Balance sheet

A financial statement that summarises a company’s assets, liabilities, and shareholders’ equity at a particular point in time. Each segment gives investors an idea as to what the company owns and owes, as well as the amount invested by shareholders. It is called a balance sheet because of the accounting equation: assets = liabilities + shareholders’ equity.

Bottom-up (investing)

Bottom-up fund managers build portfolios by focusing on the analysis of individual securities rather than broader macroeconomic or market factors in order to identify the best opportunities in an industry, country, or region; the opposite of top-down investing.

Earnings per share (EPS)

EPS is the bottom-line measure of a company’s profitability, defined as net income (profit after tax) divided by the number of outstanding shares.

Equity

A security representing ownership, typically listed on a stock exchange. ‘Equities’ as an asset class means investments in shares, as opposed to, for instance, bond. To have ‘equity’ in a company means to hold shares in that company and therefore have part ownership.

Liquidity/Liquid assets

Liquidity is a measure of how easily an asset can be bought or sold in the market. Assets that can be easily traded in the market in high volumes (without causing a major price move) are referred to as ‘liquid’.

Macroeconomics

Macroeconomics is the branch of economics that considers large-scale factors related to the economy, such as inflation, unemployment, or productivity.

Mid caps

Companies with a valuation (market capitalisation) within a certain scale (e.g., $2 – 10 billion in the US), although these measures are generally an estimate. Mid-cap indices, such as the S&P MidCap 400 in the US, track the performance of these mid-sized, publicly-traded companies. Mid-cap stocks are generally perceived to offer better growth potential than their larger peers, but with some additional risk.

M&A

Mergers and Acquisitions (M&A) refers to the consolidation of companies or assets through various financial transactions, such as mergers, acquisitions, consolidations, or tender offers.

Portfolio

A grouping of financial assets such as equities, bonds, commodities, properties, or cash. Also often called a ‘fund’.

Profit margin

The amount by which the sales of a product or service exceeds business and production costs.

Share price total return (investment trusts)

The theoretical total return to the investor assuming that all dividends received were reinvested in the shares of the company at the time the shares were quoted ex-dividend. Transaction costs are not taken into account.

Small-cap stocks

Companies with a valuation (market capitalisation) at the smaller end of the market scale.