Acquisition: A purchase of all or part of a company so as to obtain ownership of its operating resources and/or to control its business.

Amortization/Depreciation: A way of reflecting, in a company’s balance sheet, the decline in the value of an asset over a specific period of time due to use. In general, “depreciation” is the term used for property, plant and equipment; “amortization” is used for intangible assets. There are two principal methods. With straight-line depreciation or amortization, the asset’s cost of acquisition or construction is spread uniformly over its anticipated useful life. With the declining-balance method, the carrying amount of an asset is reduced by larger increments at the beginning of the depreciation or amortization period, and by smaller increments later on.

Annual report: The formal financial statement issued yearly by a corporation. The annual report shows assets, liabilities, revenues, expenses and earnings. The report defines how the company stood at the close of the business year, how it fared profit-wise during the year, as well as other information of interest to shareowners.

Annual meeting of stockholders: A meeting of all stockholders, convened at least once a year by the board of directors. Typically, the meeting held to vote, either in person or by proxy, on certain issues including the election of Directors. Stockholders may also vote on ratifying the appointment of the independent auditors. The notice of the annual stockholders’ meeting includes a proposed agenda.

Articles of incorporation: Contractual basis of a stock corporation stating the company name, headquarters, business purpose, amount of capital stock and further basic rules and regulations.

Bear market: A steep general decline in stock prices, usually over a long period. A bear market is the opposite of a bull market.

Bull market: A strong general rise in stock prices, usually over a long period. It is the opposite of a bear market.

Capital expenditure: An investment in a long-lived asset such as machinery and factories to operations to expand a company’s operations.

Cash flow: The inflows and outflows of cash over a given period of time. Cash inflows arise from the income a company generates, changes in working capital, proceeds from financing activities and income from investments. Cash outflows include investments in inventories, receivables and other working capital, expenditures on plant and equipment, and the buyback of stock and debt.

Common stock: Securities that represent the ownership interest in a company.

Continuing operations: Sales and earnings reporting for operations pertaining only to business operations that are expected to remain in the company’s portfolio for the foreseeable future.

Corporate governance: Corporate governance comprises the long-term management and oversight of the company in accordance with the principles of responsibility and transparency.

Divestiture: The partial or full disposal of an investment or asset through sale, exchange, closure or bankruptcy. Divestiture can be done slowly and systematically over a long period of time, or in large lots over a short time period.

Discontinued operations: Certain businesses sold or designated for sale within the next year. The net earnings, assets and liabilities and cash flows of such businesses are separately classified on the statement of earnings, statement of financial position, and statement of cash flows, respectively, for all periods presented.

Diversification: Expanding a company’s range of products and services, customers and geographic presence to embrace new areas that are usually related to existing activities.

Earnings before interest and taxes (EBIT): EBIT comprises the operating profit of a company, which is before deductions for items such as interest expense and income taxes.

Earnings before interest, taxes, depreciation and amortization (EBITDA): EBIT plus amortization and impairment losses on intangible assets and depreciation and impairment losses on property, plant and equipment, minus impairment loss reversals.

Earnings per share: Net income after deduction of preferred stock dividends, divided by the weighted-average number of common shares outstanding for the period. Listed in the per share of common stock amounts category on the statement of earnings.

Economic cycle: The fluctuations in business activity within a given economy, measured by specific indicators such as gross domestic product (GDP).

Effective tax rate: Provision for income taxes as a percentage of earnings from continuing operations before income taxes.

Emerging markets: Collective term for the young, developing economies of Latin America, Asia, Eastern Europe and Africa.

Equity: The ownership interest of common and preferred stockholders in a company.

Fiscal year: The period for which a company’s annual financial statements must be prepared. A fiscal year can never be more than 12 months.

Foreign exchange: In general a term used to describe the collective market for the currencies of different countries and their relative exchange rates.

Goodwill: The premium paid in an acquisition of a business. Calculated as the purchase price less the fair value of net assets acquired. (Net assets are identified tangible and intangible assets, less liabilities assumed.)

Gross profit: The difference between a company’s total sales and its cost of producing the product to generate the revenue. It is before deductions for sales and marketing and other operating expenses. Gross profit margin is the ratio of gross profit to sales.

Income before income taxes: Reported profits for an accounting period before the deduction of income taxes. Income before taxes offers greater comparability with the results of previous years and with those of other companies.

Income statement: The income statement compares expenses and income for a given period, usually a quarter or a fiscal year. If total income exceeds total expenses, the company has earned a profit. If expenses exceed income, the company shows a loss.

Income taxes: An expense based on reported earnings before income taxes. Deferred income taxes reflect the temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes.

Insider: A term for director, officers and other people who have unique information about a business or business event. Using material inside information for one’s own advantage in securities transactions is illegal.

Inventories: The products a company sells and the components used to produce those products.

Investment: The expenditures in plant, equipment and people to maintain, expand and improve a company’s business.

Market capitalization: The market value of a company listed on a stock exchange. Market capitalization is calculated by multiplying the number of shares of a company’s stock by the stock’s current trading price.

NASDAQ: An automated information network that provides brokers and dealers with price quotations on securities traded over-the-counter. NASDAQ is an acronym for National Association of Securities Dealers Automated Quotations.

Net income: A company’s total sales less all expenses, showing what a company earned (or lost, called net loss) for a set period, usually one year. Often referred to as the “bottom line.” Also known as net earnings and net profit.

Operating expenses: A company’s expenditures on research and development, sales and marketing, and other general expenses associated with running the business. Operating expenses exclude the cost of a product or service a company sells.

Operating profit: A company’s sales, less the cost of the products or services it sold and operating expenses. Operating profit is before deductions for interest expense, income taxes and certain other items. Operating margin, a measure of a company’s profitability, is calculated as the ratio of operating profit to sales.

Option: The right, not the obligation, to execute a transaction at a designated price, generally involving equity interests, interest rates, currencies or commodities.

R & D: Abbreviation for Research & Development. Activities connected with developing new products and services.

Return on equity: Earnings from continuing operations divided by average total stockholders’ equity for a given period (normally one year). A measure of return on the stockholders’ investment.

Return on capital: Earnings from continuing operations divided by average total capital in a company (stockholders’ equity plus long-term debt) for a given period (normally one year). A calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments.

Share: A unit of stock, which is the equity ownership in a corporation. The bearers or owners of shares of stock – the shareholders or stockholders – are not creditors of the corporation but co-owners of it. They have certain rights, such as voting rights at the stockholders’ meeting.

Share price/ stock price/trade price: The price of a stock on a stock exchange, determined as a function of supply and demand.

Share buyback / share repurchase / stock buyback / stock repurchase: A program by which a company buys back its own shares, thereby reducing the number of outstanding shares.

Special item: One-time items of income or expense.

Statement of cash flows: A financial statement that reports the flow of cash in and out of a company for a set period, usually one year. It reports the operating, investing, and financing activities of the company.

Statement of financial position: A financial statement that reports a company’s assets and the claims against them (liabilities and stockholders’ equity) at a set date noted on the statement. Also called balance sheet.

Statement of stockholders’ equity: A financial statement that reports the changes in the owners’ interests (equity); for example, by detailing changes in net earnings or dividends paid to stockholders.

Stockholders’ equity: Part of a company’s assets that belongs to the stockholders. It is the amount that would remain if a company sold all its assets and paid off all its liabilities. Listed as stockholders’ equity on the statement of financial position and on the statement of stockholders’ equity.

Stock: A share of ownership of a public company. Individuals or groups hold shares in companies as an investment; companies issue shares as a means of raising capital.

Stock split / stock dividend: A corporate action in which a company’s existing shares are divided into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because no real value has been added as a result of the split.

Working capital: The assets and liabilities of a company that are likely to be held for less than one year. A company’s working capital typically includes cash, inventories, accounts receivable and accounts payable. Working capital excludes long-term assets such as plant and equipment, and liabilities such as long-term debt.