Investors:
Security:
- A tradable financial asset. It represents ownership in a corporation via stock or a creditor relationship with a corporation or government entity via owning bonds or rights to ownership.
Dividend:
- A distribution of a portion of a company’s earnings to certain classes of its shareholders. Common shareholders of dividend-paying corporations are paid dividends if they own the stock by the ex-dividend date. Dividends may be paid out as cash or as additional stock in the company.
Diversification:
- A risk management strategy that mixes a variety of different asset types (real estate, stocks, bonds, etc.) in order to limit exposure to any single asset or risk. This strategy is built on the rationale that a diversified portfolio will, on average, have higher long term returns and lower risk than holding an individual holding or security.
Inflation:
- A quantitative measure of the rate at which the general prices for goods and services are rising and in turn the purchasing power of currency is falling.
Initial Public Offering (IPO):
- The process of offering shares of a private corporation to the public market in a new stock issuance for the first time. Public shares allow companies to raise capital from public investors.
KYC:
- The standard in the investment industry that ensures that investment advisors have detailed knowledge of a client’s investment knowledge, financial position and risk tolerance.
Leverage:
- The use of debt to generate returns from an investment or project. Sometimes instead of issuing stock, companies will use debt to invest in themselves and expand their asset base.
Limited Partnership:
- A partnership made up of two or more partners. The general partner runs the business while the limited partners do not help manage the business. The general partner has unlimited liability for the debt, and the limited partners have no liability beyond their total investment amount.
Liquidity:
- The ease at which an asset can be converted into cash without affecting its price.
Mutual Fund:
- A financial vehicle that pools investor funds to invest in securities such as stocks, bonds, money market instruments and other assets. The funds are then allocated to produce income or capital gains for the fund’s investors. The portfolio strategy of the mutual fund matches the investment objectives in its prospectus.
Net Asset Value:
- Represents the net value of an entity and is calculated as the total value of assets minus the total value of liabilities.
Net Income:
- Calculated as sales minus the cost of goods sold, general and administrative expenses, selling expenses, interest, depreciation, taxes and other expenses. Assesses how much revenue exceeds the overall expenses of a corporation.
Net Worth:
- The value of the assets of a corporation or person minus their total liabilities. It’s a good way to gauge a company’s health and provides a snapshot of the current financial position.
Yield:
- The earnings generated on an investment over a period of time. Expressed as a percentage of the original amount that is invested.
Issuers:
Seed Round:
- The first investment a start-up receives. Commonly received from a group of angel investors, friends and family, venture capitalists, incubators or from investors on a platform such as Equivesto. Most seed rounds raise between $100,000 to $2 million.
Series A:
- The next stage of funding after the seed round. Investors look for a solid track record of business success such as consistent revenue and an established customer base. Most Series A rounds raise between $2 to $15 million.
Angel Investor:
- A high net worth individual who provides significant investments in start-ups and small businesses, commonly in exchange for equity in the company.
Issuer:
- A company that issues securities in order to finance its operations and growth.
Capitalization Table:
- A capitalization table keeps track of who owns equity in a company. This includes founders, employees and all investors.
Balance Sheet:
- A financial statement that shows a company’s assets, liabilities and shareholders’ equity at a point in time.
Business Model:
- A company’s plan for achieving profit. This includes the company’s products/services, its target market as well as its expenses.
Business Valuation:
- The process of determining the value of a business or corporation. The valuation can be used to determine sale value, establish partner and investor ownership, etc.
Capital:
- Financial assets that are held in company accounts and funds obtained from financing sources. The three main types of capital include: debt, equity, and working capital.
Due Diligence:
- The examination of financial records, company personnel and company history in order to assess the viability of an investment.
Equity:
- The value that would be returned to a company’s shareholders if all of the company’s assets were to be liquidated and all debts were paid. Equity represents the stake of shareholders’ in the company.
Common Stock:
- Represents ownership in a company. Those who hold common stock, called common shareholders, will have lower priority than preferred shareholders, bondholders, and other debtholders in a liquidation event.
Preferred Stock:
- Represents ownership in a company. Those who hold preferred stock, called preferred shareholders, have a higher claim to asset distribution and dividends than common shareholders.
Discount Rate:
- The rate that is used to discount future cash flows while using the discounted cash flow analysis to determine the present value of future cash flows.
Board of Directors:
- The members of the board of directors have a fiduciary responsibility to protect the interests of the shareholders of a company. The members of the board make major decisions on strategy and personnel and are a key component to all successful companies.
Articles of Incorporation:
- Also known as a certificate of incorporation. It is a legal document that establishes the existence of a corporation. Has to be filed with the governing body for the jurisdiction that the company is operating in.
Account Receivables:
- The money that a company has a right to receive after providing a good or service to a customer.
Cash or Cash Equivalents:
- Current assets that include money, checking accounts and customer checks that still need to be deposited.
Long Term Debt:
- The amount owed for a period that is longer than 12 months. Long term debt can take the form of loans and other obligations that are due in longer than a year from the date of the balance sheet.
Total Assets:
- Anything that a business owns, that has value and can be converted to cash. The two main categories within total assets are current and noncurrent assets.
Revenue:
- The income generated by a business from their normal operations. It is the top line of the income statement that costs are subtracted from in order to determine net income.
Costs of Goods Sold:
- The direct costs that a company incurs in order to produce their goods and services. Includes costs of labour and materials.
Human Capital:
- The economic value of a worker’s skills, education, training and intelligence. It is an intangible asset that is not listed on the balance sheet.
Insider Trading:
- Trading in a public company’s stock by an insider who has non-public information about that stock. Insider trading is illegal and is punishable by fines or jail time.
Internal Rate of Return (IRR):
- The annual rate of growth that an investment is projected to generate.
Non-Disclosure Agreement (NDA):
- A legally binding contract establishes a confidential relationship between two parties. An NDA is common for business relationships because they allow for the sharing of sensitive information without the fear of the information being shared with competitors.
Operating Income:
- The amount of profit made from business operations after subtracting operating expenses such as depreciation, cost of goods sold and wages.
Partnership:
- A formal relationship between parties to operate and manage a business operation and both share in the profits.
Profit and Loss Statement:
- A financial statement that summarizes the revenues, costs, and expenses incurred during a period. Normally created on a quarterly or annual basis.
Prospectus:
- A document that is filed with the securities commission that provides important details about an investment. Investors can use the prospectus to gather information in order to make an informed decision about an investment.
Valuation:
- The process of determining how much a company is worth. The factors that are examined for a valuation can include an analysis of the business’s management, the company’s capital structure, the market value of its assets and the projected future earnings/cash flows.
Venture Capital
- A private equity investor that invests in companies with high potential growth and takes an equity stake in the company in exchange for their investment. Venture capitalists take on a lot of risk due to the uncertainty of early stage companies but with this high risk comes an opportunity to make large returns on their investment.