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Financial glossary
The terms behind every number on our company pages, explained in plain English, with formulas and live examples from the Pakistan Stock Exchange.
A
- Asset turnover
- Asset turnover is revenue divided by total assets: how many rupees of sales each rupee of assets generates.
B
- Book value per share
- Book value per share is shareholders' equity divided by the number of ordinary shares outstanding.
C
- CAGR (compound annual growth rate)
- CAGR is the steady yearly growth rate that takes a figure from its starting value to its ending value over a number of years.
- Current ratio
- The current ratio divides current assets by current liabilities: a measure of a company's ability to meet its bills over the next year.
D
- Debt to equity
- Debt to equity compares a company's total borrowings with its shareholders' equity.
- Dividend per share (DPS)
- Dividend per share is the total cash dividend a company declares for a fiscal year for each ordinary share.
- Dividend yield
- Dividend yield is the annual dividend per share as a percentage of the share price: the cash return from dividends at today's price.
E
- Earnings yield
- Earnings yield is earnings per share divided by the share price, the inverse of the P/E ratio, expressed as a percentage.
- EBITDA
- EBITDA is earnings before interest, tax, depreciation and amortisation: a rough measure of the cash profit of operations.
- Enterprise value (EV)
- Enterprise value is the market value of a company's shares plus its debt minus its cash: the price of the whole business.
- EPS (earnings per share)
- Earnings per share is a company's profit attributable to ordinary shareholders divided by the average number of shares in issue.
- EV/EBITDA
- EV/EBITDA divides enterprise value by EBITDA, a valuation multiple that is neutral to how a company is financed.
F
- Free cash flow (FCF)
- Free cash flow is the cash generated by operations minus capital expenditure: cash available for dividends, debt repayment or growth.
G
- Gross margin
- Gross margin is revenue minus the direct cost of the goods or services sold, as a percentage of revenue.
M
- Market capitalisation (market value)
- Market capitalisation is the share price multiplied by the number of shares outstanding: what the stock market values the company at.
N
- Net debt and net cash
- Net debt is total borrowings minus cash and short-term investments; when cash exceeds debt the company has net cash.
- Net profit (profit after tax)
- Net profit is what a company earns after all costs, finance charges and taxes; the part attributable to shareholders excludes minority interests.
- Net profit margin
- Net margin is net profit as a percentage of revenue: how much of each rupee of sales ends up as profit.
O
- Operating margin
- Operating margin is operating profit, before finance costs and tax, as a percentage of revenue.
P
- P/B ratio (price-to-book)
- Price-to-book compares a share's price with the book value of shareholders' equity per share.
- P/E ratio (price-to-earnings)
- The P/E ratio is a share's price divided by its earnings per share: how many rupees investors pay for each rupee of annual profit.
- Payout ratio
- The payout ratio is the share of a company's earnings paid out as dividends.
R
- ROA (return on assets)
- Return on assets measures annual profit as a percentage of the company's total assets.
- ROE (return on equity)
- Return on equity measures a company's annual profit as a percentage of its shareholders' equity.
T
- TTM (trailing twelve months)
- TTM figures add up the last four reported quarters, giving a full year of results that is more recent than the last annual report.