Common Finance Terms

Share Terms

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.

Leave a Reply

Your email address will not be published. Required fields are marked *