank has taken security when it has something of value. An example is a house for a mortgage.
Shareholders
Those who own the shares of a company. They are the owners.
start up
A business or company in its early stages.
State pension scheme
A retirement scheme that is provided by the state.
Syndicate
Insurance companies or individuals joining together to write insurance.
Trade
The purchase and sale of a security.
Treasury
Government department responsible for the regulation of financial services.
Unsecured
A loan to a borrower where the lender takes no security.
