Glossary of Financial Terms
|1P, 2P, 3P|
Of commodity reserves yet untapped: proven (1P), proven & probable (2P), proven, probable and possible (3P)
All-in sustainable cost: A measure used by gold miners to quantify all costs associated with keeping an operating mine running, from the mine right through to the back office, expressed in US$/oz (or A$/oz etc).
A market capitalisation-weighted index of all stocks listed on the ASX which satisfy various liquidity and free-float requirements. Once the Australian stock market benchmark, it has since been replaced in that role by the S&P/ASX200 index.
The risk associated with, or stock price movement attributable to, factors specific to that individual stock and not to the market as a whole (beta).
Average revenue per unit
Australian Securities Exchange: The Australian stock market. The exchange is a listed company called ASX Ltd with the stock code ASX.
The Standard & Poor's/ASX index of the 200 largest stocks on the ASX weighted by market capitalisation. When introduced in 2000 it replaced the All Ordinaries as Australia's stock market benchmark, although S&P/ASX also publish 20, 100 and 300 stock indices as well as other measures.
Assets under management: The value of assets held in a fund, such as a real estate investment trust.
The risk associated with, or stock price movement attributable to, the market as a whole and not to factors specific to that individual stock (alpha).
Bank of Canada: Central bank of Canada.
Bank of England: Central bank of the UK.
Bank of Japan: Central bank of Japan.
Compound annual growth rate (%). Often this will be pronounced as "cagar".
Capitalisation rate: A measure used for property funds (REITs) representing net operating income divided by property value.
Capital Expenditure: Money invested by a company in plant & equipment which is carried as assets on the balance sheet.
The value of a stock implied by the current share price mutiplied by the number of ordinary shares on issue. Typically called "market capitalisation" or "market cap".
Common equity tier one: In simple terms, ordinary shares. By regulation, bank balance sheets must carry a certain percentage of CET1 capital ("capital ratio") as a balance against risk in their loan books.
Cost of doing business
Cost of goods sold
See: Metallurgical coal
The comparison of earnings (or another measure) against a previous corresponding period (See: pcp). Eg if a company had a bad quarter a year ago due to some negative influence, then a percentage increase in earnings from that previous corresponding period may look misleadingly positive if "cycling negative comps".
The change in the price of a basket of goods & services excluding the prices of food & energy. The RBA uses a core measure called the "trimmed mean".
Consumer Price Inflation: The change in the retail price of a basket of goods and services.
Cents per share: The measure of a quantum of a dividend.
Calendar Year: January to December, as opposed to financial year (See: financial year).
Domestic Systemically Important Bank: In any country, a bank deemed by global regulation to be "too big to fail" within that economy. D-SIBs are required to hold a higher capital ratio (See CET1) than smaller banks.
Discounted cash flow: One form of stock valuation, in which forecast future cash flows are discounted at the prevailing interest rate to a value today.
The prices of goods & services and wages are declining.
Definitive Feasibility Study: If a PFS has suggested viability, a mining/oil & gas company will move to a DFS as it tightens its assessment of a proposed new project.
An increase in the number of a company's shares on issue due to a capital raising, DRP or other corporate action, thus reducing earnings and dividends per share.
The pace of growth in the prices of goods & services and wages is slowing.
Dow Jones Industrial Average. See: "Dow".
"The Dow" is the default market expression for the Dow Jones Industrial Average of the largest 30 US stocks, as published by the Dow Jones company. It is a share price average, not a market capitalisation-weighted average such as the S&P500. Dow Jones also publishes a Dow Transports Average and various other sector averages.
Dividends Per Share: A listed company's dividends paid over a period divided by its share price.
Dividend reinvestment plan: While dividends are typically paid in cash, from time to time companies may offer shareholders the choice of taking their dividend in new shares to the equivalent value. DRPs incrementally increase capital, and thus are a capital raising by stealth, to some extent.
Days sales outstanding
Earnings Before Interest & Tax
Earnings Before Interest, Tax, Depreciation & Amortisation
Earnings Before Interest, Tax, Depreciation, Amortisation & Exploration (cost)
European Central Bank: Central bank of the eurozone, being those EU members with the euro as their currency.
Energy Information Administration of the US.
A measure of valuation of a stock which moves beyond market cap (which reflects only ordinary shares) and takes into account all claimants on a company, both equity and debt.
Earnings Per Share: A listed company's net earnings value for a period divided by its share price.
European Union: The 28 member states (27 if Britain leaves) forming a European free trade, and to some extent fiscal, bloc. Of the 28, 9 still use their original currencies, while 19 have adopted the euro. These are collectively known as the eurozone.
The nineteen EU member states with the euro as their currency.
Free cash flow: Earnings generated by a company considered to be available for distribution (dividends), but then dependent on what the company may actually decide to distribute.
Front-End Engineering & Design: If a DFS has suggested viability, a mining/oil & gas company will next look at FEED before making a decision on whether to progress with a proposed new project.
Funds from operations
Final Investment Decision: Having completed feasibility studies and FEED, a mining/oil & gas company will then make a final decision on whether to proceed with a proposed new project.
Federal Open Market Committee: The committee appointed from US Federal Reserve officials and regional presidents charged with setting monetary policy (interest rate decisions). The committee's members are appointed on a rotational basis.
An Australian shareholder only pays tax on a company's profit once. If that company has paid all its tax in Australia then the dividend paid to a shareholder is not again taxed, but "fully franked". Levels of franking less than 100% imply either a company has earned a proportion of its profit offshore, or has received tax rebates (eg for exploration expense) and thus not paid "full" tax. Foreign investors are not eligible for franking.
Funds under management: The value of funds being managed by a fund manager.
Financial Year: The twelve month period over which a company accounts for its business. Typically in Australia this is July-June but some companies run on different cycles.
Gross Domestic Product: The total of goods and services produced by a nation over one year. GDP measures the total output from all resources located in the country, wherever the owners of the resources live.
The amount of debt a company is carrying as a proportion of equity.
Gross payment volume
Gross written premium
The change in the price of a basket of goods & services including the prices of food & energy.
Half on half
International Energy Agency
International Monetary Fund
Prices of goods & services and wages rise over time. (See: Headline Inflation; Core Inflation; Disinflation; Deflation; CPI; PPI)
A company raises capital by placing stock with institutional funds managers prepared to accept the price on offer.
Internal rate of return: In simple terms, the return required on an investment for that investment to break even.
Joint Ore Reserves Committee: This body sets international standards for the classification of mining reserves, proven, probable and possible. (See: 1P, 2P, 3P). Mining companies will disclose a "JORC reserve of x".
Like for like: An expression used predominantly with regard retailers which may have added/closed stores over a period. LFL sales is a meaure of sales growth for incumbent stores and thus a more "apples to apples" comparison.
London Metals Exchange: Primary global exchange for the trade of base metals and other related commodities.
Coal used in conjunction with iron ore to produce steel. Also known as coking coal.
Manufactured Housing Estate
Month on month
Mobile virtual network operator
National Association of Securities Dealers Automated Quotient: "The Nasdaq" is the default market expresion for the Nasdasq Composite Index of all stocks traded on the electronic Nasdaq exchange, which is an alternative US exchange to, for example, the New York Stock Exchange.
Net asset value
Net Interest Margin: In simple terms the difference between the net rate a bank has borrowed money at and the net rate at which the bank has lent money at.
Net profit after tax
Net present value: The value of future earnings discounted to a value today by the prevailing interest rate.
Net tangible assets: Today's value of a company's tangible assets (eg buildings) and not intangible assets (eg goodwill). An important measure for, eg, property trusts.
Organisation of Petroleum Exporting Countries: A cartel of oil producing nations, mostly, but not all, based in the Middle East, lead by Saudi Arabia.
Operational expenditure: The cost to a company of keeping a business running, as oppoed to capex. (See: capex)
People's Bank of China: Central bank of China.
Previous corresponding period: Eg if we are discussing the June quarter 2015, the pcp is the June quarter 2014.
Purchased Debt Ledger
Price/earnings ratio: The current stock price of a company divided by past earnings (historic PE) or forecast earnings (forward PE) expressed as a multiple, eg 10x. PEs are effectively a measure of market sentiment, as a higher PE implies a greater demand for a stock and a lower PE lesser demand, all else (earnings) being equal.
Price/earnings growth ratio: A second derivative of price/earnings (PE), PEG is the current price of a stock divided by that company's forecast earnings growth rate.
Pre-Feasibility Study: The first step in a mining/oil & gas company's assessment of a proposed new project.
Purchasing Managers' Index: A survey of companies in a specific sector (eg manufacturing, services, construction) designed to gauge that sector's month-on-month performance. The index measures the pace of expansion/contraction (>50/<50).
Point of purchase: Were sales are made, eg at the counter. In terms of packaging, the reference is to POP displays.
Producer Price Inflation: The change in the wholesale price of a basket of goods and services.
Quantitative easing: An alternative monetary policy tool for central banks to cutting cash rates. The central bank buys bonds issued by the government (or corporates) thus keeping rates low.
Quarter on quarter
Refundable Accommodation Deposit
Revenue per average seat kilometre
Reserve Bank of New Zealand: Central bank of New Zealand.
Real Estate Investment Trust: Listed property funds. Australian REITs are known as A-REITs.
Return on capital employed
Return on equity
Return on invested capital
Return on tangible equity
Reserve Requirement Ratio: China's answer to CET1 regulations for western banks. Chinese banks must hold a certain level of capital reserves against their loan books and the government implements changes in this ratio as a monetary policy tool.
Required rate of return
Risk weighted assets
A market capitalisation-weighted index of the largest 500 US stocks, as published by Standard & Poor's.
Small and medium enterprises
Sum of the parts: One form of stock valuation, in which the different businesses of a company are evaluated and added together.
Share Purchase Plan: Typically accompanying an institutional placement, an SPP allows retail investors to particpate in a company's capital raising on a book-build basis, meaning the balance of supply and demand determines the final purchase price.
Same store sales
Coal used to power electricity generators.
Total shareholder return: The capital gain/loss on a share price over a given period, plus any dividends paid in that period.
Volume-weighted average price
Weighted average lease expiry of the properties owned by a REIT.
West Texas Intermediate: By traditional market default, the price of WTI futures is the global "price of oil" and the benchmark for the US, despite the US producing several blends of oil. Brent crude (North Sea) is now nevertheless considered an alternative global benchmark. WTI is specifically the price of oil stored at Cushing, Oklahoma.
Annual dividend/distribution divided by share price expressed as a percentage per annum. Historical yield is last year's dividend over today's share price, forward yield is forecast dividend over today's share price, and the yield achieved by a shareholder is the dividend divided by the price of entry into the stock.
Equivalent to Yield above, a bond yield is the coupon divided by bond price expressed as a percentage per annum.
Share price rises but dividend remains the same, such that new shareholders enter at a lower achieved yield.
Year on year
Oct 25 2017 - FYI
Nov 14 2017 - Weekly Reports
Oct 31 2017 - Weekly Reports
Nov 09 2017 - Rudi's View
Nov 08 2017 - Rudi's View
Oct 26 2017 - Rudi's View