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INVESTMENT STRATEGIES: AN INVESTOR'S PRIMER AND GUIDE
TO THE INVESTMENT STRATEGIES CONFERENCE MAY 22-23

Financial Speak: A Glossary of Words and Terms

May 11, 1999

Here's a glossary of valuable financial words, phrases and terms that are likely to figure prominently in analysts' reports and annual statements to shareholders, as well as in the financial pages of The Times:

American depositary receipt: A receipt issued by a U.S. bank representing shares in a foreign company. ADRs trade like regular stock on U.S. exchanges.

Assets: The sum total of what a company owns in property, equipment, inventory and investments before accounting for any debt.

Beta: The measure of a company's stock price volatility relative to the market. A beta above 1.0 indicates that, on average, the stock rises or falls to a greater extent than the market; a beta below 1.0 indicates movement to a lesser extent than the market.

Board of directors: A group of individuals elected by shareholders and charged with looking after shareholder interests. Members of the board are consulted on matters of great import to the company but generally are not given authority over day-to-day operations. Directors usually meet several times a year and are paid for their services. Some directors may also be members of the company's management.

Book value per share: Equity--the sum of a company's assets minus debts--divided by the number of shares outstanding. In other words, if the company has $1 million in equity and has issued 500,000 common shares, its book value amounts to $2 per share.

Cash flow: How much cash a company has coming in from day-to-day operations compared with the amount it pays out on its bills. Cash flow has little meaning unless preceded by another adjective. Strong cash flow would be good, indicating the company has more than enough money coming in to cover its debts. Negative cash flow, on the other hand, is another way of saying the company is borrowing to pay its monthly bills.

Chapter 7: A corporate liquidation--closing or selling all operations--under protection of U.S. bankruptcy laws. This means employees are likely to be laid off, suppliers may be left unpaid, and shareholders are likely to find their stock losing its value.

Chapter 11: A corporate reorganization under protection of U.S. bankruptcy laws. This is better than a liquidating bankruptcy, because the company plans to stay in business, which means it must continue to make at least partial payments to both suppliers and employees. However, it still spells uncertainty--particularly for shareholders, who get few guarantees in bankruptcy proceedings.

Closely held: All of a company's common shares are owned by a small number of individuals. A closely held company's shares typically are not available to the general public.

Controlling shareholder(s): One or several shareholders who vote in concert and consequently determine whether shareholder proposals win or lose--regardless of the wants of so-called minority shareholders. Gaining voting control usually requires owning more than 50% of the common stock. However, in companies where there are dual classes of stock, controlling shareholders can own less than 50% of the shares and have voting control. That's because in dual-class voting arrangements, some shares get more votes than others.

Debt-to-equity ratio: Long-term debt divided by total equity. This is a snapshot indicating whether a company is at risk of becoming financially overextended. Companies that are growing rapidly can usually carry a higher level of debt than slower-growing firms.

Dividend: Payments to shareholders that typically come at regular intervals--usually once every three months. These payments can be made in either cash or stock.

Dividend yield: The value of annual dividends paid to shareholders as a percentage of the company's current stock price. For example: Company X pays $1 in cash dividends each year and its shares sell for $30 each. Its current dividend yield would be 3.3%.

Dollar-cost averaging: A system of putting equal amounts of money into an investment at regular intervals to lessen the risk of investing a large amount at an inopportune time.

Earnings estimate: Financial analysts estimate the earnings they believe the company will report next year and several years into the future by talking to the company's management and analyzing the company's financial reports. These estimates are used by brokers and analysts to determine if a company's shares will be worth owning in the future.

Earnings per share: A company's total earnings divided by the number of shares it has outstanding. A company with $1 million in earnings and 250,000 shares would report earnings per share of $4.

Equity: The value of what the company owns once debts are taken into account. It can be compared to home equity: If the home is worth $100,000 but you owe $50,000 on the mortgage, you have $50,000 in equity.

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