Foundations glossary

Fifty-eight concepts used across the lessons, explained in context with an educational example.

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Share: A unit of interest in a company's equity, with rights defined by its class and documents.
Example: An ordinary share may carry voting and residual rights.
Shareholder: A person or entity that owns shares under the applicable holding chain.
Example: The shareholder reviews the meeting notice.
Equity: The residual interest in assets after deducting liabilities.
Example: Equity is not the same as cash available for distribution.
Creditor: A holder of a contractual claim against the company.
Example: A creditor generally ranks ahead of the residual shareholder.
Dividend: A distribution approved for shareholders under its stated terms.
Example: The declared dividend is €0.40 per share.
Voting right: A right attached to certain shares to vote on corporate matters.
Example: The ordinary class has one vote per share in this example.
Beneficial owner: The person enjoying the economic interest even when the custody chain uses another record holder.
Example: The intermediary channels the beneficial owner's vote.
Primary market: The channel where new securities are issued and placed.
Example: The offering places newly issued shares.
Secondary market: Trading among holders of securities already issued.
Example: An exchange trade changes ownership of an existing share.
Intermediary: A firm that receives, checks, transmits or executes orders and provides related services.
Example: The intermediary applies its execution policy.
Venue: A system or market where buying and selling interests may meet.
Example: The order is routed to a permitted venue.
Order: An instruction to buy or sell under defined conditions.
Example: The order states security, side, quantity and type.
Execution: A trade formed when compatible buying and selling interests match.
Example: Twenty shares are executed.
Clearing: The process that determines obligations and manages risk before settlement.
Example: Clearing prepares delivery obligations.
Settlement: Delivery of securities and cash to complete a trade.
Example: The trade settles under the market cycle.
Custody: The safekeeping and administration of securities for their holder.
Example: Custody channels a corporate payment.
Bid: The best displayed buyer price at a point in time.
Example: The displayed bid is €9.95.
Ask: The best displayed seller price at a point in time.
Example: The displayed ask is €10.00.
Spread: The difference between comparable ask and bid prices.
Example: The spread is €0.05.
Market order: An order prioritising execution without a price limit.
Example: A large buy crosses several levels.
Limit order: An order setting the worst acceptable execution price.
Example: The limit buy pays no more than €10.10.
Order book: The displayed set of orders or quotes by price and quantity.
Example: The book shows three seller levels.
Liquidity: The ability to trade size promptly with limited price impact.
Example: A shallow book increases execution uncertainty.
Return: Relative change in value over a period under an explicit definition.
Example: Total return includes price and distributions.
Cost: An explicit or implicit amount reducing a trade or investment outcome.
Example: Commission and spread are different costs.
Inflation: A general rise in prices that reduces purchasing power.
Example: Real return adjusts nominal return for inflation.
Diversification: Spreading exposures to reduce dependence on a single risk.
Example: Five issuers do not necessarily create a diversified portfolio.
Corporate action: An issuer action affecting holders' cash, securities or rights.
Example: A dividend is a corporate action.
Ex-date: The date from which ordinary trading ceases to carry an entitlement under applicable rules.
Example: A purchase on ex-date is assessed under the documented rule.
Record date: The record date used to identify positions for an event.
Example: The agent reviews positions on the record date.
Payment date: The date scheduled for distributing cash or securities.
Example: Cash is credited on the payment date.
Split: A proportional change in share count and per-unit reference.
Example: A two-for-one split doubles the units.
Subscription right: A right to subscribe for new securities under stated terms and deadline.
Example: The prospectus sets the ratio and subscription price.
Dilution: A reduction in proportional ownership or a per-share measure after new units are issued.
Example: Not participating may reduce the ownership percentage.
Balance sheet: Statement of assets, liabilities and equity at a date.
Example: If assets are 180 and liabilities are 120, book equity is 60.
Cash flow: Movement of cash classified into operating, investing and financing activities.
Example: A sale can increase revenue before the cash is collected.
Debt: Contractual financial obligation owed to a creditor under defined terms.
Example: A loan may require principal and interest on specified dates.
Gross debt: Financial obligations before subtracting cash or other adjustments.
Example: Bonds and loans may form part of gross debt.
Net debt: Calculated measure that subtracts cash permitted by the definition from gross debt.
Example: Net debt changes if restricted cash is unavailable.
Restricted cash: Cash whose use is limited by contract, regulation or another condition.
Example: Cash pledged as collateral may not be freely available to repay debt.
Convertible: Instrument that may or must convert into shares under defined terms.
Example: The conversion price and ratio determine potential shares.
Non-GAAP or APM: Measure outside the applicable accounting framework that must be read with its definition and reconciliation.
Example: Adjusted EBITDA may exclude items included by the accounting measure.
Filing: Document submitted or published in an official register under a specific obligation.
Example: An annual report and an event filing serve different purposes.
Claim: Testable proposition that should be linked to specific current evidence.
Example: An expected closing date is a claim, not a permanent fact.
Evidence: Source and passage that allow a claim to be checked.
Example: A prospectus table can support the announced consideration.
Provenance: Record of origin, date, version and the link between evidence and claim.
Example: The URL, checked date and superseded document preserve provenance.
Amendment: Later document that changes or supplements another document.
Example: An amendment may move a date without invalidating every other term.
Superseded: Status of a version that is no longer current for the affected claim.
Example: An initial timetable is superseded when an official extension publishes new dates.
Catalyst: Identifiable event that may change information, rights or expectations; it does not guarantee a price direction.
Example: Publication of an offer is a catalyst, not a return promise.
Condition precedent: Condition that must be satisfied or waived before an event can complete.
Example: A regulatory approval may be a closing condition.
Expiry: Time after which an option, offer or instruction is no longer open under its terms.
Example: An acceptance sent after expiry may be invalid.
Settlement event: Milestone when cash, securities or other consideration must be delivered under applicable terms.
Example: Announcement and settlement are different milestones.
Exchange ratio: Number of shares received for each share surrendered in a stock transaction.
Example: A 0.5 ratio delivers half a new share per old share, before fractional-share rules.
Collar: Contractual mechanism that adjusts a ratio or consideration within defined thresholds.
Example: A ratio may remain fixed inside a band and change outside it.
TERP: Theoretical ex-rights price combining old and new share value in a rights issue.
Example: TERP does not predict the actual opening price.
Trading halt: Temporary interruption of trading under the applicable venue or regulator rules.
Example: During a halt, an order should not be assumed executable.
Reconciliation: Systematic comparison of independent records to locate and resolve differences.
Example: Comparing broker trades with custodian positions reveals breaks.
Idempotency: Property by which repeating the same action with the same identity does not duplicate its effect.
Example: Reprocessing the same event should not create two instructions.