ALTANA

Financial Glossary

The present financial glossary is a general lexicon containing terms related to investment in equities. It has been compiled with the assistance of the German Institute for Share Promotion (DAI). ALTANA assumes no responsibility for the correctness of the entries.

The present financial glossary is a general lexicon containing terms related to investment in equities. It has been compiled with the assistance of the German Institute for Share Promotion (DAI). ALTANA assumes no responsibility for the correctness of the entries.
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Ad hoc publicity

The German Securities Trading Act requires "ad hoc publicity" from the issuers of securities, i.e. the immediate publication of important news relating to the company which might exert a substantial impact on its share price. This is to ensure that price-relevant new items are not familiar only to insiders, who use this edge in terms of knowledge for their own advantage. Such news has to be passed on first of all to the German Supervisory Office for Securities Trading (BAWe) and the management of the stock exchanges, who then decide whether the quotation of the share in question should be suspended.

Aktiengesellschaft - AG (Public limited company)

Companies whose share capital is divided up into individual shares (Shareholder structure of ALTANA AG). The liability of the shareholder is limited to the size of his respective shareholding; the shareholder does not, therefore, with his entire personal assets, as is the case with proprietors of unincorporated partnerships.With listed public limited companies, the shareholder can sell his shares at any time through a bank. The institutions of a public limited company are: the management board, the supervisory board and the general meeting of shareholders. In order to protect shareholders' interests, public limited companies are subject to special publicity provisions. They have to publish their annual financial statements and announced any business developments relevant to their share price (Ad hoc publicity)

Analyst

Securities expert who tries to form as exact a picture as possible of the situation of a public limited company and the price potential of its shares with the aid of technical securities analysis and/or fundamental analysis. Analysts publish their findings and recommendations in the form of reports.

Annual general meeting (AGM)Gathering of the owners of the company. At least once a year, the shareholders of a public limited company assemble for the annual general meeting. At this the supervisory board and the auditors are appointed, resolutions are adopted on the appropriation of the published profit for the year, on capital-raising measures, on changes to the statutes and other fundamental issues; only the AGM is in a position to approve the actions of the supervisory board and the management board.

 

Annual report

The annual report of a public limited company (AG) gives an account of business performance and the current situation of a company. In addition, the annual report presents the financial statements and comments upon them. The annual report is available to all shareholders.

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Balance sheet

Presentation of assets and liabilities, i.e. credit and debit, at the end of a financial year, giving rise to the current asset position of the company. Part of the financial statements.

Bear market

Marked, mostly lengthy phases of falling share prices on the stock exchange. Opposite: bull market

Blue chip

Stock-exchange expression for the share of a major company, especially strong in terms of assets and earnings.

Bond

Like the Pfandbrief (mortgage bond), the corporate bond or the public-sector bond, the normal bond is a fixed-income security. Bonds give their bearer a creditor right. In most cases, they guarantee their bearers constant interest rates and the repayment of a certain amount.

Bonds with warrants attached

Securities which offer their bearer not only a fixed interest payment but also a temporally limited right (option) to subscribe to shares of the company in question. The subscription price and the subscription ratio are laid down before the issue of the bond with warrants attached. Once the subscription right has been exercised, or the option right has been separated from the bond, the bond remains a normal fixed-income security until it is redeemed. Bonds may also be issued with warrants entitling their bearers to subscribe to other bonds.

Book value per share

Equity per share at the end of the financial year. This is arrived at by dividing the shareholders' equity by the number of outstanding shares.

Brokerage fee

Fee charged by the broker who handles a securities transaction.

Bull and bear

The bull is the symbol for rising prices. It stands grazing on the mountain, while the bear, sitting down in the deep valley, represents falling share prices.

Bull market

Marked, mostly protracted rise in share prices on the stock exchange. Opposite: market downturn, bear market.

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Cash flow

Important variable for assessing a company's financial strength. Cash flow is the balance of in-payments and out-payments at a company and explains the changes in cash positions.

Cash-settlement price

For many securities, the price is established once only during the session, rather than continually. At this cash-settlement price, all the transactions are settled which do not specify a price limit or explicitly state this price as the limit. Cash-settlement prices are calculated: a) for securities which are not admitted to trading with variable-price quotations b) for securities admitted to trading with variable-price quotations if the order does not reach the prescribed minimum number of units (e.g. 50 shares).

Certificate and coupon sheet

Every share certificate has a coupon sheet with either 10 or 20 dividend coupons and a renewal coupon (in German: Talon), which entitles the bearer to a new sheet of coupons. Upon presentation of the relevant dividend coupon, the dividend is paid to the shareholder directly by the public limited company, though more usually by the bank. For security reasons, the share certificate and the coupon sheet are deposited in separate vaults by the banks.

Common share

see Ordinary share.

Consolidated profit

The result after income tax in a financial year, excluding the amounts attributable to minority interests.

Consolidation

The consolidated financial statements are prepared as if all the group companies formed a legally uniform company.- All the expenses and income, as well as interim results for raw materials and consumables and all other intra-group transactions are eliminated by offsetting (expense and income items as well as consolidation of interim results.- Holdings in consolidated companies are set off against their equity (consolidation of capital accounts) and- All intra-group assets and liabilities are eliminated (consolidation of debt), as such legal relations do not exist within a single legal person. The summation and consolidation of the remaining items produce the consolidated balance sheet and the consolidated income statement. Convertible bondThe bearer of a convertible bond may convert it in the course of its lifetime into shares at a previously fixed ratio. The development of the share price determines whether the possibility to convert is interesting for the investor. If the conversion right is not exercised, the bond is redeemed upon maturity. Similar: bond with warrants attached.

Custody account

Institution of the banks for managing securities for their customers. Securities may be held for every customer in individual safe custody or, with the approval of the customer, in collective safe custody. The latter is the normal and cheaper form. In both cases, the custody accounts of customers are kept separately from the bank's own portfolio and are not accessible to the bank's creditors.

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The Deutscher Aktienindex (German Share Index) reflects the performance of the 30 most important German shares. Apart from price performance, dividend payments are also taken into account here.
Dividend

Every shareholder has a claim to part of the distributed annual profit - proportional to the size of his shareholding. This part of the profit is known as the dividend (Latin dividere = to divide, distribute).

Dow Jones IndexMost important share index of the Western world. It reflects the price performance of the 30 most significant US equities.
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Earnings per share (EPS)

One of the most important figures in fundamental equity analysis. The after-tax corporate profit achieved within a certain period of time (quarter, financial year) is divided by the average number of shares issued by the company.

Earnings per share = After-tax profit
Average number of shares issued
Earnings per share is used above all to compare different companies from the same industry and for studying the earnings performance of an individual company over time. The abbreviation EPS is widely used. Earnings per share is not identical to the dividend

 

Emerging markets

Collective term for young expanding economies of Latin America, Asia and Africa.

Employee shares

Many companies give their employees the chance to buy shares of their own company. The purchase price is usually below the market price. Employee shares confer the same rights as other shares, but under certain conditions they entail tax privileges. If these tax advantages are to be claimed, the shares have to be left in a custody account for a given period, i.e. they may not be sold during the blocking period without the tax advantages being forfeited.

Equity analysis

In order to make investment decisions easier for investors, experts analyse equities, companies and stock markets. The purpose of equity analysis is, one the one hand, information, on the other forecasting. Fundamental analysis processes key corporate data in order to assess a share, also taking into consideration economic variables such as incoming orders, pay trends and exchange rates. Chart analysis represents a method for analysing price performance for individual shares or a group of shares, in which the prices are presented in the form of a chart and certain developments (formations, trends) become easier to recognise.

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Federal Supervisory Office for Securities Trading (BAWe)

It is the task of the Federal Supervisory Office to monitor the orderly conduct of securities trading. In particular, it is responsible for protecting investors against illegal insider trading (see also www.bawe.de).

Financial result

Difference between financial expenses and income in a financial year. The financial result consists of: result on investments, interest income and other financial result.

Financial statements

The financial statements comprise, among other things, a company's balance sheet and income statement. In a public limited company (AG), these are prepared by the management board, examined by officially authorised auditors and approved by the supervisory board.

Floor

The floor is the trading room of the stock exchange. Dealing is conducted by banks and brokers.

Free float

Shares issued by a public limited company which are not held as permanent investments by major shareholders.

Futures tradingSecurities transactions whose execution is not immediate, but rather at a later date. In Germany, futures trading is handled by the Eurex derivatives exchange.
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German securities code number (WKN)

Equities, bonds, investment fund certificates and warrants quoted in Germany may be unequivocally identified by means of a six-digit securities code number, or WKN. The number for the ALTANA share is 760 080.

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IAS

International Accounting Standards: internationally applicable rules for the external auditing of companies.

Index

Figure expressing changes in certain variables and making possible comparisons, especially of changes in values and prices. An equity index reflects the development of share prices in a sector of the economy or a national market. For the German stock market, indices are calculated inter alia by Deutsche Börse AG, certain banks and various organs of the press. (see also DAX, MDAX, Dow Jones Index).

Insider

In stock-exchange trading, this denotes people who have access to non-public information. It is prohibited to make use of such information for one's own benefit; infringements can be punished by imprisonment or fines.

Investment fund certificates

Term describing certificates which evidence ownership of part of the assets of an investment fund. These assets include, apart from bank balances (liquidity), above all securities, i.e. according to the type of fund, either fixed-income securities or shares, both broadly dispersed.

Investor Relations

Eine zentrale Unternehmensfunktion, die als Informations-und Kommunikationsschnittstelle zwischen den Kapitalmärkten (Analysten und Investoren) und der Unternehmensführung agiert. Investor Relations ist Ansprechpartner für Fragen von Aktionären und Analysten.

IPO

A central function of a company, serving as an information and communications interface between the capital markets (analysts and investors) and the company's management. Investor relations teams answer the questions of shareholders and analysts.

IPO

Abbreviation for initial public offering. Anglo-American expression for stock-exchange introduction.

Issue

Launch of securities by means of a public offering; occurs as a rule through the mediation of a group of banks (issuing syndicate).

Issuer

Companies or authorities which issue securities.

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Limit

To fix a price limit for buy or sell orders of securities.

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Managing board

The managing board or management board (German: Vorstand) is responsible for conducting the business of a public limited company (in Germany: AG) (see also Supervisory board and management board).

Market capitalisation

Stock-market value of a company at a given time. Market capitalisation is based on the share price multiplied by the number of shares issued.

Market capitalisation = share price x number of shares
 
Market downturn

Marked, mostly protracted decline in prices on the stock exchange. Opposite: bull market.

Market value

The price of the share is dictated by supply and demand on the stock exchange.

MDAX

The German midcap index MDAX reflects the performance of the 70 largest listed German public limited companies which come immediately after the 30 DAX companies. ALTANA is one of the largest companies in the MDAX.

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NASDAQ

American computerised stock exchange (National Association of Securities Dealers Automated Quotation System), primarily representing a market for technology companies. In terms of the number of listed public limited companies, it is the largest stock exchange; in terms of market capitalisation, it ranks fourth worldwide.

Net income for the year

Profit after taxes on income in a financial year, including profit attributable to minority interests.

Neuer Markt

see Stock exchange - Neuer Markt.

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Official trading

See Stock exchange - Official trading.

Option

In stock-exchange trading, this refers to the right, against payment of a premium, to buy or sell securities (equities or bonds), for example, within an agreed period at a previously fixed price, without any obligation to do so.

Ordinary share

Name given to voting shares without preference rights to distinguish them from the mostly non-voting preference shares, if a company has issued both types.

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Performance

The performance of a security is determined by its price development, dividend payments and subscription rights for capital increases. It is stated as a percentage figure, with reference to a certain point in time.

Preference share

As a rule, preference (or preferred) shares do not bestow voting rights. By way of compensation, they give their owners other advantages (such as guarantee of minimum dividend, obligation to make subsequent payment of omitted dividends).

Price

The share price quoted on the stock exchange, which is produced by supply and demand, is expressed in currency units (e.g. euros, US dollars) per share. In addition to other factors, the price mainly depends upon the earnings situation of the public limited company and its future outlook.

Price/earnings ratio (PER)

The price/earnings ratio (PER) is the quotient of the current share price and the after-tax annual net profit.

PER = current share price
earnings per share

The lower the PER, the "cheaper" the share. The PER reflects the expectations of investors regarding future earnings growth. The higher the expected earnings growth, the higher the PER. A comparison based on the PER is only really informative for companies from the same sector with similar characteristics (e.g. global positioning) as some sectors traditionally have a far higher PER than others.

Profit-sharing certificate

A security which evidences property rights to a company (as a rule, to shares in the profits and/or the proceeds of liquidation), but does not confer membership rights, and, above all, voting rights.

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Quarterly report

In the USA, an obligatory, but in Germany in most cases a voluntary interim report on the business and earnings performance of a company.

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Registered share

Share that is registered in the name of the shareholder. As a rule, transfer is effected by agreement, delivery and written declaration of assignment (endorsement) on the back of the share certificate. The transfer should also be entered into the share register of the public limited company.In collective safe custody, the new owner is entered into the share register when a new share certificate is issued in his name.

Return

In the case of securities, the earnings - expressed as a percentage of the purchase price - which the security produces annually, with all factors (interest or dividend, price, life to maturity, etc.) taken into consideration. As a rule, therefore, the return is not identical to the nominal interest rate or the percentage rate for the dividend.

Return on equity (ROE)

Quotient of the profit before taxes on income and average equity (pre-tax return on equity) or net income for the year and average equity (after-tax return on equity).

Return on sales (ROS)

Quotient resulting from the pre-tax profit and sales (pre-tax return on sales) or from the net profit for the year and sales (after-tax return on sales).

Pre-tax return on sales = Pre-tax profit
Sales
 
After-tax return on sales = Net profit
Sales
Return on total equity employedThis is arrived at by dividing the sum of the pre-tax profit and interest paid by the average total assets, whereby the total assets correspond to the balance-sheet total.
Return on total equity employed = Pre-tax result + interest paid
Average total assets
 
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Share

The share is a certificate documenting for its bearer a right to a certain amount of the total assets of a company (under Roman law actio = right to a share), The bearer of an ALTANA share (shareholder), therefore, "shares in" the assets of ALTANA, is a co-proprietor. As a result, the shareholder is entitled to vote at the annual general meeting of shareholders and has a right to participate in the corporate profit. His rights are protected by the provisions of the German Stock Corporation Act - Aktiengesetz. If he wishes to buy shares, he places an order to this effect with his bank. The shareholder is no longer issued with the physical share certificates; these are kept as a rule in a central bank custody account.

Share capital

The capital established in the articles or statutes of a company. The statutes also determine the number of units into which the share capital is divided. The company issues shares in the amount of its share capital.

Share index

Share indices present the price performance, or development in the value, of a number of equities. The equities covered are weighted according to certain criteria in each index (see DAX, MDAX, Dow Jones Index).

Shareholder

A shareholder owning ordinary shares (common stock) is a co-proprietor of his company with full voting rights. This means that he has a right to vote at the general meeting of shareholders and also the right to participate in profits and also to information. At the general meeting of shareholders, he can vote on the appropriation of the distributable profit and also on amendments to the statutes and changes in the company's capital. In addition, he is involved in the decision to approve the actions of the supervisory board and the management board. Furthermore, the shareholder has a right to be informed. The annual report, for example, serves the purpose of providing such information

Speculation period

Period which must lie between the purchase and disposal of securities in order that the disposal gains are not liable for tax. In Germany, the speculation period is one year.

Speculative gain

Gain from the disposal of securities within the speculation period. Such gains are liable to tax. If securities are held for a period of longer than a year, any gain realised is tax-exempt. Losses within the speculation period may be set off against the speculative gains.

Stock exchange

The stock exchange is the market (where supply and demand meet) for securities. Stock-exchange trading takes place in certain places in the Federal Republic of Germany at certain times. Germany's stock exchanges are subject to state supervision. The board of directors decides upon the admission of people to stock-exchange trading. Admission to listing for securities is decided by a listing committee which is supervised by the relevant state authority. Several market segments exist on Germany's securities markets:

  1. Official trading
    This market makes the highest demands on companies wishing to raise capital. For a stock-exchange introduction, a detailed prospectus is required, containing exact details on the company. In addition, interim reports must be published and annual accounts in a mandatory newspaper of the stock exchange. Prices are established by the official brokers. Those placing orders have a right to have their orders executed at the established price. Most transactions are conducted in this market.
  2. Regulated Market
    The Regulated Market offers easier access to trading when compared with official trading. The offering prospectus ("company report") may be shorter. The mandatory publication must not necessarily appear in a mandatory newspaper of the stock exchange; rather, it can be made available at the offices of the banks. This relaxation of the rules, and others as well, are intended to offer primarily smaller businesses the opportunity to go public at moderate cost. Trading follows the same rules as official trading.
  3. Unofficial trading
    Here securities are traded which are admitted to neither official trading nor to the Regulated Market. Admission to unofficial trading takes place on individual stock exchanges upon the application of a bank. This is granted on condition that orderly trading is guaranteed. The prices are established by special brokers and published on each trading day.
  4. Neuer Mark
    tThe growth segment. The Neuer Markt (lit.: new market) is a trading segment developed by Deutsche Börse AG, designed above all for young, innovative companies from growth industries. The company has to agree to meet particularly high standards with regard to publicity and the tradability of its share at all times. The shares of the Neuer Markt are admitted to the Regulated Market.
 
Subscription right

The shareholder's right to acquire new shares when his company effects a capital increase. The shareholders may prefer not to exercise their subscription rights and to sell their subscription rights on the stock exchange.

Supervisory board and management board

At the head of a public limited company stand the supervisory board and the management board. The supervisory board is appointed by the general meeting of shareholders and by the employees. The supervisory board itself appoints the management board and advises its members in the management of the company's business. The management board conducts the company's business transactions.

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Tax on speculative profits

Income tax that is levied on all stock-exchange transactions if not more than twelve months (speculation period) have elapsed between the purchase and the disposal of the securities.

Total dividend payment

Distribution to shareholders in respect of the previous financial year, corresponds to the dividend multiplied by the number of shares.Total dividend

payment = dividend x number of shares
 
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US-GAAP

US Generally Accepted Accounting Principles; system of rules and principles for the external auditing of companies, compliance with which is required for a listing on a stock exchange in the U.S.

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Volatility

Band of price fluctuations. If strong fluctuations are registered for a share price, it is said to have a high volatility. For investors, this means the chance of quick and sizeable price gains, but also the risk of equally quick losses..

Voting right

Every shareholder has a statutorily guaranteed voting right at the annual general meeting of shareholders. The number of voting rights which a shareholder possesses is determined by the number of shares in his portfolio. The shareholder may have his voting right exercised by third parties, e.g. his bank or an association of shareholders.

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Working capital

Net current or floating assets, which corresponds to current assets less short-term liabilities.

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XetraAbbreviation for Exchange Electronic Trading.

Computer-based securities dealing system in Germany. All the shares listed on the Frankfurt Stock Exchange, selected warrants and public-sector bonds are traded on Xetra. Trading on Xetra is in direct competition with floor trading.