Glossary of financial terms


Zodiac Aerospace glossary of financial terms: useful definitions for stock market terms.

 

Share

A share is a transferable variable-income security. It is a certificate of ownership issued to shareholders of a limited company and represents a share of the company’s capital.


French Market Regulator (AMF)

The body responsible for the supervision of all French financial markets. It has general authority over the protection of savings and oversight of the regularity of transactions and the quality of information provided by issuers. It defines the general principles for the organization of the markets, and the rules of conduct with which all parties are required to comply. It oversees public offers (takeover bids, exchange offers and squeeze-outs).
www.amf-france.org


Financial analyst

A finance professional working in a bank or brokerage firm who analyzes listed companies for investors. The financial analyst assesses the company’s environment, strategy, financial statements, and earnings outlook. Based on these elements, the analyst calculates the estimated earnings, generally over a three-year period.


General Meeting

A meeting to which the shareholders of a limited company are invited at least once a year, within six months of the financial year-end. In particular, it is required to approve the financial statements and elects members of the Supervisory Board. An Extraordinary General Meeting is convened to approve exceptional decisions (such as mergers and capital increases).


Treasury shares

Shares of its own capital held by the company. Treasury shares carry no voting right or dividend entitlement.


Earnings per share (EPS)

This is the company’s consolidated net profit divided by the weighted average number of shares outstanding in the relevant period.


CAC40 or CAC40 index

This is the leading index of the Paris stock market and it is composed of the 40 most active stocks. It is calculated from a base of 1,000 at December 31, 1987. It is weighted by the stock market capitalization of each of the companies included in it. Inclusion in the CAC 40 is decided by the Conseil Scientifique des Bourses de Valeur based on various criteria, including liquidity and the representative weight of the companies in economic terms. (CAC stands for Cotation Assistée en Continu or automated quotation.)


Market capitalization

The value of a company calculated by multiplying the number of shares comprising its capital by the stock price at a given moment.


Consolidation

An accounting method used to present the financial position of various companies of a group as if they were a single company. Accordingly, a group composed of several subsidiaries will present consolidated sales revenues or consolidated results.


Stock price

The stock price is the value in euros (for a stock listed in Paris) of the stock at a given moment. It is based on the match up of asks and bids (buy and sell orders).


Dilution

If the number of shares is increased (due to a capital increase or payment of the dividend in shares), the net earnings per share will decrease if the company’s overall result is constant. This is called the dilutive effect (its opposite is an accretive effect).


Dividend

A share in the earnings distributed to every shareholder in proportion to the number of shares held. This constitutes remuneration for the shareholders' invested capital. The amount of the dividend is subject to a vote at the General Meeting which is required to review and approve the financial statements for the year ended.


Voting right

Each ordinary share is entitled to a single vote. This offers the possibility of voting at Shareholders’ Meetings. When stipulated by the Bylaws, the voting right may be doubled for shareholders who hold their shares for two years or more. Preference shares and investment certificates have no voting right. The Zodiac Aerospace bylaws provide for a double voting right for registered shareholders who hold their shares for over 4 years.


Euronext – Paris

A specialist financial establishment that has taken over from the Compagnie des Agents de Change and the Société des Bourses Françaises. It conducts daily market operations (specifically the publication of share prices and certification of stock prices at the close of each trading session), and works to develop and enhance the market. In conjunction with the French Market Regulator (AMF), it ensures that transactions conducted by stockbrokers comply with the regulations. Euronext Paris is a subsidiary of the Euronext Group which merged with NYSE (New York Stock Exchange) in 2007 to become NYSE Euronext.


Free float

The portion of capital that is eligible to be traded on the stock market. For example, shares held by the Government or within a shareholder pact do not form part of the free float. The greater the free float, the higher the share’s liquidity.
The free float capitalization is the stock market capitalization multiplied by the percentage of the free float.


Stock market index

Stock price index that tracks market trends. This indicator is based on the average of share prices in a representative sample of stocks.


Paris stock market indices

The CAC 40, CAC Next20, SBF 120, SBF 250, the Second Marché index, the Nouveau Marché and the MID CAC are among the most well known indices on the Paris stock market.
The main foreign stock market indices are :
-    in the United States, the “Dow Jones”, created by Charles Dow and Edward Jones in 1884, is the world’s most renowned stock market index, composed of the biggest 30 industrial companies in the United States, while the Standard & Poor’s index includes 500 stocks listed on the first market of the New York Stock Exchange;
-    in Europe, the Dow Jones Stoxx and for euro countries the Dow Jones Euro Stoxx, created in February 1998,
-    in the UK, the FTSE100,
-    in Germany, the DAX,
-    in Japan, the Nikkei 225.


Institutional investors

Institutions such as pension funds, insurance companies, investment companies, or UCITS which invest in the capital of companies, for their own account or on behalf of third parties.


Internal cash flow

This is equal to net earnings plus depreciation and amortization and provisions. It is a measure of the company’s capacity to invest without raising external resources (shareholder contributions or debt).


Shareholders’ agreement

An agreement signed between major shareholders of a company to ensure they consult each other in the event that any one of them wishes to withdraw capital. Shareholders’ agreements are generally defined for a specific period. Parties to such an agreement enjoy a preemptive right.


Capital gain/loss on disposals

A capital gain on the stock market is the positive difference between a share’s sale price and purchase price. If the difference is negative, it is a capital loss.


Quorum

The proportion of the capital that must be present or represented at a General Meeting in order for it to validly transact business. For an Ordinary General Meeting, a quorum of 25% is required on first notice. For an Extraordinary General Meeting, the required quorum is one third on first notice and one quarter on second.


Yield

This is the ratio, expressed as a percentage, between the dividend paid per share and the market price of the share. The yield is calculated on an overall basis, according to the total dividend.


SBF 120

Launched on December 8, 1993, the SBF 120 index is composed of the forty CAC 40 index stocks plus eighty of the most liquid stocks from the Premier Marché. It has been calculated and broadcast in real time since April 18, 1994.


SBF 250

This supplements the range of Paris stock market indices. It includes stocks from the CAC 40 and SBF 120 index and is representative of all listed sectors. It is calculated twice daily.


Deferred settlement service (SRD – Service de Règlement Différé)

Since September 25, 2000, trading and settlement methods have been identical on all markets, with cash payment generally required. However, to enable shareholders who wish to defer payment for their transactions, financial intermediaries offer a deferred settlement service.


Payout ratio

The ratio between the amount of the dividends distributed and the amount of net earnings.


Transferable security

A transferable stock, issued by a company or a Government, representing a debt or associated right. The two main categories of transferable securities are bonds and shares.


Nominal value

The nominal or par value of a share is the proportion of equity capital represented by the share.