Jargon Buster

4Q

4 Quarters

ABS

Asset Backed Securities.

Active Money

Where a fund manager has made a decision to have a different amount invested in a particular share or bond, or country or asset, than the amount that particular investment represents in an index.

AIG

American International Group, Inc. (AIG) is an insurance corporation, ranked number 4 on the Forbes 500 list for 2003, and 10 on the Fortune 500 list in 2004

AIM

The London Stock Exchange's Alternative Investment Market which provides an alternative route for smaller companies seeking a listing.

Alpha

A coefficient which measures risk-adjusted performance.

AMC (annual management charge)

This is a charge which is deducted by the fund manager automatically from your investment on an annual basis. The annual management charge covers the running costs of the fund including any trail (renewal) commission paid to investment advisers.

Angel

A wealthy individual who invests in entrepreneurial firms or a successful entrepreneur, who has built up a business, sold it and now brings not just money but experience to a young developing business.

Annualised return

This is the average annual percentage growth over the period.

Annualised risk

See standard deviation/annualised standard deviation.

Annualised standard deviation

A fund with an annualised return of 10% and an annualised standard deviation of 5% indicates that over the performance period, returns in any 12 month period have been between 5% and 15% about 2/3rds of the time. See standard deviation.

Bank of England Base Rate

The Bank's Monetary Policy Committee (MPC) sets a base lending rate it judges will meet its inflation target. The cost of variable-rate loans (such as mortgages or business loans) usually rises when the Bank of England Base Rate goes up. An increase in the Base Rate benefits savers but can have a detrimental effect on borrowers and investors and vice versa when the Base Rate goes down.

Bear Market

A market condition in which the prices of securities are falling or are expected to fall.

Beauty parades

A way of providing companies with a choice of providers of financial and professional services. It normally involves a short-list of potential suppliers being drawn up and invited to pitch for business usually by presentation and interview.

Benchmark

A Benchmark or index is a figure that reflects the performance of a selection of investments. For example, the FTSE 100 reflects the share prices of the UK's 100 largest companies. There are different indices for different markets, countries and sectors. An index is referred to as a benchmark when it is used by a fund manager as a comparison to show how the fund is performing in relation to the market it invests in.

Beta

A quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market.

B-Issuance

B Grade [Bond] Issuance

BIMBO

A combination of management buy-out and buy-in where the team buying the business includes both existing management and new managers.

Bid-offer spread

This is the difference between the price at which you can buy units in a fund ('offer price') and the price at which you can sell units in a fund ('bid price') at any particular time. Unit Trusts are dual priced in this way with the units being purchased at one price and sold at a different price. The buying price is always higher than the selling price at any point in time and this difference is the bid-offer spread.

Blue Chip

This is the name given to the UK's biggest companies (usually members of the FTSE 100) which are usually considered to be a safer investment than smaller firms. The term 'blue chip' comes from the high-value blue-coloured chips used in casinos.

Book Value

The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities. By being compared to the company's market value, the book value can indicate whether a stock is under or over-priced.

Bottom-up

Bottom-up is used to describe a style of fund management in which investments are chosen on the basis of careful analysis of individual companies' strengths and weaknesses. It is the opposite of a top-down style, which concentrates more on economic trends and market movements. Similarly, a bottom-up forecast or analysis is one based on a company's particular circumstances rather than general trends.

Bps

Basis Point(s) - A "basis point" is 1/100th of a percentage point.

Bull Market

A financial market of a certain group of securities in which prices are rising or are expected to rise.

Business plan

A detailed description of the plans of an existing business and its expansion plans or a new business, with financial projections.

Buy and build

An investment made in a business with the intention of acquiring further businesses in order to build the value of the original investment.

BVCA

British Venture Capital Association

CAPEX

This term refers to capital expenditures which include purchase of new equipment.

CDO

Collateralised Debt Obligation.

CLO

Collateralised Loan Obligation.

Consensus Forecast

The forecasts for a given variable, taken in aggregate, for all analysts who follow that variable. In the case of GDP, consensus forecasts are aggregated from a number of economists/ Financial Institutions - the resulting figure is representative of the 'true' underlying value. Due to the inherent irregularity and variability of the underlying data these figures are often revised over time.

Close or price

This is the level at which the company's shares stood when the markets closed the previous day. In most cases it is expressed as a number midway between the buying and selling prices.

Consumer Price Index (CPI)

The tendency of prices to rise on a year-on-year basis is measured in the UK by the Consumer Price Index (CPI). This official measure recently replaced the Retail Price Index (RPI) as an indication of inflation and is calculated each month by measuring the cost of a sample of goods and services that a typical household might purchase including food, heating, household goods and travel.

The CPI measures the increase in the price of this 'basket' of goods and services compared to its cost in the previous month. The number that attracts the most attention is the year on year rise in cost for this 'basket' which indicates the current rate of inflation. This annual figure is the one used by the media, wage negotiators and policy makers. (See also Inflation)

Correlation

The statistical measure of how two securities move in relation to each other. Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move by an equal amount in the opposite direction. If the correlation is 0, the movements of the securities is said to have no correlation, it is completely random. If one security moves up or down there is as good a chance that the other will move either up or down, the way in which they move is totally random.

CGT (Capital Gains Tax)

The tax on profits made after selling assets such as shares, a business, a second home and other investments. A capital loss can be used to offset a capital gain, reducing tax due. You only pay CGT when your gain exceeds the personal allowance (£8,800 for the 2006/07 tax year), but you don't pay CGT on gains inside PEPs and ISAs.

Commission

Money paid to individuals or companies when you carry out financial transactions.

Completion

The moment when legal documents are signed and a corporate finance transaction is concluded.

Credit Cycle

The credit cycle is the expansion then subsequent contraction of credit.

Credit Score

Numeric index estimating a company's creditworthiness and ability to repay financial obligations.

Credit Spread

The spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating.

Deal flow

The rate at which investment propositions come to venture capitalists or other investors.

Debt

Debt is borrowed money from a bank or other institution, where interest has to be paid at a specified rate and the total borrowed must be repaid either on a specified date or (as in bank overdrafts) on demand.

Default

Failure to make required debt payments on a timely basis or to comply with other conditions of an obligation or agreement.

Development capital

Also known as growth capital and often provided by venture capital solutions. It is the long-term equity capital raised to allow a company to grow without relying wholly on short-term bank debt.

Dispersion

A term used in statistics that refers to the location of a set of values relative to a mean or average level.

Diversification

A portfolio strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the same direction. The goal of diversification is to reduce the risk in a portfolio.

Dividend

Cash (or, occasionally, shares) distributed to shareholders. As a part-owner of a company you are paid dividends as your share of the profits from the business.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock.

Due diligence

The detailed analysis and appraisal of a business, which takes place after an investment, loan or sale, has been agreed in principle. The aim is to ensure that there is nothing which contradicts the financier's or buyers understanding of the current state and potential of the business. The individual elements of due diligence may include commercial due diligence (markets, product and customers), a market report (marketing study), an accountants report (trading record, net asset and taxation position) and legal due diligence (implications of litigation, title to assets and intellectual property issues).

Duration

Duration is a weighted measure of the length of time the bond will pay out.

Earnings per share

Profit after tax divided by the number of ordinary shares in issue.

EBIT

Earnings before interest and tax.

EBITDA

Earnings before interest, tax, depreciation and amortisation. EBITDA is a measure of cash flow. By excluding interest, taxes, depreciation and amortisation the amount of money a company is bringing in can be clearly seen.

EMD

Emerging Market Debt

Entrepreneur

A word to describe an enterprising businessman or woman. Normally an owner of an independent business.

EPRA

Earnings Prospects and Risk Analysis (ICRA Limited)

EPS

Earnings per Share. A company's earnings divided by the number of shares it has in issue - commonly used as a measure of profitability.

Equity

Equity investors share ownership of an enterprise. Consequently, they share both the rewards, if the business prospers, and the risk of losing their investment if things go wrong.

EV Analysis

Earned Value Analysis; of which essential features include (1) a project plan that identifies work to be accomplished, (2) a valuation of planned work, called planned value (PV), and (3) pre-defined "earning rules" (also called metrics) to quantify the accomplishment of work, called Earned Value (EV). EVM implementations for large or complex projects include many more features, such as indicators and forecasts of cost performance (over/under budget) and schedule performance (behind/ahead of schedule). The most basic requirement of an EVM system, however, is that it quantifies progress using PV and EV.

Exit

The opportunity for investors to sell their investment. Normally, the exit from investment in a private company occurs either through a trade sale of the company or through its flotation on the stock market. When raising finance, the opportunity to exit will be a key part of the investors' assessment.

Financing Gap

The gap in the provision of finance for medium-sized, fast-growing firms. Often these firms are too large or fast growing to ask the individual shareholders for more funds or to obtain sufficient bank finance. Also they are not ready to launch on the stock market

Flotation

When a company trades its shares on the stock market - either the London Stock Exchange or one of the other markets, such as AIM.

FMR

Fidelity Management and Research Co. - Fidelity's American Counterpart.

FSA (Financial Services Authority)

The regulator responsible for managing the conduct of firms and individuals involved in regulated products such as investments and mortgages.

FTSE (Financial Times/Stock Exchange)

FTSE provides indices for a number of international markets. In the UK, the most well-known indices are the FTSE 100 (the 'Footsie' tracks the value of the UK's hundred largest listed businesses); the FTSE 250 (measures the next 250 firms after the top 100, according to size); and the FTSE All-Share, which measures the value of around 700 firms.

GDP

This is one of several measures of the size of a country’s economy. The GDP of a country is defined as the market value of all final goods and services produced within a country in a given period of time. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time. Real GDP is adjusted for inflation.

Gearing

The ratio of debt to equity capital. If a balance sheet shows £10 million of total assets and a debt of £6 million, the gearing is 60%. The higher the gearing, the greater the exposure to changes in circumstances although in secure times high gearing can fuel growth.

Gilt

A bond issued by the UK government. Gilts are the UK equivalent of a US Treasury security.

Going private

Ambitious businesses sometimes aspire to going public - becoming a quoted company. However, there are directors of quoted companies who feel that the advantages of listing are outweighed by the disadvantages and turn themselves back into a private company.

Goodwill

The value of a business over and above its tangible assets. It includes the business's reputation, contacts and intellectual property.

Gross

What you receive before tax is taken off. For example, gross interest is paid by banks and building societies to non-taxpayers.

Growth capital or development capital

The long-term equity capital raised to allow a company to grow ambitiously without relying wholly on short-term bank debt.

Holt and Quest

Financial reports/analysis software to aid stock picking (see stock picking)

HY

High Yield

IBO (Institutional buy-out)

Where a financial institution acquires a business and installs its own management. This is slightly different from a bought deal, where an institution negotiates the acquisition of a business with a view to handing it over to an MBO or MBI team.

Index

An index is a figure that reflects the performance of a selection of investments. For example, the FTSE 100 reflects the share prices of the UK's 100 largest companies. There are different indices for different markets, countries and sectors. An index is referred to as a benchmark when it is used by a fund manager as a comparison to show how the fund is performing in relation to the market it invests in.

Inflation

Inflation is the increase in the price of goods and services over a period of time. Although it may be in relation to one item, or a small group of items, the term is usually used to describe the general increase in prices of a 'basket' of goods, such as those measured by the Retail Price Index (RPI) and Consumer Price Index (CPI) in the UK. (See also CPI)

Initial Commission

Intermediaries commonly receive initial commission from a fund manager when a client invests in one of the fund manager's funds. Initial commission is accounted for by the fund managers in their initial charges and is calculated as a percentage of your initial investment into a fund.

Instrument

Sometimes used to describe a particular type of loan or share capital.

Intermediary

Advisers that bring together the principals in a deal or prospective deal. They are usually accountants, other corporate advisers and merchant bankers.

Investment capital

Long-term equity capital provided by institutions to facilitate growth in private companies. To some extent the term is interchangeable with venture capital.

Investment Grade

A bond that is rated within the top four categories by Moody's or Standard & Poor's.

Investors

Providers of capital for the long-term, as distinct from lenders of short-term capital. Investors have rights which lenders don't enjoy - and accept risks which lenders aren't exposed to.

IPO

Initial public offering. Once called a flotation this is the initial offering of the company's shares on a public market.

ISA (Individual Savings Account)

An ISA is simply a wrapper placed around an investment (such as shares, bonds or cash) to protect it from tax. You can shelter up to £3,000 of cash in a Mini Cash ISA or up to £7,000 in shares, unit trusts, OEICs, etc via a Maxi Equity ISA. Please see our Guide to ISAs for more information on this subject.

LBO (leveraged buy-out)

The takeover of a company or controlling interest in a company, using a significant amount of borrowed money.

Leading Indicator

An economic indicator that changes before the economy has changed. Examples of leading indicators include production workweek, building permits, unemployment insurance claims, money supply, inventory changes, and stock prices. The Fed watches many of these indicators as it decides what to do about interest rates. There are also coincident indicators, which change about the same time as the overall economy, and lagging indicators, which change after the overall economy, but these are of minimal use as predictive tools.

LHS

Left Hand Scale.

LIBID

London Interbank Bid Rate.

Liquidity

This is a measure of the ease with which the assets of a business can be transformed into cash. Also, where companies are publicly quoted, on the stock market or on AIM, their shares are said to be liquid if they are readily bought and sold. Smaller, or less fashionable, quoted companies may find their shares lack liquidity.

Long Dated Paper

A security which has a maturity of over 15 years; Medium 5-15yrs, Short Dated less than 5 years.

Lower Grade

A bond rated B or lower by Moody's or Standard & Poor's. Sometimes "sub-prime" or "sub investment grade

LTCM

Long Term Capital Management

LTM

Last Twelve Months

M&A

Mergers and acquisitions; refers to the aspect of corporate finance strategy and management dealing with the merging and acquiring of different companies.

Macro

Deals with the performance, structure, and behaviour of the economy as a whole (Snowden and Vane 2002)

Market Capitalisation

This is one way of expressing a company's value. It is the number of shares a company has in issue multiplied by the share price. This may be quite different from the real value of the company's assets, since the share price will take account of factors that may be difficult to quantify, such as market sentiment and the company's potential. It is often shortened to market cap.

• Large cap – This refers to the market capitalisation of a company - "large" is taken to mean between $10 billion and $200 billion (Mega cap would be at the top end of this scale)
• Mid cap – This refers to the market capitalisation of a company - "mid" is taken to mean between $2 billion and $10 billion
• Small cap – This refers to the market capitalisation of a company - "small" is taken to mean between $300 million to £2 billion.

MBI (management buy-in)

MBIs developed as a variation of the MBO as a means of acquiring a business. An incoming management team acquires the business with backing from institutional investors (as opposed to incumbent managers who acquire it in the case of an MBO). See also BIMBO.

MBO (management buy-out)

An MBO involves the management team of a business, usually with the backing of external financing, taking over ownership of the business where they are employed. MBOs are a common way of changing ownership. Often, a large company hives off one of its subsidiaries by selling to its management team. Another source of MBOs is family businesses where the owner wishes to retire.

MEBO (management and employee buy-out)

An MBO where a substantial number of employees as well as managers hold shares in the company.

Median

The midpoint of the range numbers that are arranged in order of value

Mezzanine

Types of high risk debt which have some attributes of debt and some of equity. It ranks and is repaid after Senior/Junior Debt but before institutional loan stock. Generally carries an option/warrant or redemption fee which tends to distinguish it from Junior Debt.

MSCI

Morgan Stanley Capital International

MV/Capita

Market Value to Capital

NAREIT

National Association of Real Estate Investment Trusts.

Net

What you receive after tax has been taken off. For example, dividends are paid net of basic rate tax with no further liability to basic rate tax-payers.

Net Equity

This is the difference between the net liquid assets of a business and its long-term liabilities.

Normalised Earnings

These are earnings adjusted for cyclical ups and downs in the economy. On the balance sheet, earnings adjusted to remove unusual or one-time influences.

OAS

Option Adjusted Spread. This is a calculation produced by Monte Carlo simulation of the spread (in basis points) produced by a security over a benchmark, such as US Treasuries. Monte Carlo calculates a theoretical market value of securities with embedded options, for many interest rate paths.

OEIC (Open-Ended Investment Company)

An Open Ended Investment Company (OEIC) is an investment vehicle which provides a route to collectively invest, usually in stocks and shares.

Each investor's money will be pooled with that of other investors and used to purchase 'shares' in their chosen fund. Each 'share' represents a fraction of the assets held by the OEIC which is managed by a professional fund manager. Please see our Guide to OEICs for more information on this subject.

Ordinary Shares

The type of shares most commonly traded on exchanges such as the London Stock Exchange, also known as Equities.

Outstanding Market

This refers to the number of securities that are issued and are still outstanding in the market

Overheat

An economic situation in which growth is occurring so quickly that economists fear a rise in inflation. This happens when producers are not able to make enough goods and services to meet rising demand, and raise prices instead.

Overweight

Refers to an investment position that is larger than the generally accepted benchmark

P/E

This stands for price-earnings ratio which is a measure of how much each share is worth as a function of its company's net profits. It is calculated by dividing the current market price of a share by the earnings per share of the company. In general, a high P/E means that the share price is higher than one would expect for the amount the company is earning. This could be because its earnings have been low but are expected to increase. The P/E in itself does not tell you a great deal. It has to be compared with the P/Es of companies in the same industry, or with the overall P/E of a market in general, or with the company's own historical P/E.

P/E compression

The effect that arises when a stock trades at a certain multiple and, while earnings may be strong, the stock price doesn't move up (or even goes down). The result is that the given multiple (P/E) is reduced even though nothing is fundamentally wrong with the company. Compression of a company's multiple can be interpreted as the valuation being called into question.

PEP (Personal Equity Plan)

A PEP, or Personal Equity Plan, is a tax-efficient 'wrapper' that protects any gains or income from further personal liability to capital gains and income tax. On 6th April 1999, PEPs were replaced by Individual Savings Accounts (ISAs). Following the introduction of ISAs you can no longer invest any new money in a PEP.

You can use your existing PEP to continue to invest in stocks and shares where returns are free of further tax. Please see our Guide to PEPs for more information on this subject.

PM

Portfolio Manager

Price Signal

Technical analysis term for any indication of when it is time to buy or sell a particular investment, or when a market trend is shifting, based on charts, data, and formulas.

Price to earnings ratio

Often called the P/E, this measures a company's share price against its earnings per share. In general, a high P/E means that the share price is higher than one would expect for the amount the company is earning. This could be because its earnings have been low but are expected to increase. The P/E in itself does not tell one a great deal. It has to be compared with the P/Es of companies in the same industry, or with the overall P/E of a market in general, or with the company's own historical P/E.

Price/Book Value

This ratio compares a stock's Market Price to its Book Value. (See Book Value)

Private equity

Private equity is a broad term that refers to any type of equity investment in an asset in which the equity is not freely tradable on a public stock market. Passive institutional investors may invest in private equity funds, which are in turn used by private equity firms for investment in target companies. Categories of private equity investment include leveraged buyout, venture capital, growth capital, angel investing, mezzanine capital and others. Private equity funds typically control management of the companies in which they invest, and often bring in new management teams that focus on making the company more valuable.

Private placing

The sale of a block of shares in a private company to an investment institution. Private placings normally do not involve any change in control of the business. They can occur when shareholders wish to retire or, for some other reason, wish to realise all or part of their holdings.

Quant

A mathematical process which applies various numerical approaches in analysing securities or markets.

Rebased

This refers to expressing in terms of a revised base value; the percentage changes become more apparent than the actually numeric value

Receivership

The state of affairs when a receiver is appointed to recover debts of a company which has failed. In the case of a large company, with subsidiaries, the receiver may seek a buyer for a subsidiary. This often leads to an MBO, an MBI or a trade sale.

Recovery

A period in a business cycle following a recession, during which the GDP rises.

Reflation

The intentional reversal of deflation through a monetary action by a government.

Restructuring

Bringing about fairly major changes in the organisation of a company by changing the management and/or the share ownership structure.

Rescue

When a business in trouble is turned round and made viable by outside intervention.

Reverse takeover

When a small company takes over a large one, or when the company being taken over is likely to be the major element in the combined business.

RHS

Right Hand Scale

Risk

See Standard Deviation/Volatility.

Risk Premium

The excess return over a risk-free asset (e.g. a gilt) which investors will require to compensate themselves for the higher risk associated with holding an asset.

S & P500

The Standard & Poor's 500 is an index made up of 500 blue chip stocks.

Secondary buy-out

Also known as a "buy-out of a buy-out". Where the original MBO managers will sell the company to the next generation of managers.

Secondary purchase

Another name for private placing.

Seed capital

Early funding which enables a project or idea to develop into a business.

Shares

A stake in a company. Buying even a single share in a company gives you part-ownership of that firm. Shares allow you to benefit from a company's success, which usually includes being paid dividends and having the right to vote on company matters.

Share placing

The sale of shares to a number of investors but not to the general public.

Spreads

See "Credit Spread".

Stagflation

Sluggish economic growth coupled with a high rate of inflation and unemployment.

Standard Deviation

A measure of the dispersion of a set of data from its mean. The more 'spread apart' the data is, the higher the deviation. In finance, it is applied to the annual rate of return of an investment to measure the investment's volatility (risk).

Start-up

A new business which can be on any scale - but most start-ups are small. Their critical phase often comes later when they may need significant amounts of capital to enter their chosen market.

Stock Picking (Stock Picker)

The literal description of selecting companies in which to invest.

Sub-Prime

A sub-prime loan is any loan in which the borrower has challenges in obtaining financing because of poor credit, hard to document income or assets, or any unique situation that would prevent them from obtaining funding through "conforming" lenders.

Target

A target is a company suitable for takeover.

Technical Analysis

Technical analysis, also known as charting, is the study of the trading history (the price and volume over time) of any type of traded security (stocks, commodities, etc.) to attempt to predict future prices.

TESSA (Tax-Exempt Special Savings Account); TOISA (TESSA-Only ISA)

TESSAs (Tax-Exempt Special Savings Accounts) were created to encourage people to start saving by allowing them to take all interest earned on these deposit accounts tax free, provided they were held for five years.

No new TESSAs could be opened after 5th April 1999 so they no longer exist, but any TESSAs that matured after this date could be rolled over into a TESSA-Only ISA (TOISA) so that savers could continue to receive tax free interest in addition to their ISA allowance.

Time-Lag

An interval of time between two related phenomena (such as a cause and its effect).

TNA

Total Net Assets

Top-Down

An investment approach where an investor looks at the economy and market movements before considering an industry to invest in. The next stage is then to determine what industries or sectors will perform well because of the economic conditions, and then finally they buy stocks that are attractive within that industry

Top-Down overlay

This is the process of integrating Top-Down analysis (see Top-Down)

TOPIX

Index of the larger issues on the Tokyo Stock Exchange

Trail Commission

Fund managers can pay intermediaries trail commission to provide an ongoing service in relation to your investment in their fund. Trail commission is calculated as a percentage of your fund value, typically this percentage is 0.5% per annum, and is accounted for within the fund manager's Annual Management Charge (AMC).

Trade sale

Sale of a company to another company. As a form of exit, a trade sale is a more common alternative to a flotation.

Turnaround

When an underperforming business is made profitable. This can be achieved by existing management or through a rescue involving new management.

Underweight

Refers to an investment position that is less than the generally accepted benchmark.

Unit Trust

A Unit Trust is an investment vehicle which provides a route to collectively invest, usually in stocks and shares.

Each investor's money will be pooled with that of other investors and used to purchase 'shares' in their chosen fund. Each 'share' represents a fraction of the assets held by the Unit Trust which is managed by a professional fund manager. Please see our Guide to Unit Trusts for more information on this subject.

Valuation of shares

The shares of publicly quoted companies are valued daily, according to demand and supply on the stock market. Valuation of private companies is more difficult because there is no market in their shares - unless the whole company is being sold. In other cases, valuation of private company shares is often done by reference to P/E ratios in similar quoted companies, or by discounting the projected future cash flow of the business.

Valuation upside/downside

Upside - The potential value or percentage amount by which the market or a stock could rise. This is basically an educated guess on how high a stock could go in the near future.

Downside - the opposite to Upside -The potential value or percentage amount by which the market or a stock could fall

Value [Stock]

A stock that is considered to be a good stock at a great price, based on its fundamentals, as opposed to a great stock at a good price.

VCTs (venture capital trusts)

A recent appearance on the financial markets. VCTs are specialist investment trusts, which offer tax advantages to investors willing to provide money for investment in unquoted companies.

Vendor

The seller of a business.

Vendor finance

This can either be in the form of deferred loans from, or shares subscribed by the vendor. The vendor may well take shares alongside the management in the new entity. This category of finance is generally used where the vendor's expectation of the value of the business is higher than that of management and the institutions backing them.

Venture capital

Risk capital in the form of equity and/or loan capital that is provided by an investment institution to back a business venture which is expected to grow in value.

Volatility

A measure of a security's propensity to go up and down in price. A volatile share is one which has a tendency to move violently through a deep share price range. Mathematically, this is expressed as the standard deviation* from the average performance. In general, high volatility means high unpredictability, and therefore greater risk. Numerous attempts have been made to incorporate volatility into pricing models, but the problem has always been that past volatility is not necessarily a good guide to future volatility

Volume

This shows how many shares were traded during the previous day and is normally expressed in thousands.

Warrant

A security which gives the holder the right to purchase shares in a company at a pre-determined price. A warrant is a long term option, usually valid for several years or indefinitely.

Warranties and indemnities

The legal undertakings often required by the purchaser of a business or asset from the previous owners to confirm there will be no nasty surprises.

Whole of Market Adviser

A Whole of Market Adviser can advise you on the products of all of the companies in the financial services marketplace.

Working capital

Capital that is required to finance the trading activities of a company.

Yield

The annual income provided by an investment, expressed as a percentage. For example, an annual dividend of 20p on a share worth 400p means a yield of 20/400 = 5%.

Y-on-Y

Year on Year