One of the initial obstacles that I had to overcome was the terms that were used in the financial accounts. I found these to be quite hard to understand and found myself looking them up online on a regular basis, which was fairly time consuming. Therefore I intend to make a note of every term I had difficulty with, alongside a definition on this page.
Dividend Cover – This is the ratio of the company’s earnings over the dividend paid. It can be calculated by dividing the Earnings Per Share (EPS) by the dividend per share. A number under 1 indicates the company is paying out more in dividends than it earns. Ideally I would want a dividend cover of more than 1.5.
Dividend Yield – This is a very useful term and is basically the percentage paid out per share in a dividend to the company’s shareholders per year.
Earnings – This is the amount of profit made during a specific time period and is stated net of any costs or taxes.
Earnings Per Share (EPS) – This is the earnings per each outstanding share and is a good way to compare the earnings on a like for like basis with previous years. There are a number of different definitions for earnings but it is usually taken as the post tax profit.
Income – This is the amount of money received after deduction of all expenses. It is otherwise known as Earnings.
Loss – When total expenses exceed to total revenues, the resultant negative amount is known as a loss.
Profit – This is the amount of money made by a company after all expenses have been taken off. By definition it is always positive, if it were negative it would be known as a loss.
Revenue -This is the amount of money a company receives before any costs are taken off.