Glossary
Ad hoc disclosures are announcements by German stock corporations (disclosing news that could have an impact on share price development. The company is required to keep the public informed about any changes.
= abbreviation for Aktiengesetz (German Stock Corporation Act), which defines the legal status of German stock corporations and contains all provisions relevant to the structure, the decision-making bodies, the supervisory boards etc.
An analyst is an expert for financial markets, specialized in the analysis of securities. Methods used include fundamental and technical securities analysis, to evaluate the present and future situation of a company and, if possible, forecast potential price developments.
In company law, the annual general meeting (AGM) is the highest ranking body of a stock corporation. All shareholders of a company are entitled to participate in the AGM. At the meeting, fundamental decisions are made for the company, such as the election of supervisory board members, changes to the articles of association and resolutions on profit distributions in the form of a dividend. Another important agenda item is the granting of official approval and discharge for the actions of the supervisory and management boards.
The annual report concludes accounting for every financial year, and presents the income generated by the company as well as the structure of business assets.
Articles of association are legal norms drafted by autonomous administrative bodies to govern their own administrative affairs, with effect for its members and the persons subject to its authority.
= abbreviation for the Börsengesetz (German Exchange Act), which governs commercial transactions on an exchange. The Exchange Act applies only to exchanges established as unincorporated public institutions, whether as venues for securities or commodities trading.
A capital increase is a measure undertaken for company financing through additional equity. For stock corporations, a capital increase can be implemented through the issue of new shares or through a withdrawal from reserves.
The capital market is a financial market. The term refers to the sum of all institutions that serve to match supply of and demand for (financial) capital (cash and securities). Unlike the money market, medium to long-term loans and equity capital are traded on the capital market. Trading is conducted primarily via banks and exchanges.
Cash flow is the surplus of cash generated through business activities. It is calculated through the cash flow statement adding all non-cash expenses and subtracting all non-cash income to/from net income.
A chart is used in general to display data or information. In the financial sector, share price curves over a certain period are often presented in a chart – usually in logarithmic form. The logarithmic scale of measurement makes price movements comparable even between shares with differing price levels. Technical market analysts use the data on price movements to forecast the future share price trend.
The closing price is the last price quoted for a security in variable trading at the end of a trading day.
= abbreviation for Deutscher Aktienindex (“German Stock Index”). The DAX tracks the performance of the 30 most important German shares. It takes into account the performance of the company as well as the dividends paid and changes in share capital. The DAX is a real-time index calculated solely on the basis of prices in the XETRA electronic trading system.
Debt is the portion of capital on the liability side of the balance sheet, which has not been provided by the company or its owners/shareholders. This includes bank loans, mortgages and bonds etc.
The DAX is the performance index tracking the top 30 stocks in Germany. It takes into account company performance as well as dividends and changes in share capital. The DAX is a real-time index calculated solely on the basis of prices in the XETRA electronic trading system.
Stock corporations and fund management companies are subject to disclosure requirements if they wish to be admitted to exchange trading. Under these, AGs and KAGs (investment companies) must regularly publish detailed information on business developments. The idea is to provide shareholders with a uniform degree of basic information. If a company fails to fulfill its disclosure requirements, it may be suspended from trading.
Distribution refers to the passing on of income to investors in the form of a so-called dividend.
The Dow Jones Industrial Average is the most important equity index in the western world, tracking the price developments of the 30 most significant US stocks.
Due diligence refers to the analysis and valuation of a company by external experts. A differentiation can be made between general, commercial, financial, legal, tax and environmental due diligence. In addition to an examination of the current business and financial situation of the company, due diligence entails a risk assessment.
Earnings before interest and taxes (EBIT) is a measure of operating profit excluding interest and income tax expenses.
Earnings before interest, taxes, depreciation and amortization (EBITDA) reverses all expenses for interest, tax, depreciation and amortization in net income.
Earnings per share (EPS) is used to assess the earnings strength of a company. To calculate this indicator, the profit generated by the company in a given period is divided by the number of issued shares.
Earnings per share are calculated as net income divided by the number of shares. This number is used by fundamental analysts to determine the price to earnings (P/E) ratio. It serves as a yardstick for investors to assess the profitability of a company.
= abbreviation for earnings before interest and taxes, a measure of operating profit excluding interest and income tax expenses.
= abbreviation for earnings before interest, taxes, depreciation and amortization, which is essentially net income with all interest, tax, depreciation and amortization added back to it.
= abbreviation for earnings per share. EPS is used to assess the earnings strength of a company. To calculate this indicator, the profit generated by the company in a given period is divided by the number of issued shares.
Equity refers to the cash and assets either available to a company or generated and retained by a company.
Equity analysis refers to the examination of a share to derive an estimate of future price and return developments.
An equity index is meant to provide a representative indicator for the price development of a stock market or market segment (sectors etc.).
The equity story provides a summary view of a company and its opportunities and risks (also in the context of an IPO).
An exchange is an organized market for trading in securities, currencies, certain goods and their derivatives. Such markets are subject to regulatory supervision by so-called trading surveillance offices. During trading hours, brokers define prices based on the buy and sell orders in their order books.
The Börsengesetz (BörsG) is the German Exchange Act, which governs commercial transactions on an exchange. The Exchange Act applies only to exchanges established as unincorporated public institutions, whether as venues for securities or commodities trading.
Forward prices or forward rates are those defined for at the time a forward transaction is concluded. These prices and rates are based on the concept of interest rate adjustment in relation to the currencies involved in the transaction.
Forward transactions refer to the purchase and sale of securities for later, rather than immediate, delivery and payment. All details, including the price, are already agreed at the time of transaction.
Free float refers to the shares of a company that are available for trading on the market and are not held by institutional investors.
Free float refers to the shares of a company that are available for trading on the market and are not held by institutional investors.
= abbreviation for generally accepted accounting principles (USA). Since 1973, the independent organization FASB (Financial Accounting Standards Board) has developed US standards for accounting, asset measurement and reporting.
Refers to the generally accepted accounting principles of the United States. Since 1973, the independent organization FASB (Financial Accounting Standards Board) has developed standards for accounting, asset measurement and reporting in the US.
The German Commercial Code (Handelsgesetzbuch – HGB) is the primary law governing business, for instance the rules for partnerships and corporations.
Germany’s Aktiengesellschaft (AG) is a form of incorporated company limited by shares, the share capital of which (equity) is provided through the purchase of shares by the shareholders; the legal framework for an AG is set out in the Stock Corporation Act (Aktiengesetz – AktG).
The term “going public” refers to the initial offering of shares by a company to a broad public on the stock exchange.
A "greenshoe" agreement allows an underwriting bank to issue additional shares (over-allotment) of its client company during an IPO. The shares are provided from the holdings of existing shareholders.
= abbreviation for Handelsgesetzbuch (German Commercial Code), the primary law governing business, for instance the rules for partnerships and corporations, in Germany.
glossar test_en
= abbreviation for International Accounting Standards. These are a framework for accounting created by an independent legal body, the International Accounting Standards Board (IASB). The aim is to develop a coherent and high-quality set of standards for accounting, in order to achieve transparency and comparability in financial reporting.
An initial public offering (IPO) refers to the first-ever broad offering of shares to interested investors.
Insiders are persons whose position within a company makes them privy to information that could have an impact on share price movements.
The International Accounting Standards provide a framework for accounting. They were created by an independent legal body, the International Accounting Standards Board (IASB). The aim is to develop a coherent and high-quality set of standards for accounting, in order to achieve transparency and comparability in financial reporting.
Investment companies are banks whose business is oriented on investing client monies in its own name, separate from its own assets, for the mutual account of the investors in accordance with the principle of risk diversification.
Kaptialertragssteuer (Interest Income Withholding) is an income tax collection mechanism, and the amount paid is considered to be a tax prepayment. In the assessment process, interest income is subjected to the individual tax rate of the recipient, and the amount paid credited towards the ultimate income tax liability.
Investors are any natural persons or legal entities that provide financing for investment projects (e.g. new manufacturing facilities).
Investor relations (IR) refers to the maintenance of ties between a company and its actual or potential shareholders. It includes all measures designed to create long-term loyalty among shareholders and to win over potential investors.
= abbreviation for initial public offering (IPO). This refers to the first-ever broad offering of shares to interested investors.
= abbreviation for investor relations (IR). This refers to the maintenance of ties between a company and its actual or potential shareholders. It includes all measures designed to create long-term loyalty among shareholders and to win over potential investors.
An issue is the offering of new securities (equities, bonds etc.), which in Germany generally entails the involvement of banks that form a syndicate with other banks for this purpose.
The issue price refers to the price at which newly issued securities are offered.
Issued share capital refers to the nominal value of all issued shares of a company (AG). Under German law (section 272 (1) sentence 1 HGB), the liability of the company for all debts and obligations incurred vis-à-vis shareholders is limited to this amount.
Company or entity that offers (issues) securities for the purpose of raising capital, e.g. federal and state governments, banks, industrial companies etc.
An issuing prospectus is a disclosure document published by the issuer of new securities. It describes the economic and legal situation of the issuer, as well as providing details about the planned securities offering. This is meant to allow investors to inform themselves with respect to the rights conferred by the securities as well as the assets, earnings and future outlook of the issuer.
An issuing syndicate is a (temporary) grouping, particularly of banks (underwriting banks), meant to spread the risk in connection with major financing transactions. In recent times, such consortia are formed mainly for the placement of securities.
Underwriting business involves the execution of transactions by a syndicate of banks under the leadership of one bank known as the lead manager. Such transactions are allocated among the participating banks based on an underwriting quota.
The management report is part of the annual report for medium to large companies as well as listed companies and groups. It is meant to provide an overview of the economic performance (past) and the overall situation of the company (future-oriented). Moreover, the information function of the annual report is supported by the supplementary, particularly future-oriented, information in the management report with respect to the balance sheet, income statement and notes. The statutory basis derives from sections 289 and 315 HGB, more closely defined by the DRS accounting standards and the provisions of the Securities Trading Act (WphG).
Market capitalization describes the market value of a listed company. It is calculated as the total number of shares of a company multiplied by the prevailing share price. High market capitalization is the goal and/or the result of value-based management.
Market capitalization describes the market value of a listed company. It is calculated as the total number of shares of a company multiplied by the prevailing share price. High market capitalization is the goal and/or the result of value-based management.
The market value is the value of a security based on its trading price. It is to be differentiated from the nominal price/value of a security.
The Mid Cap Dax (MDAX) is a German share index, launched on 19 January 1996. It comprises 50 shares of traditional, non-high-tech industries, which follow behind the DAX with respect to market capitalization and trading turnover. The MDAX thus reflects the price performance of equities from mid-sized German companies or companies active primarily in Germany (mid caps).
The Mid Cap Dax (MDAX) is a German share index, launched on 19 January 1996. It comprises 50 shares of traditional, non-high-tech industries, which follow behind the DAX with respect to market capitalization and trading turnover. The MDAX thus reflects the price performance of equities from mid-sized German companies or companies active primarily in Germany (mid caps).
Short-term loans are traded on the money market. More specifically, the money market is the marketplace for central bank funds and money market instruments. The main players in the money market are banks.
The Neuer Markt was an exchange segment for young und upcoming companies in and outside of Germany. The NEMAX All Share index tracked the performance of all shares traded on the Neuer Markt. In July 2009, the NEMAX 50, which tracked the 50 most liquid shares, was launched by Deutsche Börse to provide a better overview of the market. The Neue Markt was closed by and the NEMAX indices were discontinued by the operator, Deutsche Börse, after the collapse of the tech bubble.
New issue is the term of initial placement of a new security in the capital market. New issues are usually executed through the cooperation of several banks in an issuing syndicate. The proceeds from the issue generally go to the company for purposes of investment, or to the existing shareholders.
No-par value shares do not represent a set amount of a company’s share capital, but rather a percentage. The proportion is not marked on the share certificate, as it changes with every capital increase or decrease.
The nominal or par value of a security is the amount printed on the physical certificate (in units of currency). In the case of equities, the nominal value is a portion of the total share capital of the stock corporation (AG).
The Official Market is one of the EU-regulated market segments operated by German stock exchanges.
An option is a right to accept or reject a specific, contractually agreed offer (within a defined period).
The term "oversubscription" is used when the number of securities subscribed exceeds the actual number of securities offered in the context of a new issue. The shares are then generally allocated based on a lottery.
= abbreviation for the price to cash flow ratio, which is used for company valuation and indicates the relation between the share price and cash flow per share. The lower the ratio, the more favorable is the valuation of the share.
= abbreviation for the price to earnings ration, which is used to assess the earnings power of the company. In this context, the price of each share is considered in relation to the portion of profit attributable to it (total earnings of the company divided by the number of shares). The lower the P/E, the better the bargain.
Performance refers to the development in the value/price of a security, investment or portfolio during a specific period and in relation to a defined benchmark. The performance of a security reflects the success of an investment and is stated in percent. Performance is often also presented in comparison to the overall market or the relevant sector.
Placement refers to the public sale of securities (on the exchange). The more buyers purchase a newly offered security, the better the placement. A broad diversification of securities is meant to mitigate the risk of a price collapse through sudden selloffs in the market.
Preference (or preferred) shares carry no voting rights, but do confer certain advantages to the holder, which can be expressed as dividend rights etc.
The price to cash flow ratio (P/CF) is used for company valuation and indicates the relation between the share price and cash flow per share. The lower the ratio, the more favorable is the valuation of the share.
The price to earnings ratio (P/E) is used to assess the earnings power of the company. In this context, the price of each share is considered in relation to the portion of profit attributable to it (total earnings of the company divided by the number of shares). The lower the P/E, the better the bargain.
The prospectus is published by the company before admission to official trading on an exchange. It informs the public with respect to the fields of business, historical company performance and management / supervisory board membership. It must also present the most recent balance sheet. Moreover, the prospectus entails publication of the securities offering in official stock exchange gazettes and newspapers with “supra-regional” circulation.
The prospectus is published by the company before admission to official trading on an exchange. It informs the public with respect to the fields of business, historical company performance and management / supervisory board membership. It must also present the most recent balance sheet. Moreover, the prospectus entails publication of the securities offering in official stock exchange gazettes and newspapers with “supra-regional” circulation.
Report that is common in the US and generally voluntary in Germany, reflecting the development of revenue and earnings of a company at the end of a given quarter.
Quotation/price quotation is the definition of the official exchange price by the exchange operator or the official exchange brokers.
The term "rating" refers generally to a method for the evaluation of companies/borrowers. The rating can be used to assess the ability of a borrower to service its debt.
The Regulated Market refers to exchange trading in securities with unofficial listing. As an additional market segment, it allows entry into the market with simplified requirements, thus opening the way for companies unable to meet the standards of the Official Market.
The Regulated Unofficial Market, since 2005 also known as the Open Market, is broadly defined as over-the-counter securities trading, and more narrowly specifies the market segment reserved for products that are not approved for trading on the Official or Regulated Market (esp. shares of small companies, certificates, warrants and most securities from foreign issuers).
Return on capital employed (ROCE) is based on the ratio of borrowing costs and profit to total assets. This indicator provides insight into how profitably total capital, comprising equity and debt, is employed in the company’s business.
Return on capital employed describes the ratio of borrowing costs and profit to total assets. This indicator provides insight into how profitably total capital, comprising equity and debt, is employed in the company’s business.
Return on equity (ROE) is an indicator of a company's profitability. It reflects much profit (net income) is generated with the money shareholders have invested.
This indicator reflects the amount of profit generated per unit of invested capital. It is used to assess the profitability of capital investment during a given period, which is an important criterion for performance measurement and analysis.
Road shows are events at which the management delivers a presentation of the company. Prior to an IPO, various cities are visited, where the company is introduced to members of the financial community.
= abbreviation for return on capital employed, which describes the ratio of borrowing costs and profit to total assets. This indicator provides insight into how profitably total capital, comprising equity and debt, is employed in the company’s business.
= abbreviation for return on investment, which reflects the amount of profit generated per unit of invested capital. It is used to assess the profitability of capital investment during a given period, which is an important criterion for performance measurement and analysis.
The SDAX (Small Cap Dax) is an index provided by Deutsche Börse, comprising the 100 most important German companies by market capitalization, following behind the companies of the DAX and MDAX.
Share capital refers to the initial value of shares issued by a stock corporation (also known as nominal capital). For a shareholder, share capital is based on the relation between the nominal amount of the shares held and this amount.
The share capital of a company is the sum of the nominal values of all ordinary and preferred shares.
A shareholder is the owner of equity shares in a stock corporation. Thus, the shareholder is part owner of the company, with all rights and obligations defined in the Stock Corporation Act (Aktiengesetz – AktG).
Based on the principle of shareholder value is a management concept that focuses business decision making on the success of the shareholders. Investor-friendly information policies, above-average return on equity over the long term and a targeted corporate strategy centered on the core competencies of the company are the key elements of the approach.
This is the price for securities, the price of which is quoted only once per trading day. In official trading in Germany, all orders not cleared in variable trading are settled at the standard quotation (spot price).
Standard & Poor’s is one of the leading rating agencies for the assessment of companies. They evaluate issuers based on the probability that they will be able to satisfy their interest and principal payment obligations, and group them in rating classes accordingly.
= spot price. This is the price for securities, the price of which is quoted only once per trading day. In official trading in Germany, all orders not cleared in variable trading are settled at the standard quotation.
= the Aktiengesetz defines the legal status of a German stock corporation (AG) and contains all provisions relevant to the structure, the decision-making bodies, the supervisory boards etc.
Stock options and warrants grant the holder a right to buy (call) or sell (put) a specific quantity of a share at a predefined price (strike price) within a certain period or at a specified time.
Subscription refers to participation in the purchase of securities in the context of a new issue prior to initial trading at the nominal price. The term is also often used in relation to closed-end funds or alternative investments, which are not traded on an exchange, but rather acquired by investors through subscription after a statement of intent.
A syndicate is a temporary association of banks, companies or business people for the purpose of a specific transaction. Rights and obligations among the syndicate members are defined in a syndicate agreement.
The bank that places the issued securities or a portion thereof with interested investors.
An underwriting syndicate is usually an issuing syndicate. In this case, the syndicate purchases the entirety of the issued securities. Then, the securities are place in the market. Any remaining holdings are taken into the holdings of the syndicate and placed at a later time.
= United States Generally Accepted Accounting Principles. These are the accounting rules for financial statements and annual reports applicable in the US.
Venture capital is equity financing provided to a company by specialized companies and funds. In this way they often participate in young companies with promising growth prospects, becoming temporary co-owners.
Volatility defines the average extent of past fluctuations in securities prices and currency rates as well as exchange rates. Calculation of the various volatility coefficients is based, for instance, on standard deviations.
Every shareholder has a statutory right to vote at the annual general meeting. The number of votes that a single shareholder is entitled to exercise is based on the nominal value of the shareholdings. Shareholders may also permit the exercise of their voting rights by third parties, such as banks or associations of shareholders.
The Wertpapierkennnummer (WKN) is a six-digit German securities identification code for unique identification of a security to foster trading. Different numeric ranges are reserved for certain types of security, e.g. 100 000 – 199 999 for German federal, state and local government bonds, 500 000 – 789 999 for industrial stocks.
= abbreviation for Wertpapierkennnummer (WKN), the six-digit German securities identification code for unique identification of a security to foster trading. Different numeric ranges are reserved for certain types of security, e.g. 100 000 – 199 999 for German federal, state and local government bonds, 500 000 – 789 999 for industrial stocks.
XETRA (Exchange Electronic Trading) is an electronic system for over-the-counter trading of high-volume securities. It replaced the IBIS trading system at the end of 1997. Unlike floor trading, trades are processed via a central, open order book.
The return/yield on a security refers to the gain in the value of a security based on the market price.