ASB Securities glossary of terms

Here are explanations of some of the investment and share trading terms you may come across as an ASB Securities customer.

  • Accounts Payable

    A current liability representing the amounts due to suppliers and other creditors.

  • Accrued Interest

    Accrued interest arises when stock is purchased between interest payment dates because the accrued coupon interest has to be paid to compensate the previous owner who foregoes the next interest payment. It takes into consideration the number of days between the last interest payment date and the settlement date. This accrued interest is then paid to the new stockholder when the next coupon payment is due.

  • Active Funds

    Funds that are actively managed with the aim of outperforming the stockmarket by choosing shares which will give the best return.

  • Adjusted Net Profit

    The operating profit after tax and interest, but excluding abnormals and non-recurring items.

  • All Ordinaries

    The main Australian price index, which traces the change in the market value of the top 500 publicly listed companies. 

  • All Ordinaries Index

    The difference in percentage performance between the stock and the overall market. For example, if the stock return is 15 percent and the market return is 10 percent for a given period, then the /- figure will be 15 percent -10 percent = 5 percent.

  • Amortisation

    Like depreciation, amortisation is a non-cash item which is an expense on the profit and loss statement. Amortisation is typically a result of goodwill generated from the acquisition of an asset for more than its book value. This excess amount must be written off over a period not longer than 20 years. Amortisation from "extractive" industries, such as mining, is sometimes due to the carry forward of exploration and development costs, which can be amortised over a period of time, rather than being expensed immediately, if they meet certain conditions set out in the accounting Standards. Amortisation from goodwill can have a distorting effect on earnings if the useful economic life of an acquired asset exceeds the 20-year limit set out in the Standard. This 20-year limit is fairly arbitrary. When looking at earnings, it is useful to check the level of amortisation to see whether it is having a significant impact on the level of profits.

  • Asking Price (Ask)

    A term used to describe the price at which someone is prepared to sell securities. Also known as selling or offer price.

  • ASX

    The Australian Stock Exchange. More about the stock exchange.

  • ASX Sector

    The difference in percentage performance between the company's stock and the Sector or Industry Index. For example, if the stock return is 15 percent and the sector return is 10 percent for a given period, then the /- figure will be 15 percent-10 percent=5 percent.

  • At Market

    The most favourable price a broker can obtain for a client at the time the order is placed when buying or selling securities.

  • Average Annual P/E Ratio

    Calculated on the basis of monthly closing prices and gives an indication of the company's P/E over time. It is measured by dividing the monthly closing share price for that year by earnings per share. Average annual P/E ratios can provide a useful benchmark for comparing the company's current P/E ratio. Companies which are selling for much more than their historical P/E could be overvalued. It is important to bear in mind, however, that other factors can influence the level of P/E ratios. In a low interest rate environment, for example, higher P/E ratios can be sustained.

  • Average Buy/Sell Spread

    The average percentage difference between the last bid and ask price each day. The figure is calculated each day based on all the closing prices for the year in question. The buy/sell spread (also known as the bid/ask spread) is an important indicator of the liquidity of a stock. Typically, large cap stocks trade on low spreads, usually less than one percent. Smaller companies can sometimes trade on much higher percentages. Investors should examine this number carefully for small companies, as the spread will often be a more significant cost than brokerage, and can significantly affect the realisable return on a trade.

  • Bad and Doubtful Debts

    For banks, this is a provision taken from the profit and loss statement to cover problem loans.

  • Bank Acceptances

    For banks, the liability accepted by a bank in an acceptance agreement. This is typically used in letters of credit for the financing of international trade transactions.

  • Bear

    An investor who believes the price of securities will fall. A market pessimist - the opposite to a bull.

  • Bear Market

    A market in which share prices are falling and the volume and value of securities traded are low. (Imagine a large bear clawing prices down).

  • Below Par

    Any security trading at a price lower than its face value or initial value.

  • Beta

    Measures the stock price's sensitivity to fluctuations of the market as a whole. A beta greater than one indicates greater volatility, and a beta of less than one indicates lower volatility, than the market. Using industry betas provides a more stable platform for evaluating risk and is less subject to statistical error.

  • Blue Chip Security

    A share of a company recognised for its ability to make profits and pay dividends in the bad economic times as well as the good - usually a higher priced investment. The highest value gambling chips are blue hence the term.

  • Bond

    A type of loan to an organisation. Bonds will usually be repaid with interest on a set repayment date.

  • Bonus

    A free issue of shares to shareholders on a pro rata basis. For example 1:5 bonus equals, one free share for every 5 shares held.

  • Book Value per Share (net assets)

    Represents what the shareholder owns of the company, after netting total liabilities from total assets. It includes both tangible and intangible assets. It is measured by dividing shareholders' equity by the number of shares outstanding, as of the year end balance date.

  • Boom

    A strong upward phase of the sharemarket or economic cycle.

  • Borrowings

    Long-term debt used to fund the acquisition of assets.

  • Brokerage

    The fee charged for buying or selling your shares.

  • Bull

    A market optimist - the opposite to bear (The bull tosses prices up).

  • Bull Market

    A rising stockmarket.

  • Buyers Market

    A market where supply exceeds demand, which favours the buyer.

  • Capital

    This is the money you start out with - your initial investment.

  • Capital Adequacy Ratio

    For banks, measures the level of capital held by a bank that can be used to withstand any losses resulting from credit risk. The total of risk-weighted assets is shown as a percentage of the capital base.

  • Capital Expenditure per Share

    The amount of cashflow being reinvested in plant and equipment to maintain and grow the company's operations. It excludes investment in acquisitions. It is measured by capital expenditure divided by the weighted average number of shares outstanding during the year.

  • Capital gain

    The profit you make when you sell an investment for more than you paid for it.

  • Capital Raising

    The issuing of equity and debt securities by a company in order to obtain funds.

  • Capital Structure

    Shows the sources of long-term funding for the business. This funding can be either long-term debt, shareholders' equity, or preferred stock, which has characteristics of both debt and equity. The percentage of capital which comes from debt, and from equity, is shown here. This ratio is also known as the debt ratio. Also shown in this section is the annual interest cost of the debt. There is no right or wrong level of debt. The appropriate level will depend on the characteristics of the company and the economic environment. Low levels of debt will reduce the financial risk of a company from the shareholders' point of view, but will also potentially reduce the returns to shareholders because there is less "leverage" or gearing available to boost returns. The things to look for when assessing debt are:

    1. Is there sufficient interest cover to pay the interest costs associated with the debt? 
    2. Is ROE higher than ROC? This shows whether the debt has been a benefit or not to shareholders.
  • Capital value

    The market value of your investment.

  • Cash Assets

    Represents cash on hand, plus short-term deposits, that can be readily converted into cash.

  • Cash Coverage Ratio

    Measures the ability of a company to meet its fixed interest obligations. It represents the net cashflow for the year, divided by the interest paid.

  • Cash per Share

    Net cash from operating activities, divided by the weighted average number of ordinary shares outstanding. Net cashflow represents cash from operating activities. It includes tax, but does not include capital expenditure. Free cashflow can be derived by subtracting capex per share from cashflow per share.

  • Claims Expense

    For insurance companies, the amount paid out to policyholders from claims lodged, after allowing for recoveries.

  • Claims Solvency Ratio

    For insurance companies, the measurement used to determine solvency. The ratio is measured by quoting net assets as a percentage of outstanding claims.

  • Client Advisor

    A person working for a stock broking firm which is a member of the NZSE. He or she advises on buying or selling securities.

  • Client Number

    Please quote your six digit number on any documentation or when telephoning ASB Securities.

  • CHESS - Clearing House Electronic Subregister System

    CHESS is a computerised share subregister system operated by the Australian Stock Exchange. Rather than each company issuing share certificates, share ownership in Australia is recorded electronically - either in the company's own registry or in CHESS.

    When you buy shares, you will be sent a holding statement, much like a bank statement, from the company's registry or from CHESS. If you later sell some or all of your shares, you will be sent another statement showing the new balance. Holding statements are usually sent in the month following the transaction.

    While it is up to you to decide whether to have any shares you buy sponsored by the issuer in the company's registry or by a stockbroker in CHESS, we strongly recommend that you elect to be sponsored by Finclear Execution Ltd. This is mandatory for ASB Securities Discount and Internet clients. Having your shares sponsored by Finclear Execution Ltd has a number of advantages:

    1. You can trade or sell your shares immediately if you are sponsored by Finclear Execution Ltd. With issuer sponsorship, you cannot sell your shares unless you know your Share Holder Reference Number (SRN) and it can take up to six weeks to get your SRN from some companies.
    2. You have only one Holder Identification Number (HIN) for all your shareholdings. With issuer-sponsored shares, you are given a different SRN for each company. A single HIN is easier to remember and, if you change address, you only need to notify us rather than notifying every company that you hold shares in.
    3. You can elect to have Finclear Execution Ltd sponsor you into CHESS simply by filling in the section in the Client Service Agreement when you register as a client.

    If you already have issuer-sponsored shares or any shares sponsored by another stockbroker, you can arrange to have them transferred to Finclear Execution Ltd by faxing or mailing your instructions to us including copies of any holding statements.

  • Combined Ratio

    For insurance companies, the sum of the loss ratio and the expense ratio. This ratio determines the underwriting profit or loss of an insurance company during the financial year. A ratio of over 100 percent indicates an operating loss. Insurance companies generally make only small, or even negative, underwriting profits. They will rely on investment returns from shareholders' and policyholders' funds to provide the major source of revenue. Nevertheless, well managed insurance companies can often sustain a long-term combined ratio under 100 percent. This is particularly desirable.

  • Common Shareholder Number (CSN)

    This is a single shareholder number that is common to all NZ Share Registries for all company listed securities. This number is the way the registry identifies your holding as separate from any other holder.

  • Company Structure and Resource

    ASB Securities is a wholly owned subsidiary of ASB Bank Limited, whose ultimate shareholder is Commonwealth Bank of Australia.

    ASB Securities has been a Member of the New Zealand Stock Exchange since July 1999 and was started following the acquisition of the New Zealand retail operation of Warburg Dillon Read.

    In November 1999, ASB Securities launched site offering even greater convenience to investors. The ASB Securities Internet site is available 24 hours a day, seven days a week, providing customers with a wide range of financial information and services.

    This is continually being expanded to ensure ASB Securities provides a service that is unbeatable for its clients.

  • Contract Note

    Document sent by a NZSE Member Firm to a client confirming the purchase or sale of shares, showing details of price, number and brokerage.

  • Contributing Share

    A share that has not had its par value paid, often associated with limited liability companies. Also called a partly paid share.

  • Cost-To-Income Ratio

    For banks, the non-interest costs divided by the total operating income. This ratio is an important measure of the banks' ability to manage their costs efficiently. It excludes provisions for items such as bad and doubtful debts.

  • Coupon Interest Rate

    The coupon rate is fixed from the date the bond is issued. It represents the original interest rate the issuer agreed to pay to investors. This is payable half yearly or quarterly in arrears and can be mailed directly to the registered holder or direct credited to the holder's bank account. This is not necessarily the return you receive on your investment. The return you receive (yield to maturity) is determined by the premium, or discount you pay for a specified face value of bonds.


    This is a 4-digit number that is associated with your holdings across all NZ Share Registries. The CSN FIN must be quoted as part of the authorisation for sale and transfer of securities.

  • Current Position

    Shows the current assets and current liabilities, which together are known as working capital. These balance sheet items represent short-term capital needed to run the business on a day-to-day basis. The current position can provide some important indicators of a company's short-term health. Generally, a positive level of working capital (current assets, less current liabilities) is needed to ensure sufficient cashflow to fund the ongoing business. Working capital which is too high, however, can be a sign that too much money is being tied up in these assets. For example, inventories might be growing faster than sales, which could lead to problems if they cannot be sold at their stated cost.

  • Customers' Acceptances

    For banks, an acceptance is a guarantee used extensively in international trade to effect payment for merchandise in import/export transactions.

  • Debt Due

    Represents debt which is short term, i.e., due within one year. Forms one part of total debt, the other part being long-term debt.

  • Debt/Equity Ratio

    Ratio of interest-bearing debt to shareholders' equity, as of the last annual report. Shareholders' equity is based on the book value of equity, not the current market value of a company's stock.

  • Deferred Tax

    For property and investment companies, a provision for future taxation liabilities based on the unrealised gains in the company's property or investment portfolio.

  • Deposits

    For banks, the money held by banks on behalf of customers in the form of cheque accounts, savings accounts and the like. Deposits are typically the largest single source of funding for banks.

  • Depreciation

    The amount by which the company's depreciable assets have been written down during the year. Depreciation will be correlated with capital expenditure, but will lag as capital expenditure is gradually expensed in the profit and loss statement. High levels of current capital expenditure will generally be followed up with higher depreciation in future periods, which will lower earnings.

  • Discount rate

    The discount rate to calculate the present value of future earnings and cash flows. It is calculated using a formula known as the Capital Asset Pricing Model (CAPM). The discount rate incorporates a risk-free rate (yield on long-term bonds) and a risk factor for individual stocks, which is calculated by multiplying a stock's beta by a market risk premium. The discount rate is a key driver of stock prices. Small changes will have a significant impact on a stock's current value. When interest rates go up, for example, the stock price will decline because the higher interest rate has increased the discount rate and hence reduced the present value of the company's future cashflows. The discount rate can be thought of as the company's cost of equity based on its individual risk profile. The higher a company's beta or risk profile, the higher the required rate of return to compensate the investor for taking on more risk.

  • Diversified portfolio

    A way of managing risk by mixing a wide variety of investments within a portfolio. More on diversification.

  • Dividend

    A payment from a company to its shareholders. More about dividends.

  • Dividend Pay Date

    The date on which the dividend will actually be paid to shareholders.

  • Dividend per Share (DPS)

    Total dividend for the year, divided by the number of shares ranked for dividend.

  • Dividend Reinvestment Scheme

    An arrangement by which shareholders receive dividends in the form of company shares rather than cash.

  • Dividend Yield

    The average of the actual dividend over the last 12 months, and the consensus projected dividend for the next 12 months, all divided by the current price.

  • Dividend Yield (after tax)

    Calculated by including the effect of tax credits from inputed or franked dividends.

  • Earnings per Share (EPS)

    Earnings attributable to each common share, adjusted for stock splits and dividends. Measured by net income after preference dividend, divided by the weighted number of ordinary shares outstanding during the year. The earnings exclude non-recurring items such as abnormals and extraordinary items. For equity investment companies, the EPS calculation includes the net gain/loss on the sale of long-term investments.

  • Employees

    The number of employees of the company, as reported in the annual report.

  • Equities

    Refers to a security that represents ownership of the underlying assets, i.e. a share.

  • Ex-Dividend Date

    The "cutoff" date for receiving the next dividend. From this date, new shareholders will not participate in the next dividend. The price of a share will typically fall by the value of the dividend on this date, as it will no longer carry an entitlement to receive this latest dividend.

  • Exercise Price

    The price a buyer must pay if exercising an exchange traded option. Also called the strike price. For a company option it is the cost of converting the option to a fully paid share.

  • Expense Ratio

    For insurance companies, a ratio of underwriting and administration expenses to net-earned premium. It is a measure of the efficiency of the company's cost structure, and is part of the combined ratio.

  • Face Value

    This represents the amount to be repaid to the investor at maturity.


    The acronym used by the New Zealand Stock Exchange to describe its screen-trading system which automatically records and settles transactions. Fully Automated Screen Trading and Electronic Registration System.

  • FIN

    The FIN number is a 4-digit number, which is required to access your holdings at the share registry so that your shares can be sold. It should be treated like a PIN number on a bank account and should be kept in a safe place at all times.

  • Fixed Assets

    For banks, assets such as property and equipment which are part of the bank's infrastructure. They are considered non-earning assets because they do not generate interest income. Banks are generally trying to reduce their overheads as much as possible to improve their cost-to-income ratio. Reducing the level of fixed assets, particularly the property assets tied up in the branch network, is one of the primary ways to achieve greater efficiency.

  • Fixed Interest Securities

    Securities such as bonds or debentures which pay a specified rate of interest for a given period of time.

  • Float

    Another term used to describe an IPO.

  • Footsie

    Colloquial name for the FT 100 index, which is the Financial Times Stock Exchange 100 Share Index, it is a major indicator of the state of the UK Sharemarket.

  • Franking

    This figure shows the percentage of the dividend which contains a dividend imputation credit.

  • Gross Earned Premium

    For insurance companies, the amount of premium which is actually earned over the financial year and recognised as revenue. This is calculated before the effect of outward reinsurance premium expenses and other recoveries.

  • Gross Written Premium

    For insurance companies, the measure which represents the total premium accrued during the financial year, before reinsurance premium expenses and other recoveries.

  • Historical Dividend Yield

    The actual dividend over the last 12 months, divided by the current price.

  • Historical Price Earnings Ratio

    The current price, divided by the last actual earnings per share figure.

  • Impaired Assets

    For banks, used as a measure for credit risk. Impaired assets incorporates non-accrual loans less provisions, restructured loans and assets acquired through security enforcement.

  • Imputation Credit

    A credit which shareholders can offset against their income tax liability if the company has already paid tax on its profits.

  • Income Coverage

    Measures the ability of the company to meet its fixed interest obligations. It equals the earnings, before interest and after tax, divided by the interest paid.

  • Income Tax Rate

    Income tax expense, divided by net profit, after abnormal items before income tax. The income tax rate can provide an important indicator of the quality of a company's earnings. After-tax earnings which are based on a low tax rate are usually not sustainable, because they indicate the company is benefiting from tax loss carry-forwards from prior periods, or other tax reduction benefits which are generally not long-term.

  • Index

    A method of measuring the extent to which a variable has changed over time.

  • Inflation

    A gradual change in the value of money over time.

  • Interest-Earning Assets

    For banks, those assets which generate interest revenue. The largest source of interest-earning assets is typically loans to customers. The percentage of interest-earnings assets is an important measure of the productivity of a bank's balance sheet. A high ratio is a positive sign that a large proportion of a bank's assets are generating revenue rather than being a cost. Examples of non-interest-earning assets are fixed assets such as land and buildings.

  • Interim Dividend

    A dividend paid during the year as distinct from one paid at the end. More profitable companies tend to pay dividends twice a year.

  • Inventory

    Represents the value of stocks or goods currently held.

  • Investment Income

    Income earned including dividends, interest and rents received on investments, and any other investment income.

  • Investment Portfolio

    For insurance companies, the distribution of assets by value for the company's investment funds. These are shareholders' funds and do not include other assets, such as investment unit trusts, which are not included in the balance sheet. Because investment earnings are such a significant part of an insurance company's earnings, the asset allocation decisions on investments can play a significant role in the performance of an insurance company. Insurance companies generally have relatively conservative portfolios, with a significant proportion of assets in fixed income investments and cash. The degree to which an insurance company has invested in growth assets such as shares will influence both the likely performance and the risk of the stock.

  • Investments

    Investments held either in companies, property or other entities. Investments listed as current assets are generally those which can readily be liquidated, such as listed shares.

  • Investment Securities

    For banks, assets held in bonds, or other investments.

  • Investment Specialist

    Someone qualified to give you personalised financial advice, based on your circumstances.

  • Investment Yield

    Measured by net investment income as a percentage of the market value of investments at the beginning of the financial year.

  • Issuer

    A company or organisation which applies for an NZSE Listing and issues securities.

  • IPO

    An Initial Public Offering is the first time shares are offered to the public. More about IPOs.

  • Limit Price

    A limit order is an order to buy or sell a stock at a specific price or better.  A buy limit sets the maximum price you are willing to pay and a sell limit sets the minimum price at which you are willing to sell. Setting a limit on your order ensures you do not trade outside a specific price range but it does not ensure that your order will be executed.

  • Listed Company

    A Company whose securities can be bought and sold by the public on the stockmarket that has an official Listing Agreement with the Exchange.

  • Liquidity

    Being able to convert assets into cash easily, quickly and with little or no loss of capital. A liquid market is a market with enough participants to make buying and selling easy.

  • Loans

    For banks, this is generally the largest component of interest- earning assets, and comprises money lent to customers in the form of home loans, business loans and the like.

  • Long-Term Debt

    Any interest-bearing debt not payable within one year. Long-term debt is the other major source of capital for a company beside shareholders' equity. Working capital, which is current assets less current liabilities, can also be a source of funding but is not long-term.

  • Management Expense Ratio

    Management expenses expressed as a percentage of total assets. Expenses include auditor's remuneration, legal and professional fees and manager's fees.

  • Market

    A place for matching buyers and sellers, not necessarily a physical location.

  • Marketable Parcel

    The minimum number of shares or rights needed for a transaction to take place. The number of shares in a marketable parcel is determined by the market price.

  • Market Capitalisation

    The market value of the company's equity capital. This is calculated by multiplying the number of common shares by the current price. Other classes of equity such as preference shares are normally not included, except in certain cases where the shares are "quasi-ordinary."

  • Moving Averages (EMA 1 & EMA 2)

    Moving Averages are the simplest and arguably the most widely employed technical indicator used by analysts. Moving Averages smooth the price data by averaging the previous [x] days closing price. Analysts look for crosses in the price line by the Moving Average line to signal a trading opportunity. The length you choose for the Moving Average generally depends on your investment strategy. Longer Moving Average periods are best for picking long term trends. Conversely short Moving Averages will highlight short term trends. On our charts, you can plot up to two Moving Averages on each chart at any one time. EMA 1 is shown in Green and EMA 2 is shown in Red.

  • Net Assets

    Net assets, or book value, represents the amount of the company a shareholder owns, after netting total liabilities from total assets. It includes both tangible and intangible assets.

  • Net Earned Premium

    For insurance companies, gross earned premium less reinsurance costs and other recoveries.

  • Net Interest Income

    For banks, a measure showing the net difference between interest earned on loans and other investments, and interest paid on deposits and other borrowings.

  • Net Interest Margin

    For banks, indicates profitability in relation to earning assets. It is calculated by dividing net interest income (difference between interest earned and paid) by average interest-earning assets.

  • Net Loss Ratio

    For insurance companies, the ratio of net Incurred claims to net earned premium. It is part of the combined ratio for insurance companies. Net loss ratio provides an indication of the risk profile of the business written by the company, and its ability to manage its claims efficiently.

  • Net Profit After Abnormals

    The operating profit after tax and interest, including any abnormal or non-recurring items. This is the bottom line number which is usually reported by the company and picked up by the financial press. Net profit before abnormals provides a better indication of the long-term earnings trend.

  • Net Profit Before Abnormals

    Eliminates one-off or non-recurring items and the tax effect of these items. Net profit before abnormals provides a better indication of the long-term earnings trend. For equity investment companies, net profit before abnormals includes the net gain/loss from the sale of long-term investment.

  • Net Profit Before Revaluation

    For property trusts, it measures the net profit before abnormal items and the increment or decrement upon the revaluation of investment properties during the financial year.

  • Net Profit Margin

    Profit after tax before abnormal items, divided by revenues. This profit margin includes all depreciation, amortisation, tax and interest charges which are not included in the operating margin calculation.

  • Net Tangible Assets per Share

    Represents shareholders' equity net of intangible assets, converting preference share capital and minority interest, divided by the number of ordinary shares at the end of the period.

  • Net Written Premium

    For insurance companies, calculated as the gross written premium accrued by the insurer, less the cost of reinsurance protection and other recoveries.

  • Nominee

    ASB Securities offers a nominee service where shares are registered in a Nominee account on behalf of the client. All their paperwork including FINs, CSN FINs, CSNs and holder numbers are kept in safe keeping at ASB Securities. This is suitable for clients who wish to be able to sell NZ or overseas shares without having to wait for shareholder details. Nominee Clients are informed of all Corporate Actions. Any decision made by the client is actioned by ASB Securities.

  • Non-Interest Income

    For banks, represents forms of income other than interest, including fees, foreign exchange and securities trading income.

  • NZX

    The New Zealand Stock Exchange. More about the stock exchange.

  • Operating Margin

    Earnings before depreciation, amortisation, interest and tax, divided by operating revenues. Operating margin is a key statistic for industrial and service companies. It shows the underlying profitability of the business before the effects of financing and from new investments. The trend of operating margin is particularly important and can give a good indication of the long-term viability of a given business.

  • Options

    An option to buy securities (usually ordinary shares) at a certain price (exercise price) at a certain date/s (exercise date) in the future.

  • Order

    Instructions issued by a client to buy or sell securities.

  • Outstanding Claims

    For insurance companies, claims received but not yet settled. Can be either a current liability (expected within one year) or non-current (expected to be paid later than one year).

  • Outstanding Claims Provision

    For insurance companies, the amount held in reserve for the future estimated cost of meeting claims that are outstanding at the end of the financial year, less amounts paid, and anticipated recoveries.

  • Outstanding Claims Ratio

    For insurance companies, measurement used to determine solvency, together with the solvency ratio. The ratio is measured by quoting net assets as a percentage of the outstanding claims provision.

  • Passive funds

    Funds, such as TeNZ, which track the performance of the stockmarket without being actively managed. Also called Index Funds.

  • Payout Ratio

    The percentage of net profit paid out as dividends. It is calculated by dividing the total dividend payout during the year by net profit before abnormals. Payout ratio is important for a couple of reasons. First, it gives an indication of the sustainability of a company's dividend. A very high payout ratio means the company does not have a large buffer in annual earnings and may need to cut dividends if earnings fall over time. Second, the payout ratio provides a clue to the growth orientation of the company. A low payout ratio means that the company is reinvesting a larger proportion of earnings in future growth. If the investments are successful it should lead to higher future earnings. If it does not, then the company will be destroying future shareholder wealth.

  • Portfolio

    The various securities held by an investor.

  • Preference Shares

    A share having a claim ahead of ordinary shares to profits and the firms' assets should be wound up or liquidated.

  • Premium Solvency Ratio

    For insurance companies, measurement used to determine solvency. The ratio is measured by quoting net assets as a percentage of net written premium.

  • Price to Book Ratio

    The ratio of the current price per share divided by book value per share. The book value measures the value of the shareholder's ownership in the company, as measured by the last full year balance sheet. The price to book ratio is usually greater than one as the market value will usually exceed the balance sheet value attributed to the assets of the company. This is because assets are generally recorded at their original cost, less any accumulated depreciation. The market, on the other hand, is concerned with the cash-generating ability of the company's assets rather than its historical cost. If an asset can generate returns in excess of its cost of capital, then a premium will be paid for the asset. This premium is the price to book ratio.

  • Price/Earnings (P/E) Ratio

    The current price divided by the average of the last actual earnings per share figure and the projected EPS figure for the next year. The two figures are weighted based on the elapsed time between each period.

  • Price/Earnings Growth Ratio (PEG)

    Ratio of the stock's P/E to its prospective earnings per share growth rate. In general, the P/E should equal the long-term growth rate in percent. A ratio of one is considered to represent fair value and a ratio greater than one indicates a more "expensive" stock. This ratio is a useful high level check to see whether the P/E is justified.

  • Price/Net Asset Backing

    For investment and property companies, this is the latest price divided by the last reported net assets figure. For property companies, the net asset backing is taken from the latest annual balance sheet. For investment companies, net asset backing is reported on a monthly basis. It is reported after tax on realised gains and before tax on unrealised gains. The price/net asset backing ratio is a useful valuation measure. Companies should normally trade at close to their net asset backing, particularly with investment companies where the underlying assets are readily valued. Property companies may deviate more from their net asset value as their underlying property assets are not valued as easily nor as frequently. In both cases, however, it is desirable to purchase these stocks when the price is at a discount to the net asset backing.

  • Pricing

    By applying the bond pricing formula, a cost per $100 of face value can be determined. The formula gives recognition of the market value of a series of future cashflows.

  • Profit

    Normally refers to revenue of a company less expenses and tax.

  • Property

    For property trusts, this is the latest value of the properties owned. Properties are generally revalued every 12 months.

  • Property Expenses

    For property trusts, expenses incurred through the management and maintenance of property investments. It includes property rates and taxes, repairs and management fees and property management fees.

  • Prospectus

    A document issued by a company or fund setting out the terms of its public offering and providing the background of the financial and management status of the company or fund.

  • Provisions

    For banks, the amount held as a liability to cover bad loans. The provision account is replenished through a charge for bad and doubtful debts taken from the profit and loss statement.

  • Quote

    A Quote is the price at which people offer to buy and sell shares to each other. When they match, a market price is generated and the shares traded.

    Our quote table shows the highest buying price (bid), the lowest selling price (offer), the last traded price (last), the difference between the last traded price and the close of the previous day (change), the price the shares opened at today (open), the highest (high) and lowest (low) traded price of that day, and the number of trades (volume).

  • Quote with Depth

    Our quote with depth table shows the volume of shares people want to buy at a given price, and the volume of shares people want to sell at a given price.

  • Realised Gains and Losses

    The realised gain or loss is measured by the difference of the proceeds on the sale of an investment and its market value at year end the previous year, or its cost if it was acquired during the same year.

  • Receivables

    Represents the outstanding balance of the value of goods and services that have been supplied and not yet paid for. It includes pre-payments.

  • Record Date

    The date used in determining who is entitled to a dividend or other entitlement associated with a security. Those on the register on the record date are eligible for the entitlement. The Record Date occurs after the Ex Date. 

  • Reinsurance Cover

    For insurance companies, reinsurance is arranged to protect their net assets in the event of a major loss and to provide capacity to expand their underwriting activities.

  • Rental Income

    For property trusts, income derived from the leasing of properties owned by the trust.

  • Return on Assets (ROA)

    For banks, a measure of the returns generated by the bank's asset base, which includes both interest earning and non-interest earnings assets. It is measured by dividing net profit before abnormals by total assets.

  • Return on Capital

    An evaluation of profit earned in relation to both debt and equity capital invested. It is measured by dividing operating profit after income tax before interest by shareholders' equity and long-term debt. By comparing return on capital to return on equity, investors can determine whether a company's financial leverage has benefited shareholders. If return on equity is higher than return on capital it indicates the company's debt has provided a positive return to shareholders. If the opposite is true it indicates the company's current leverage is reducing returns to shareholders.

  • Return on Equity

    An evaluation of profit earned in relation to equity resources invested (the viewpoint of equity holders). It is calculated by dividing net profit before abnormals by shareholders' equity. By comparing return on capital to return on equity, investors can determine whether a company's financial leverage has benefited shareholders. If return on equity is higher than return on capital, it indicates the company's debt has provided a positive return to shareholders. If the opposite is true, it indicates the company's current leverage is reducing returns to shareholders.

  • Return on Investments

    For insurance companies, the annual return on shareholders' invested funds. It includes both realised and unrealised gains. It does not include investment returns from assets not belonging to shareholders, such as returns from unit trusts managed by the company.

  • Return on Sales (ROS)

    Calculated for a particular industry or geographical segment. Returns are on a pre-tax basis unless otherwise noted. The total ROS figure is the weighted average ROS for all the segments.

  • Revenue

    Sales plus other operating revenue. For industrial and service companies, it excludes non-operating revenue such as interest income.

  • Revenue Breakdown

    The percentage of total revenue for that year attributed to the industry or geographical sector.

  • Rights Issue

    An offer made to existing shareholders to allow them to buy additional shares, usually below current market price. Application money is payable on all rights buy orders. This is added to the cost of the purchase (the brokerage is calculated on the gross amount of the purchase).

  • Sales per Share

    Calculated by dividing operating revenue by the average number of ordinary shares outstanding. Non-operating revenue, such as interest, is not included.

  • Securities

    A generic term used to describe both the equity securities (shares), or fixed interest securities (bonds, debentures). Stock Exchange Indices You will often hear stockmarket reports refer to stock exchange indices e.g. NZSE40 index. Indices track the performance of securities listed on the NZSE Exchange. There are a number of different indices which all give a snapshot of how a certain section of the Exchange is performing. The main indices are:

    • NZSE40 - this is the main index, which measures the value of the shares of the forty largest Issuers listed on the Exchange. The NZSE40 gross index includes dividend payments made by these companies.
    • NZSE10 - this index reflects the movement of prices in the ten biggest companies listed on the Exchange.
    • NZSESCI - (Smaller companies) - this index measures the performance of the smaller Issuers listed on the Exchange. These indices are calculated both in gross and capital form.
    • Capital Index - this index measures the market value of a collection of securities on any given trading day. It is based on securities prices, but does not take into account the extra benefit of dividend payments.
    • Gross Index - this measure includes both the market value of the securities and dividends, i.e. the total return from securities, including imputation credits. There are also indices, which track the performance of companies in the industry Group sectors.
  • Security

    Another term for a bond, share, bank account or term deposit.

  • Segment Performance

    Provides a breakdown of the company's operations by both industry and geographical segment. The importance of each segment to total revenue is shown, as well as each segment's operating profitability (before tax and interest) and its return on allocated assets. When assessing the impact of a new product line or a geographic division, it is important to understand its contribution to overall revenue and profit. A high growth new division which represents only five percent of revenues, for example, will have only a minimal impact on overall earnings per share in the short term.

  • Settlement Date

    The day on which the contract is due to be settled.

  • Share

    A single unit of ownership in a company. More about shares.

  • Shareholder's Equity

    The capital invested from shareholders and from retained profits (i.e., not distributed as dividends). It is measured by adding share capital, reserves, retained profits and minority interest. It is equivalent to book value.

  • Sharemarket

    The market where shares are traded.

  • Shares Outstanding

    The number of ordinary shares issued in the market at the end of the year in question. It is adjusted in the prior year's account for dilutions from relevant capital changes, such as bonus issues, share splits, and rights issues.

  • Share Price Standard Deviation

    For property and investment companies, used as a measure of risk and highlights the variability of a company's stock price.

  • Share trading

    The act of buying and selling shares.

  • Short-Term Money

    For banks, short-term money comprises cash and short-term liquid money.

  • Stability of Earnings Growth (STAEGR?)

    A measure of the stability of the growth of earnings from year to year expressed as a percentage. The maximum figure of 100 percent represents earnings that go up (or down) by the same percentage each year. A low figure means the company's earnings are more volatile and vary significantly from year to year. The stability of earnings growth is based upon fitting an exponential curve to both historical earnings (up to 10 years) and the next two or three years of consensus forecast earnings. More emphasis is placed on the stability of the growth of forecast earnings. Special adjustments are made for negative earnings, for extreme outlines and for earnings near zero. STAEGR is calculated with a minimum of four years of data, two of which can be forecasted earnings per share.

    STAEGR? is a trademark of Dr. John Price

  • Stop Loss

    Indicates that a Sell order should be activated if a stock trades only at the selected price or below.

  • Target

    Indicates that a Buy order should be activated if a stock trades only at the selected price or above.

  • Top 20 Shareholder Ownership

    Represents the percentage of the company's stock held by the 20 largest shareholders . It can provide an indication of a company's liquidity. A high figure will often mean that there is less stock available for trading.

  • Total Assets

    For banks, the total assets as reported in the annual report.

  • Total Consideration

    This is the actual purchase price to be paid by the client and includes the capital value and any accrued interest. It fully reflects the yield to maturity as negotiated. ASB Securities should receive the total consideration before settlement date. Payment can be made by cheque, or by ensuring sufficient funds are available in your ASB Securities Cash Management account. Upon receipt of payment, ASB Securities will complete registration procedures in favour of the client.

  • Total Debt

    Total debt includes both current debt (due within one year) and long-term debt.

  • Total Return

    Measures the percentage increase in the value of a shareholder's investment in the company's shares, assuming reinvestment of dividends. It is calculated on a pre-tax basis.

  • Total Shareholder Return

    The annualised return to shareholders, including all price changes and reinvestment of dividends. It includes the effect of bonus issues and splits. This figure is calculated pre-tax.

  • Turnover

    Turnover is the average number of shares traded per year as a percentage of total shares outstanding. It is calculated on a rolling 12-month basis. Turnover provides an indication of the liquidity of a stock and the general level of interest in a company's equity. Turnover is usually higher in large cap stocks with a significant degree of institutional shareholders.

  • Trend

    The general direction of a share price or market over time.

  • Underwriting Profit

    For insurance companies, the net difference between premium revenue and claims expense, after allowing for reinsurance revenue and expense.

  • Unearned Premiums

    For insurance companies, a liability representing the amount of premium which is not recognised as revenue in the year.

  • Unrealised Gains and Losses

    Represents the increase or decrease on an investment in its current year-end market value, compared to the previous year-end value, or its cost if it was acquired during the current financial year.

  • Volatility

    The ups and downs of a share's price over time.

  • Warrants

    A longer term option which gives the holder a right to buy shares of a Listed Issuer (often different from the issuer of the warrant), at a future time on specified terms.

  • Yield to Maturity

    The yield to maturity is the return (effective interest rate), which you will achieve on your investment if you hold it to maturity. As stock is purchased and sold in the secondary market the yield will differ from the coupon rate as interest rates change. The bond pricing formula assumes in calculating the yield that the coupon interest is reinvested at the yield for the life of the stock.

ASB Securities ASB Securities glossary of terms