E

EARNINGS PER SHARE

This key number expresses the earnings available to shareholders in per share terms – hence the term earning per share. So if a firm makes profits after tax of say £100m and has 50m shares in issue, EPS is £100m/50m or £2. The higher this number the better from a shareholder’s perspective although the overall …

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EBITDA

Earnings before interest, tax, depreciation and amortisation (EBITDA) is a number that some analysts prefer to use as a profits measure when analysing companies. It tries to solve some of the weaknesses inherent in the profits after tax figure. In particular it takes out two of the more subjective costs – depreciation and amortisation of …

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ENTERPRISE INVESTMENT SCHEME

An enterprise investment scheme (or EIS) is a way for those people who want to invest in the shares of risky, young companies tax-efficiently to do so. There are generous income tax, capital gains tax and inheritance tax reliefs available. These are subject to certain criteria which include that the original investment must be held …

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EQUITY RISK PREMIUM

Shares are riskier than say cash balances or government gilts because they are more price volatile and carry a higher overall risk. That means investors should expect to earn a higher return for investing in equities as opposed to something safer. The difference between the return you expect to earn from a relatively low risk …

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EXCHANGE TRADED FUND

Also known as an ETF, this is a fund that gives investors exposure to the movement in an underlying index or sector or commodity without them having to own that underlying asset. Instead the investor owns an exchange traded share that tracks it – one of the earliest ETFs tracked the S&P 500 for example. …

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EXECUTOR

When a person dies someone has to take responsibility for valuing their death estate, paying the relevant inheritance tax and distributing the remaining assets according to the terms of the deceased person’s will. This job – known as probate – is done by an executor, who may typically be a family member or a paid …

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EXECUTION ONLY

Brokers who simply execute trades on behalf of clients and offer no advice are called execution only brokers. This service is generally cheaper than an advisory service but only suited to clients who know exactly what they want to buy and/or are comfortable running a diversified portfolio without support. READ MORE

ENDURING POWER OF ATTORNEY (EPA)

These were documents that gave someone else the power to make decisions concerning your welfare and finances. They have now been superseded by the Lasting Power of Attorney. If you have an existing EPA you may wish to discuss updating it with an advisor. READ MORE

ENTERPRISE VALUE

When valuing a company there are several choices. Stock exchanges tend to quote firms on the basis of their market capitalisation – the number of shares in issue multiplied by the current share price. However this measure doesn’t explicitly consider the impact of a firm’s decision to take on debt finance nor does it consider …

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EUROBOND

When a UK firm borrows sterling from UK investors, it is known as a domestic bond issue. However it is also possible for overseas firms to target Eurocurrencies when borrowing – that is money on deposit outside of its country of origin. For example if a US company wants to raise a euro-denominated loan here, …

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