Finance Glossary

1. Acquisition: When a firm buys another firm.

2. Amortization: The repayment of a loan by installments

3. Audit: An examination of a company's accounting records and books
conducted by an outside professional in order to determine whether the company
is maintaining records according to generally accepted accounting principles

4. Bond: Bonds are debt and are issued for a period of more than one year.
The US government, local governments, water districts, companies and many
other types of institutions sell bonds. When an investor buys bonds, he or she
is lending money. The seller of the bond agrees to repay the principal amount
of the loan at a specified time. Interest-bearing bonds pay interest
periodically.

5. Call option: An option contract that gives its holder the right (but not the obligation)
to purchase a specified number of shares of the underlying stock at the given strike price,
on or before the expiration date of the contract.

6. Collateral: Asset than can be repossessed if a borrower defaults.

7. Compound interest: Interest paid on previously earned interest as well as
on the principal.

8. Cooperative: An organization owned by its members. Examples are
agriculture cooperatives that assist farmers in selling their products more
efficiently and apartment buildings owned by the residents who have full
Control of the property.
9. Corporation: A legal entity that is separate and distinct from its owners.
A corporation is allowed to own assets, incur liabilities, and sell
securities, among other things.

10. Debt capital: Capital raised through the issuance of bonds.

11. Debenture: Any debt obligation backed strictly by the borrower's
integrity, e.g. an unsecured bond. A debenture is documented in an indenture.

12. Delivery price: The price at which the futures contract is settled when delivery is made.

13. Depositary: An agent appointed for a Tender or Exchange Offer who accepts
certificates from shareholders, processes them and assures that the
appropriate cash or new securities are properly remitted to the tendering
party.

14. Derivative: A financial contract whose value is based on, or "derived" from, a
traditional security (such as a stock or bond), an asset (such as a commodity), or
a market index.

15. Divestment: To sell your shares in a company or to stop taking part in a business
activity

16. Dividend: A portion of a company's profit paid to common and preferred
shareholders. A stock selling for $20 a share with an annual dividend of $1 a
share yields the investor 5%.

17. Disinvestments: A reduction in capital investment reflected by a decrease in
capital goods and a company's decision not to replace depleted capital goods.

18. Direct investment: The purchase of a controlling interest in a company or
at least enough interest to have enough influence to direct the course of the
company.

19. Disposable income: The amount of personal income an individual has after
taxes and government fees, which can be spent on necessities, or
non-essentials, or be saved.

20.Equity: The amount which shareholders own in a publicly quoted company. Equity is the
risk-bearing part of the company's capital and contrasts with debt capital
which is usually secured in some way and which has priority over shareholders
if the company becomes insolvent and its assets are distributed. For most companies
there are two types of equity: ordinary shares, which have voting rights, and
preference shares which do not. Owners of preference shares rank ahead of ordinary
shareholders in a liquidation.

21. Endorse: Transferring asset ownership by signing the back of the asset's
certificate.

22. Endowment: Gift of money or property to a specified institution for a
specified purpose.

23. Equity: Ownership interest in a firm. Also, the residual dollar value of a
futures trading account, assuming its liquidation is at the going trade price.
In real estate, dollar difference between what a property could be sold for
and debts claimed against it. In a brokerage account, equity equals the value
of the account's securities minus any debit balance in a margin account.
Equity is also shorthand for stock market investments.

24. Excise tax: Federal or state tax placed on the sale or manufacture of a
commodity, typically a luxury item e.g., alcohol.

25. Federal Reserve Bank: One of the 12 member banks constituting the Federal
Reserve System that is responsible for overseeing the commercial and savings
banks of its region to ensure their compliance with regulation.

26. Forward contract: A contract that specifies the price and quantity of an asset to
be delivered on in the future. Forward contracts are not standardized and are not
traded on organized exchanges

27. Forward contract: A contract that specifies the price and quantity of an asset to
be delivered on in the future. Forward contracts are not standardized and are not
traded on organized exchanges

28. Future: A term used to designate all contracts covering the sale of financial
instruments or physical commodities for future delivery on a commodity exchange.

29. Futures contract: A legally binding agreement to buy or sell a commodity or financial
instrument in a designated future month at a price agreed upon today by the buyer and
seller. Futures contracts are standardized according to the quality, quantity, and
delivery time and location for each commodity. A futures contract differs from an option
because an option is the right to buy or sell, while a futures contract is the promise
to actually make a transaction. A future is part of a class of securities called derivatives,
so named because such securities derive their value from the worth of an underlying investment.
Unlike forward contracts its traded in a exchange.

30. Fixed income instruments: Assets that pay a fixed dollar amount, such as bonds and
preferred stock.

31. Fixed income market: The market for trading bonds and preferred stock.

32. Global bonds: Bonds designed to qualify for immediate trading in any
domestic capital market and in the Euro market.

33. Hedging: A strategy designed to reduce investment risk using call options, put options,
short-selling, or futures contracts. A hedge can help lock in profits. Its purpose is to
reduce the volatility of a portfolio by reducing the risk of loss.

34. Insolvent: Unable to meet debt obligations.

35. Interim dividend: A dividend, which is declared and distributed before the company's annual
earnings have been calculated; often distributed quarterly.

36. Invoice: Bill written by a seller of goods or services and submitted to a
purchaser for payment

37. Leverage: The use of debt financing, or property of rising or falling at a
Proportionally greater amount than comparable investments. For example, an
option is said to have high leverage compared to the underlying stock because
a given price change in the stock may result in a greater increase or decrease
in the value of the option.

38. Liability: A financial obligation, or the cash outlay that must be made at
a specific time to satisfy the contractual terms of such an obligation.

39. Liquidity: A high level of trading activity, allowing buying and selling
with minimum price disturbance. Also, a market characterized by the ability to
buy and sell with relative ease. Antithesis of illiquidity.

40. Liquidate: To sell all of a company's assets, pay outstanding debts, and distribute
the remainder to shareholders, and then go out of business.

ii) To convert to cash.

iii) A broker's sale of his/her customer's securities after the customer failed
to meet a margin call.

41. Liquid asset: Asset that is easily and cheaply turned into cash-notably,
cash itself and short-term securities.

42. Long position: The state of actually owning a security, contract, or commodity.
also called long. opposite of short.

43. Merger: Acquisition in which all assets and liabilities are absorbed
by the buyer. (2) More generally, any combination of two companies. The firm's
activity in this respect is sometimes called M&A (Merger and Acquisition)

44. Monte Carlo simulation: An analytical technique for solving a problem by
performing a large number of trail runs, called simulations, and inferring a
solution from the collective results of the trial runs. Method for calculating
the probability distribution of possible outcomes.

45. Mortgage: A loan secured by the collateral of some specified real estate
Property, which obliges the borrower to make a predetermined series of
payments.

46. Option: Gives the buyer the right, but not the obligation, to buy or sell an asset at a
set price on or before a given date. Investors, not companies, issue options. Buyers of
call options bet that a stock will be worth more than the price set by the option (the
strike price), plus the price they pay for the option itself. Buyers of put options bet
that the stock's price will drop below the price set by the option. An option is part of
a class of securities called derivatives, which means these securities derive their value
from the worth of an underlying investment.

47. Ordinary shares: Companies are incorporated with an authorized share capital - for instance
1,000 ordinary £1 shares. They do not have to issue all the authorized shares,
but can issue as many as they like up to the authorized number. Once issued the
shares can be traded either privately or on an exchange if the company has listed
them. The price at which they trade will have nothing to do with the par value,
but will be determined by market forces. Broadly speaking, if there are more willing
buyers than sellers, the price will rise; if there are more sellers than buyers, it
will fall. Shares usually come with a right to vote at the company's Annual General
Meeting, and an entitlement to a share of dividends declared. They are,
however, unsecured. This means that shareholders are last in the queue if a
company goes bust and has to sell off its assets. If the amount realized is
enough to pay off all creditors, the shareholders may salvage something. If it
isn't, the shares will be worthless.

48. Par value: Also called the maturity value or face value; the amount that
an issuer agrees to pay at the maturity date.

49. Portfolio: A collection of investments, real and/or financial.

50. Put option: This security gives investors the right to sell (or put) a fixed number of
shares at a fixed price within a given period. An investor, for example, might wish to have
the right to sell shares of a stock at a certain price by a certain time in order to protect,
or hedge, an existing investment.

51. Risk-free rate: The rate earned on a risk less asset.

52. Risk-free asset: An asset whose future normal return is known today with Certainty.

53. Return: The change in the value of a portfolio over an evaluation period,
Including any distributions made from the portfolio during that period.

54. Retail: Individual and institutional customers as opposed to dealers and
Brokers.

55. Short position: In the case of a futures contract, the promise to sell a certain
quantity of a good at a particular price in the future. Opposite of a long position.

56. Sale: An agreement between a buyer and a seller on the price to be paid for a security,
followed by delivery.

57. Securities: Paper certificates (definitive securities) or electronic records (book-entry
securities) evidencing ownership of equity (stocks) or debt obligations (bonds).

58. Strike price: The stated price per share for which underlying stock may be
Purchased (in the case of a call) or sold (in the case of a put) by the option
Holder upon exercise of the option contract.

59. Stock option: An option whose underlying asset is the common stock of a Corporation.

60. Stock: Ownership of a corporation indicated by shares, which represent a
Piece of the corporation's assets and earnings.

61. Stock split: Occurs when a firm issues new shares of stock and in turn
Lowers the current market price of its stock to a level that is proportionate
To pre-split prices. For example, if IBM trades at $100 before a two-for-one
Split, after the split it will trade at $50, and holders of the stock will
Have twice as many shares as they had before the split.

62.Savings account: An account with a bank or financial institution, which pays interest on
balances held, usually once or twice per year, the amount of interest usually
depending on to the amount of money in the account and the 'base rate' of the
Bank of England. There is often a notice period required for withdrawals and
in most cases the longer the notice period, the higher the interest rate.

63. Secuered bond: A bond, which is secured by the guarantee of assets or collateral.

64. Stakeholders: All parties that have an interest, financial or otherwise,
in a firm-stockholders, creditors, bondholders, employees, customers, management,
the community, and the government.