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Financial glossary

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Working capital requirements (WCR), consensus, operating income, etc. Find all the definitions for financial terms in this glossary.

A

AGM/EGM

An Annual General Meeting for shareholders must be convened by the Board of Directors once a year to deal with standard administrative decisions: approval of accounts, election of directors, etc. An Extraordinary General Meeting is convened to approve strategic and exceptional decisions: merger, increase or reduction of share capital, etc.

Annex

Set of explanatory notes on the balance sheet and the income statement (e.g.: consolidation, stock valuation, debt schedule, substantiation of provisions, etc).

Annual accounts

The annual accounts include the balance sheet, the income statement and an annex. The term for compiling annual accounts is 3 months (for public limited companies with a Board of Directors), or 4 months (for other listed companies) from the end of the fiscal year.

Annual income

Annual publication of the company establishing the difference between a company’s income and expenses for a given fiscal year.

Assets (balance sheet)

The left-hand side of the balance sheet lists all the assets and the interests making up a company's net worth at the end of the fiscal year.

Autorité des Marchés Financiers (AMF)

Institution responsible for monitoring all markets. This body holds general authority over protecting savings, oversees the legality of transactions and the quality of the information provided by issuers.

B

Balance Sheet

A snapshot of a company's net worth at a given time. The left-hand column, known as the assets breaks down the company's holdings, and the right-hand column shows the liabilities, detailing the elements enabling the funding of the assets.

C

CAC 40

This is the main index for the Paris Stock Exchange and is made up of the 40 most active securities. It is calculated from the base value of 1,000, set on December 31, 1987. It is weighted by the market capitalization of each of its component companies. The Conseil Scientifique des Bourses de Valeur decides which companies enter into the CAC 40, based on several criteria. (CAC = Cotation Assistée en Continu).

Capital gain

On the stock exchange, a capital gain is the positive difference between the sales price and the purchase price of shares. If the difference is negative, it is a capital loss.

Capital loss

A stock market loss in value is a loss arising from the sale of a share at a lower price than the price at which the shareholder bought it.

Cash flow

The capacity for self-financing, or Cash Flow, is the accounting measurement for liquidities generated by a company's activities, indicating its capacity for self-financing (funding growth, paying back debts and paying its shareholders through their own capital).

Cash position

When the figure is positive, it represents the amount of cash available and appears at the bottom of the asset side of the balance sheet; when it is negative, i.e. an overdrawn bank account, it appears at the bottom of the liabilities side of the balance sheet. Net cash position represents the difference between the two.

Consensus

Average forecasts established by a range of financial analysts. The consensus gives a good representation of what the financial market thinks of a company and its potential at a given time.

Consolidated accounts

These are published by commercial companies when they hold exclusive or joint control over one or more other companies. They therefore include all the accounts of the parent company and its subsidiaries.

Consolidation of accounts

Accounting method used to present the financial situation of various companies within a single group, as if they acted as a single company. We therefore talk about consolidated turnover or consolidated profits to designate information from a group made up of several subsidiaries.

Corporate valuation

A process whose purpose is to determine the value of a company and thus the value of the share to be offered to shareholders.

Current operating income (EBIT)

Current operating income (or operating income) depicts the growth in wealth produced by the company's industrial and commercial operations. Unlike EBITDA (Earnings before income tax, depreciation and amortization), which focuses on the operating cycle, the operating income also includes net amortization and provisions recorded during the period.

Custodian and transfer services

Custodian and transfer services are provided by:
Société Générale Securities Services - Investor Relation Department
32, rue du Champ de Tir - BP 81236
44312 Nantes Cedex 3, France
Tel.: +33 (0)2 51 85 67 89
www.nominet.socgen.com
www.sg-securities-services.com

 

D

Distribution rate

Relationship between the amount of the distributed dividends and the net profit. Also known as the Pay Out Ratio.

Dividend

Share in the company profits distributed to each shareholder as a proportion of the number of shares that they hold. It constitutes payment for the capital invested by the shareholders. The amount of the dividend is subject to voting at the General Meeting, which examines and ratifies the accounts for the past fiscal year.

E

EBIT

Earnings Before Interest and Taxes. See operating income.

EBITDA

Stands for Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA is an interim balance of the income statement corresponding to the operational profit plus allocations to amortizations and provisions. It corresponds to the profits arising from operating activities.

Equity Capital

This represents the book value of a company. It is composed of shareholders' equity, company profits and minority interests.

Exceptional items

Includes non-recurring income and expenses, particularly capital gains and losses on sales of assets.

F

Financial analyst

Professional working in a bank or a brokerage, financial analysts produce reports on listed companies for investors. They analyze the company's situation, its accounts and its profit prospects. Based on these elements, they calculate a profit estimate - usually for the upcoming 3 years.

Financial market

Meeting place for supply and demand of short-term capital, even day-to-day. It is open to all economic players who buy and sell specific and varied securities.

Financial results

The financial results detail the charges and revenue directly linked to a company's indebtedness and investment activities. As most companies do not work specifically in the financial sector, we usually refer to net financial charges on revenue.

Float

Proportion of a company's share capital that can be traded on the stock market. For example, shares held by the government or as part of a shareholders' agreement are not part of the float. The larger the float, the higher the liquidity of the security.

G

General Meetings

The General Meeting of Shareholders meets once a year to approve the accounts and vote on any resolutions that appear on the agenda. Decisions are made by majority vote. See also AGM/EGM.

Goodwill

The variance between the purchasing price of an acquired company and its book value (amount of net assets). We talk about bad will when this variance is negative.

Governance

Governance means the measures implemented in order to ensure a company's operation and control. These measures emphasize transparency of information.

Group net profits

This represents the remaining part of the income, once the company has paid out everything it owes to its creditors and to the government. The net income is the part of the income that can be distributed to shareholders in the form of dividends or put into reserve in order to increase the company’s share capital.

H

Half-year results

Biannual publication by the company establishing the difference between a company’s revenue and expenses at the half-year point of the fiscal year.

I

IFRS (International Financial Reporting Standards)

New international accounting standards, formerly known as IAS (International Accounting Standard). The "IAS 2005" European ruling directly requires listed European companies to prepare and publish consolidated accounts which comply with IFRS standards, for the fiscal years from January 1, 2005, at the latest. The implementation of IFRS standards has had a significant impact on the presentation of financial statements, financial indicators and ratios, and income volatility.

Income statement

This relates to all the transactions carried out over the fiscal year. Transactions with a positive result translate into revenue and negative results translate into charges. The difference between revenue and charges constitutes the earnings for the financial year (profit or loss).

Investment Certificate (IC)

Share without voting rights listed on the stock market. IC holders have the same rights as shareholders, with the exception of voting rights during General Meetings. Until May 30, 2011, AREVA’s float capital (4% of the capital) was listed under the form of investment certificates. From this date, AREVA’s entire capital is listed under the form of ordinary shares.

ISIN Code

The ISIN code of a company is made up of 12 characters, with the first 2 representing the location where its shares are listed. This code is used to distinguish between the different stocks listed on the market.

L

Liabilities (balance sheet)

The right side of the balance sheet, representing all the debts and commitments of a company at the end of its fiscal year.

M

Market capitalization

The value of a company calculated by multiplying the number of shares making up the company's share capital by the market rate at a given time.

Market index

Calculated indicator enabling the measurement of market growth. This indicator is based on the average of the rate for a representative sample of securities.

N

Net profit per share

This is the consolidated net profit of the company divided by the number of shares in circulation during the period under consideration.

Nominal value

The nominal value of a share is the interest in the share capital represented by that share.


Nominative

  • Pure Nominative Account: the securities account is opened with the company issuing the securities (shares, bonds, etc.) which entrusts management (Custodian Service) to a financial institution.
  • Administered Nominative Account: the securities account is opened with the company that issued the shares, but the owner of the securities entrusts management to the broker of his or her choice. The owner bears the related expenses. 
  • The Bearer Account, unlike the Nominative Accounts, is held by a brokerage institution. The account owner is unknown to the company that issued the shares. The owner bears the related custodian expenses.

O

Operating margin

Balance obtained by deducting the total operating expenses from the turnover, i.e.: all the charges linked with the company's current daily business.

P

Par value

The par value of a share is the interest in the share capital represented by that share.

PER (Price Earning Ratio)

Earnings capitalization rate. This is the ratio of the share price to the earnings per share of a given company. It expresses the price of a company in number of years of earnings.

Profit and loss statement

This relates to all the transactions carried out over the financial year. Transactions with a positive result translate into revenue and negative results translate into charges. The difference between revenue and charges constitutes the earnings for the financial year (profit or loss).

Q

Quorum

Proportion of share capital that must be present or represented at an Annual General Meeting of Shareholders for it to deliberate legitimately. For an Annual General Meeting, a quorum of 25% is required on the 1st notice of meeting. For an Extraordinary General Meeting, a 1/3 quorum is required on the 1st notice of meeting and a 1/4 quorum is required on the 2nd notice.

R

Rating agency or credit rating agency

An independent body which pronounces its opinion on the quality of a public or private borrower, based on its own criteria. A high rating entitles the borrower to better rates, whereas a low rating—aside from the negative psychological effect it brings—restricts the borrower to a higher rate.

Reference document

Document containing all the legal, economic and accounting information relating to the presentation of a company over a given fiscal year. As soon as it is filed with the AMF, it becomes a public document, and can be viewed by anyone at any time.

Registered

  • Pure Registered Account: the securities account is opened with the company issuing the securities (shares, bonds, etc.), which entrusts management (securities service) to a financial institution.
  • Administered Registered Account: the securities account is opened with the company that issued the shares, but the owner of the securities entrusts management to the broker of his or her choice. The owner bears the related expenses.
  • Bearer Accounts, unlike Registerd Accounts, are held by a brokerage institution. The account owner is unknown to the company that issued the shares. The owner bears the related custodian expenses.

Return on Average Capital Employed/ROACE Revenue

The ROACE (Return On Average Capital Employed) is a profitability ratio, expressed as a percentage. It is equal to the ratio of operating income after tax to invested capital, which gives an indication of the return on the capital used by the company for its operating activities.

Revenue

Total sales of goods or services for a company over a given period.

S

Share

Marketable security representing a fraction of the capital of a public limited company or a company limited by shares, issued to shareholders in exchange for a capital contribution. This security confers rights to its holder: a share in the profits in the form of a dividend, a vote in the General Meeting, right to information and a final dividend in the event of liquidation.

Share Capital

In accounting, the share capital of a company represents the shareholders' contributions. Its value is always the nominal value of shares, multiplied by the number of shares.

Shareholder

The holder of at least 1 share in a company.

Shareholders' equity

This represents all the resources owned by the company, meaning the difference between the total assets and the total debts. It includes the share capital, reserves and the balance brought forward.

Shareholding

List of all the shareholders in a company.

Stock

Synonym of transferable security.

Stock Exchange

Market for transferable securities and derivative products. It sets the rate of shares through the supply and demand principle, enabling issuers to find capital and savers to find liquidity.

Stock exchange price

This represents all the resources owned by the company, meaning the difference between the total assets and the total debts. It includes the share capital, reserves and the balance brought forward

Subsidiary

A company in which a business (known as the "parent company" holds more than 50% of the share capital).

T

Transferable security

A negotiable security, issued by a company or by a government that represents a receivable or a related right. The two major categories of transferable securities are stocks and bonds.

Turnover

Total sales of goods or services for a company over a given period.

V

Voting rights

Voting rights give a vote attached to shares which enable shareholders to vote on resolutions presented at General Meetings.

W

WCR (Working Capital Requirements)

This is the difference between the requirements linked to the natural business year and the resources arising from this year. It therefore corresponds to the amount of money that the company needs to have available in order to remain operational.

Y

Yield

The relationship, expressed as a percentage, between the dividend paid on a share and the share's stock exchange price. Yield is generally calculated based on the total dividend (including the dividend tax credit).

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2015 Reference document