Advance Fee Fraud, 419 Scam, Nigerian Scam
Internet scam whereby con artists, masquerading as corrupt officials or the offspring of African dictators, offer people a cut in their secret fortune in exchange for 'assistance', endless 'service charges' and advances.
The Annual Equivalent Rate is a calculation of the interest a bank account will earn in a year. AER takes into account how often interest is compounded and paid out and provides a yardstick for comparing the potential returns on different accounts.
The 'Annual Percentage Rate' is a useful calculation that allows users to compare the annual cost of credit across different products (on loans, credit cards etc), by including both the interest payments and applicable fees.
accident, sickness and unemployment insurance
Bank Base Rate
The yardstick rate of interest quoted by the major commercial banks, based on the Bank of England’s official repo rate. The interest rate on most loans to small businesses and to private individuals is a function of the bank base rate, and shifts with it.
Bear Market, Bearish
A prolonged downward trend in an investment market - which sees prices fall amidst pessimistic investor sentiment. Sellers outnumber buyers in a 'bear' market – depressing prices still further. The opposite of a bull market.
Blue Chip Shares
Shares in large, established companies with reputations for regular dividend payouts. Typically FTSE 100 members, they are seen as safe investments. Ironically, the term is drawn from gambling and refers to the highest-value chip in poker.
Boiler Room, Bucket Shop
An unauthorised telesales broker that uses high-pressure, aggressive tactics to flog dubious shares at inflated prices. Boiler rooms are generally based overseas, so duped investors don’t qualify for UK compensation schemes.
Bull Market, Bullish
A prolonged upward trend in an investment market - involving price rises and positive/ optimistic investor sentiment. A 'bullish' outlook sees buyers outnumbering sellers – strengthening share prices in the process. The opposite of a bear market.
Computational Fluid Dynamics
Dead Cat Bounce
A dead cat, dropped from a tall building, will 'bounce' on hitting the pavement. So a 'dead cat bounce' is a momentary recovery in a share price following bad news and a sharp price collapse - typically followed by flat-line performance. Sorry Felix!
Specialised financial instruments whose value is based on the price movements of an underlying share, sector, index, commodity or market. This broad category includes futures, options, CFDs, warrants and more.
A firm’s dividend payout divided by its share price, used to assess the return on a share. A low ratio suggests a high growth firm, a high yield a low growth, high risk one. Dividend payout is at the firm’s discretion so this rule is not universal!
Earnings Before Interest, Taxes, Depreciation and Amortisation. An increasingly accepted measure of a firm’s operating profit and potential profitability, especially in the US.
Calculated by dividing Earnings attributable to ordinary shareholders by the number of ordinary shares, Earnings per Share is a better measure of growth and company management than raw profit because companies often issue additional shares.
Exchange Traded Funds
The term Eurodollar refers to US dollars deposited in banks outside of the US - and subsequently traded internationally. This market originated in Europe (hence the 'Euro' prefix) before the modern Euro currency - and it is now largely based in London.
Exchange Traded Funds, Tracker Funds
A tradable investment fund which tracks the movement of an index. Its portfolio of shares mirrors a particular index - be it the FTSE 100 or the world gold index - in terms of composition, and will change accordingly. Also known as indexed funds.
FTSE 100 Index
Comprised of the 100 largest companies by market capitalisation on the LSE main market. These quintessential large-cap or blue-chip firms represent some 80% of the UK market. The 'Footsie' is the basis for many financial products, such as derivatives.
FTSE 250 Index
The FTSE 250 Index is comprised of the 250 largest UK companies by market capitalisation listed on the LSE Main Market after those in the FTSE 100 Index. These quintessential mid-cap firms represent approximately 17% of UK market capitalisation.
FTSE 350 Index
Combining the FTSE 100 Index and FTSE 250 Indices, the FTSE 350 Index comprises the 350 largest UK companies by market capitalisation on the LSE main market. The FTSE 350 represents 17% of UK market capitalisation and is a benchmark for companies in which
FTSE All-Share Index
The aggregation of the FTSE 100, FTSE 250 and FTSE Small Cap Indices, representing 98-99% of the UK market capitalisation. Of the UK companies listed on the LSE Main Market, only those in the FTSE Fledgling Index are excluded due to their small size
FTSE All-Small Index
The FTSE All-Small Index consists of all the companies in the FTSE SmallCap and FTSE Fledging indices, i.e. all Main Market companies outside the FTSE 350. Companies included in the All-Small are small-cap companies par excellence.
FTSE Fledgling Index
The FTSE Fledgling Index is made up of LSE Main Market-listed companies that are too small in terms of market capitalisation for inclusion in the FTSE All-Share Index. With the FTSE SmallCap Index, the Fledgling Index makes up the FTSE All-Small Index.
FTSE SmallCap Index
The FTSE SmallCap consists of those LSE Main Market-listed companies outside the FTSE 350 Index but large enough for inclusion in the All-Share Index. With the FTSE Fledgling Index, the SmallCap makes up the FTSE All-Small Index.
Going Long, 'Longing', Taking a Long Position
Buying shares, stocks or derivatives in the expectation that prices will rise and will bring in a profit when sold. The opposite, astonishingly, of 'going short'.
Going Short, 'Shorting', Taking a Short Position
The practice of selling shares or derivatives that the investor does not own in the expectation that prices will fall and that buying them back will bring in a profit. Institutional investors may borrow shares for this purpose. Compare with 'going long'.
Ratio used to measure a firm’s gearing - calculated by dividing its profit by its interest payments. Interest Cover measures the firm’s ability to meet its interest obligations, pay a dividend, service a debt and make a profit if interest rates rise.
Individual Saving Account
individual voluntary arrangement
The London Inter-Bank Offered Rate is the interest rate at which banks borrow and lend money within the London inter-bank market. Set daily by the British Bankers’ Association, LIBOR is the global benchmark for short-term interest rates.
A common expression of a company’s value, calculated by multiplying its total number of ordinary shares in issue by their market price. Thus, if a plc has 1 million shares in circulation at £3 each, its ‘market cap’ is £3 million.
Old Lady of Threadneedle Street
Journalistic jargon for the Bank of England, headquartered on said street. The term is frequently used by those seeking to dazzle friends & acquaintances with their command of finance witticisms.
The market price of a company’s share divided by its earnings per share. A measure of investor confidence: a high P/E ratio means investors are willing to forego short-term gains in expectation of high future earnings; a low P/E ratio suggests the opposit
Internet scam involving the distribution of millions of random emails purporting to come from banks, financial institutions and even eBay, asking for your account details and passwords - and then emptying your account if you are foolish enough to respond.
The rate of interest at which the Bank of England is prepared to lend to the commercial banks. Set monthly by the Bank’s Monetary Policy Committee, the Official Dealing Rate (as it is also known) influences interest rates across the UK economy and beyond.
Return on Capital Employed is a profitability ratio allowing us to compare firms’ effectiveness at generating returns on available assets. ROCE is calculated by dividing a firm’s profit before interest payable & tax by the capital employed.