Glossary

AGM

Annual General Meeting, held once a year for shareholders to approve the report and accounts and the final dividend, and vote on any proposed motions (such as the re-election of directors).

Articles of association

A company's articles set out its rules. The articles form part of the memorandum and articles of association.

Assets

An asset is something a company owns or has rights to that has future economic benefit. In most financial statements, assets are divided into two categories current and non-current (or liquid and fixed).

Balance sheet

The Balance Sheet shows assets and liabilities of a company at a unique point in time (i.e. the end of a particular specified day). It will also give details of how the company is funded by shareholders' funds and debt at that point in time.

Bonds

A bond is a written promise to repay a debt at an agreed time and to pay an agreed rate of interest on that debt.

Capital and reserves

Capital is the money shareholders have contributed in setting up the company. Reserves are the profits earned and other resources received by the company that have been kept for the benefit of shareholders.

Creditors amounts falling due after one year liabilities of the company that do not have to be paid within one year of the balance sheet date. They include money borrowed on a long-term basis to fund operations.

Capital gain

The profit made between the buying and selling price of shares or other assets.

Capital growth

The rise in the value of an initial investment.

Charting

Capturing the patterns of the overall market or an individual share price on a line, bar or other type of graph.

Debentures

This is a document issued by a company which acknowledges that some or all of the company's assets are security for a debt (usually to a bank). It is also a name for certain long-term loans to companies.

Depreciation and Amortisation

Depreciation and Amortisation are means to spread the cost of fixed assets over the periods they are expected to benefit. Amortisation is the writing off of an intangible asset over the projected life of that asset. Depreciation is a decline in the value of a fixed asset due to general wear and tear or obsolescence.

Directors' emoluments

See Emoluments

Directors' report

Every year, company directors have to prepare a report for the company's members, to explain what the company has been doing and their plans for the future.

Dividend

A taxable payment declared or recommended by a company's board of directors and provided to its shareholders out of the company's current or retained earnings.

Earnings per share

Profit for the financial year divided by the average number of shares in issue during the period.

EGM

Extraordinary General Meeting, any meeting of a company's shareholders other than its AGM. EGMs are held to enable shareholders to approve special transactions such as large acquisitions, mergers and disposals.

Emoluments

Salary and benefits.

Ex-dividend

The date, a few days before the Record date, following which shares are traded on the basis that the seller retains the right to receive the dividend.

Exercise (of share options)

To implement the rights of an option.

Final dividend

The dividend recommended by the directors for shareholders' approval at the AGM for payment after the meeting.

Financial statements

This is a statement which includes the annual accounts, directors' report and so on.

Fixed assets

See assets

Flotation

When a company's shares are sold to investors and quoted on the stock market for the first time, sometimes known as an Initial Public Offering or IPO.

Gearing

Ratio of borrowing minus cash and short-term investments to total capital and reserves and minority interests.

Goodwill

An intangible asset which provides a competitive advantage, such as a strong brand, reputation, or high employee morale. In an acquisition, goodwill appears on the balance sheet of the acquirer in the amount by which the purchase price exceeds the net tangible assets of the acquired company.

Gross

Before tax or other items have been deducted. After the deductions, the amount is described as "net".

Income statement

US term for profit & loss account

Interim dividend

A dividend usually declared part way through a company's financial year, authorised solely by the directors.

Liabilities

Liabilities are obligations to pay or convey assets or provide other economic benefits in the future, based on past transactions. Liabilities are divided into current and non-current. Current liabilities are those obligations that will be satisfied within one year; non-current liabilities are those expected to be satisfied after one year of the balance sheet date.

Market capitalisation

If you multiply the number of ordinary shares a company has issued by their market price, you get the market capitalisation value of the company.

Merger

The joining of two companies.

Minority interests

The rights of outside shareholders of subsidiary companies of the group to a proportion of the group's profits or assets.

Net

After tax or other items have been deducted from the "gross" amount.

Nominal value

The value ascribed to a share when it is first authorised and "par value".

Operating costs

The day-to-day expenses incurred in running a business, such as supplies, employees' wages and salaries and depreciation.

Operating profit (or loss)

The profit (or loss) from a company's principal (main) trading activity.

Other operating income

Income from activities other than normal business operations, such as rent income or profit from the sale of non-inventory assets.

Preliminary figures

A company's full-year results, announced as a prelude to the publication of the report and accounts.

Provisions for liabilities and charges

Amounts set aside for liabilities that are not yet certain.

Profit & loss account

A profit and loss account shows the money a business has earned from selling goods and services, less the money spent on goods, services and overheads.

Prospectus

If a public company wants people to invest in it, it prepares a prospectus giving details of its past performance and its plans for the future.

Provision for liabilities and charges

When accounts are being prepared and an amount needs to be set aside for liabilities which are known to exist, but which cannot be measured accurately, the amount set aside is called a provision.

Proxy

A form by which a shareholder votes without needing to attend an Annual or Extraordinary General Meeting by appointing someone else to vote on his or her behalf. Proxies can also be used to transfer voting authority to another party.

Quote

If a company has a quote (or is quoted), its shares can be bought and sold on the stock market.

Record date

The deadline, determined by a company's board of directors, by when an investor must be recorded as an owner of shares in order to qualify for a forthcoming dividend or share distribution.

Retained profit

The result for the year, after taking off tax, minority interests and dividends, which is kept in the business.

Rights issue

This is an issue of extra shares by a company. Existing shareholders can buy extra new shares in proportion to the shares they already hold. The shares are usually on sale at a price lower than the stock market price to encourage shareholders to buy. The shareholders can sell the rights if they do not wish to use them.

SEAQ

Stock Exchange Automated Quotations, a screen-based quote display system used as a price reference point for telephone execution between market participants and registered market makers.

SETS

Stock Exchange Electronic Trading Service - an electronic limit order book used to trade blue chip stocks, including all FTSE-100 stocks.

Share capital

Shareholders' equity (or net worth) money put into a business by its owners for use by the business in acquiring assets and retained profits.

techMARK

The London Stock Exchange's market for innovative technology companies.

Total Shareholder Return (TSR)

The measure of the returns that a company has provided for its shareholders - the product of share price movement plus dividends reinvested over a stated period. A good indicator of a company's overall performance.

Total turnover

Products and services sold to customers by a company. For mmO2 plc, our total turnover includes our share of our ventures' sales.

Transfer

The form signed by the seller of a share authorising the company to remove his/her name from the register and substitute that of the buyer.

Underwriter

An institutional investor who effectively insures a new issue (or rights issue) by agreeing to buy all shares which are not sold to other investors.

Volatility

The relative amount or percentage by which a share's price rises and falls during a period of time.

Volume

The total number of shares traded (bought and sold) in a given period of time.