GLOSSARY OF FINANCIAL TERMS
Amortization of a debt or a loan : The gradual reimbursement of a debt or a loan through regular payments over a specified period of time. Assets : All items of economic value, such as property, goods and rights, owned by a company. Balance sheet : A snapshot of a company’s assets and liabilities at a specific point in time. Bearer share : A certificate representing one unit of ownership in a company, whose owner’s name is not registered. Bond : A debt instrument representing a share of a loan issued by a government, an institution or a corporation. Bondholders are paid interest (known as a “coupon”) over the life of the loan; CAC 40 : Photographie de la situation patrimoniale d’une entreprise à un instant donné. Cash flow : The cash and cash equivalents generated by a company. Cash flow is a measure of a company’s ability to finance growth, reimburse debt and pay dividends out of its own funds. Depreciation : An expense recorded in a company’s accounts to reduce the value of a capital asset, reflecting its actual loss of value over time. Dividend : The portion of a company’s earnings distributed to shareholders, as approved by the Annual Meeting. Goodwill : The excess of the purchase price paid for a company over the fair market value of that company’s net tangible assets. The purchasing company amortizes goodwill out of its after-tax income. If the acquisition price is lower than the value of the net tangible assets, the differe nce is referred to as negative goodwill or badwill. Liabilities : All the debts, funds and other commitments owed by a company.
Loans outstanding : Total amount of a company’s loans remaining to be repaid. Market capitalization : The market value of a company, as calculated by multiplying the number of outstanding shares by the price per share. Market value fluctuates daily with the share price. It represents the price that would have to be paid to acquire 100% of the company’s capital. Net financial position : A company’s total debt less cash and cash equivalents (bank balances, short-term investments, short-term loans). If the balance is negative (i.e. debt exceeds cash and cash equivalents), the company is said to have net debt. Net income : A company’s earnings after operating, interest and extraordinary expenses, as well as corporate income tax. Operating margin : The amount remaining after all a company’s operating expenses have been deducted from sales. The operating margin reflects the financial health of a company before taxes, interest expense and extraordinary items.
Price/Earnings Ratio (PER) : The ratio between a company’s share price and its forecast earnings per share for the year in progress. PER measures how expensive a stock is and enables comparisons with other stocks in the same industry. P.E.R (Price Earning Ratio) : Rapport entre le cours d’une action et le bénéfice net par action attendu pour l’exercice en cours. Cet indicateur mesure le prix d’une action et permet d’établir des comparaisons avec d’autres valeurs d’un même secteur d’activité. Public offer for cash : A transaction whereby a person or a corporation publicly offers to buy shares in another company from its shareholders, in order to acquire a controlling inter in the company. To make the offer est attractive, the acquiring company offers to pay more than the market price for the target company’s shares. In France, companies issuing public offers for cash must submit their offer to the Conseil des Marchés Financiers (CMF), at which point trading in the target company’s shares is suspended. They also have to prepare a prospectus to be registered with the Commission des Opérations de Bourse (COB). Public offer for shares : As above, except that the buyer offers to swap its own shares for those in the target company, in accordance with a pre-defined ratio or parity.
Return on capital employed (ROCE) : The ratio between operating income (or operating margin in the case of PSA Peugeot Citroën) less interest expense , taxes and income from companies accounted for by the equity method on the one hand, and the total amount of capital employed in the company on the other. ROCE is a measure of a company’s profitability. Return on investment : A measure of the profitability of a project in relation to the amount of money invested in it. Different ratios can be used, such as internal rate of return and net present value. Sales The total revenues generated by the sale of goods and/or services over a given period of time. Share A certificate representing one unit of ownership in a company. Working capital provided by operations The cash and cash equivalents that a company clears from operations and uses to finance its operating needs (working capital requirement), pay dividends to shareholders and finance its future growth through capital expenditure. Working capital requirement The difference between capital needed in a company’s ongoing operations (inventory build-up, customer credit, etc.) and income provided by operations (supplier credit, customer advances, etc.).