Investor glossary

ADR
An American Depository Receipt (ADR) is a negotiable instrument issued by a depositary bank that evidences ownership of shares in a non-US company and is specifically designed to facilitate the purchase, holding and sale of non-US securities by US investors. Each ADR represents a specific number of underlying ordinary shares in a non-US company on deposit with a custodian in the applicable home market. ADRs are quoted and traded in US dollars in the US securities market.​
AGM
Annual General Meeting for shareholders.​
Auditor
An independent firm or person who checks the accounts against agreed standards.​
Balance Sheet
A statement showing the financial position of a business on a specific date by listing its assets (what it owns) and its liabilities (the claims on its assets, or what it owes).​
Board
The Board of Directors of a Company.​
Bond
A bond is technically a certificate of debt exchanged in return for a loan from an investor. They are issued by governments, companies, banks, public utilities and other large organisations to raise funds.​
Buy Back
Companies with spare cash to invest can offer to buy back shares from shareholders, effectively investing in themselves.​
Capital
The money invested in a firm by shareholders.​
Compliance
The requirement to operate in accordance with statutory or regulatory guidelines.​
Corporate governance
The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its all stakeholders.​
Corporate Social Responsibility (CSR)
A term used to describe how companies measure up to standards of business conduct and deal with issues such as sustainability, environmental management, human rights, relations with local communities, customers, suppliers, employees and health and safety at work.​
Credit Rating
A rating from an independent institution that assesses creditworthiness or the credit risk and provides ratings that are publically available and used by investors as well as analysts as a guide for investment decisions in regard to relative credit standing or strength. The highest rating is normally AAA, and the lowest D.​
Currency fluctuations
The ongoing changes between the relative value of the currency issued by one country when compared to a different currency.​
Depreciation
Reduction in the worth of an asset in a company's accounts to reflect its loss of value through age and use​
Dividend
A share of a company’s profits paid to shareholders, usually as cash. UK dividends are usually paid twice a year: interim dividends based on half-year results and final dividends based on full-year results.​
Dividend yield
This measure shows shareholders how much income they receive in relation to the current share price.​
Earnings
Another word for profit.​
Earnings before interest and tax (EBIT)
EBIT is defined as earnings before interest, taxation, foreign exchange gains and losses, profit on partial disposal of investments in associate, divergence on financial guarantee costs, movement on contract for differences and restructuring costs. This KPI measures directly the underlying operating profitability.​
Earnings per share (EPS)
EPS is a commonly used financial metric which can be used to measure the profitability and strength of a company over time. EPS is calculated by dividing profit by the number of ordinary shares. Basic EPS uses the weighted average number of ordinary shares outstanding during the year. Diluted EPS adjusts the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares, for example share awards and share options awarded to employees.​
Economies of scale
The reduction in cost per unit that results from increased production, achieved through operational efficiencies.​
EU
European Union.​
Exceptional item
A transaction shown in a company's profit and loss account that is not expected to happen again.​
Ex-dividend
The ex-dividend date is the time when the registrar of a company draws up the list of shareholders who qualify for a dividend payment. To receive the dividend you must hold a share before it goes ex-dividend.​
Extraordinary general meeting (EGM)
A meeting of shareholders, called to seek their approval for exceptional action on the part of the company or affecting their interest as shareholders.​
Final salary pension scheme
A pension scheme where the benefit (pension) is calculated according to the member's earnings at or near the date of their retirement, or at the time of leaving service. The amount of pension will be a proportion of the member's final salary, depending on their length of service. Also known as a defined benefit scheme.​
Fixed rates
Interest rates on loans fixed for the period of the loan.​
FTSE 100 Index
The benchmark index for share prices in London, the "Footsie" is based on the price of the 100 largest companies by market capitalisation quoted on the Stock Exchange.​
FTSE250
Measures the performance of the 250 biggest companies ranking just below the FTSE 100.​
Full year results
A company's unaudited full-year results, declared as a prelude to the publication of the annual report and accounts.​
Gearing
The ratio of a company’s share capital to its debt. Known in the US as leverage.​
Gross
Before tax has been deducted.​
Gross profit margin
Total profit made in a year as a percentage of sales, an indicator of profitability.​
Group
The company and its subsidiaries.​
Half year results
Figures issued during the financial year to indicate business performance since the last full-year accounts were published.​
Hedging
Any technique designed reduce or eliminate risk.​
IFRS
International Financial Reporting Standards. Accounting standards issued by the International Accounting Standards Board (IASB). The Group’s consolidated financial statements are required to be prepared in accordance with IFRS.​
Institutional investor
Large financial organisation, such as a bank, insurance company, pension fund or investment trust, that holds and trades substantial volumes of stocks and shares for its own benefit or on behalf of others.​
Interest
The fee charged by a lender for the use of borrowed money, or the return earned on an investment, such as savings in a deposit account. Can also mean part or total ownership of an asset.​
Interest margin
Net interest income for the year as a percentage of average total assets during the year disclosed in basis points (1/100th of 1%).​
Interest rate
Percentage rate at which money is added to savings or borrowings. The cost of borrowing or lending money.​
Joint venture
Partnership or co-operation on a business activity between two or more companies.​
KPI
Key Performance Indicator. These are measures by reference to which the development, performance or position of the business can be measured effectively.​
Liabilities
A company's debts and obligations, shown on the balance sheet as claims on its assets.​
Liquidity
A firm’s ability to meet short-term debts​
LSE
London Stock Exchange. The UK's main marketplace for buying and selling shares in quoted companies.​
Management profit
Aggregates the trading profit of subsidiaries with the Group’s share of the trading profit of joint ventures.​
Management sales
Aggregates the sales of subsidiaries with the Group’s share of the sales of joint ventures.​
Margin
Profit margin as a percentage of trading profit. Reflects the underlying profitability of the business. It is calculated before interest charges and tax.​
Market capitalisation
The value of a company calculated by multiplying the number of shares the company has in circulation by the market price of those shares.​
Merger
A "marriage" of two or more companies, with the pre-agreement of both, whereby one company acquires the shares of the other or the shares of both companies pass to a third party.​
Net
After tax has been deducted.​
Net profit
The profit that is left after all expenses and deductions have been made.​
Net profit margin
Total profit minus cost made in a year as a percentage of sales.​
Nominee
Someone nominated to act on your behalf.​
Operating costs
The day-to-day expenses involved in running a business, such as sales and administration, as opposed to production costs. Also called operating expenses.​
PE Ratio
Price:Earnings Ratio. Share price divided by earnings per share over the latest 12-month period. The result offers investors a way of comparing companies' prospects.​
PLC
Public Limited Company. A company in the UK whose shares can be bought by members of the public and which has authorised share capital above a statutory minimum £50,000.​
Profit and loss account
An account compiled at the end of the financial year showing that year's revenue and expense items, and indicating gross and net profit or loss.​
Proforma results
Set way to describe or restate a company's financial results when circumstances have changed, for example after a flotation, merger or takeover.​
Proxy
A method by which a shareholder may vote without attending a meeting by appointing someone else to vote on their behalf.​
Quoted
If a company has a quote (or is "quoted"), its shares can be bought and sold on the stock exchange.
Registrar
Person or organisation that keeps a record of individual shareholders and information such as dividend payment dates.​
Return on Capital Employed (ROCE)
Usually calculated as pre-tax profit divided by capital employed (total assets minus current liabilities), expressed as a percentage. Indicates how efficiently a company's management uses its assets to generate profits over a period of time.​
Return on Equity (RoE)
Calculated as IFRS underlying profit after tax divided by opening net assets.​
Rights issue
An invitation from a company to their existing shareholders to buy new shares, usually for less than the prevailing share price, to raise additional capital.​
Sector
Part of a market or industry whose components share similar characteristics.​
Share
Common term for equity. Specifically, a certificate conferring ownership rights in a company, only issued by listed companies. Shares provide voting rights at company meetings and entitle the holder to a proportional share of profits.
Shareholder
Someone who owns shares or stock in a company or mutual fund.​
Statutory accounts
The accounts that every public limited company is required by law to produce.​
Statutory basis
The valuation basis and approach used for reporting financial statements to local regulators.​
Subsidiary
An entity that is controlled by GKN.​
The Company
GKN plc.​
Total shareholder return
A measure of the overall return to shareholders and includes the movement in the share price and any dividends paid and reinvested.​
Trustee
Someone appointed to hold or administer assets for the benefit of other people.​
Turnover
Total revenue or income from sales.​
Variable rate
An interest rate that fluctuates or is periodically reset.​
Volume
The total number of shares traded (bought and sold) in a given period.​
Working capital
The difference between a firm’s cash and its short-term debts.​
Yield
Rate of return on an investment in percentage terms, taking into account annual income and any change in capital value. Also the dividend payable on a share expressed as a percentage of the market price.​
YTD
Abbreviation for ‘year to date’​.