Glossary of financial terms

AGENT

Any person who acts on behalf of another

ALTERNATIVE INVESTMENT MARKET

A share trading mechanism established and regulated by the London Stock Exchange

BID-OFFER SPREAD

The difference between the 'Bid Price' and the 'Offer Price' which can be expressed as a percentage of the 'Offer Price'

BID PRICE

The price shown by a 'Market Maker' at which an investor may sell shares, so long as the number of shares does not exceed the indicated 'Market Size'. The 'Bid Price' is not a guaranteed selling price when a transaction is in excess of (outside) 'Market Size'.

EARNINGS PER SHARE

The profits of a company, after tax, divided by the weighted average number of shares the company had in issue during the accounting period.

GEARING

A ratio between a company's borrowings and its share capital or 'shareholders funds' which is expressed as a percentage. High gearing means a proportionately high level of debt and vice versa.

HOLDING COMPANY

A company that controls one or more other companies.

LIQUIDITY

The degree of ease with which an asset can be turned into cash. A 'liquid market' is one with many buyers and sellers where dealing is usually easier and shares have a narrow 'Bid- Offer Spread'

MARKET CAPITALISATION

The value of a company calculated by multiplying the number of shares in issue by the 'Mid-Price' of the share.

MARKET MAKER

A person (effectively a middleman) who is prepared to buy and sell shares at prices determined by them. The market makers also determine the 'Market Size' and 'Bid- Offer spread'.

MARKET SIZE

An indicated number of shares in which a 'Market Maker' is willing to make a transaction at the 'Bid' and 'Offer' prices they are quoting.

MID- PRICE

The mid point between the 'Bid' and'Offer' prices. This is used for many valuations and ratio calculations and is the price shown when companies feature in newspapers.

NET ASSET VALUE

The assets of a company, minus its liabilities divided by the number of shares in issue.

NOMINAL VALUE

The 'value' of a security as printed on a share certificate, e.g. 'Ordinary 10p Shares'. Also called 'par value' or 'face value', the measure has no bearing on the actual price of a share on the open market.

OFEX

The UK's independent market focussed on small and medium enterprises from around the world.

OFFER PRICE

The price shown by a 'Market Maker' at which an investor may buy shares, so long as the number of shares does not exceed the indicated 'Market Size'. The Offer Price is not a guaranteed buying price when a transaction is in excess of (outside) 'Market Size'

PLACING

A method of raising money for a company. Usually, a placing is effected by institutional subscription to a new share issue, which is not open to the general public.

PRICE/EARNINGS RATIO

The mid- price of a share divided by the earnings per share, provides a multiple of a company's market value to the profit it makes. For loss- making companies the measure is irrelevant.

RIGHTS ISSUE

Where a company offers new shares, on a pro rata basis, to its shareholders at a set price. Unlike an 'Open Offer' the shareholders can potentially make a capital gain without actually paying for the Rights Issue shares.

YIELD

The annual income from a share based on its current price. Yield for an individual investor will depend on the price they have paid for the share.



Risk Warning

There is an extra risk of losing money when shares are bought in some smaller companies including 'Penny Shares'. There is a big difference between the buying price and the selling price of these shares. If they have to be sold immediately, you may get back much less than you paid for them or you may have difficulty in selling them. Past performance is not a reliable indicator of future results. The price may change quickly and it may go down as well as up. You could lose every penny put into a particular share.

The information contained above has been compiled from documented sources which are believed to be reliable but, due to their very nature, are subject to a degree of historical inaccuracy and have not been independently verified and cannot be guaranteed. The pages on this website are provided for information only. City Equities Limited will not accept responsibility for loss incurred by any person or body acting, or refraining from acting, as a result of information and/or opinions given anywhere on this website. Issued by City Equities Limited, Aldermary House, 10-15 Queen Street, London, EC4N 1TY. Registered in England. Registered No. 2742847. Registered Address: Amwell House, 19 Amwell Street, Hoddeson, Herts. EN11 8TS. City Equities Limited is Authorised and regulated by the Financial Services Authority. Registration No. 155051.