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You are Here : Home > Investor Education > Glossary

Glossary to investment terminology : E

 
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Earnings per Share
This is the portion of a company's profit after tax that is allocated to each ordinary share. It is calculated by dividing the net profit by the number of ordinary shares. It serves as an indicator of the company's profitability and is considered the single most important variable in determining a share's price.

Earnings Yield
This is the net profit after tax of a company divided by the total market price of its shares.

Eating Stock
Eating stock is when you purchase shares because you are forced to do so and not because you desire to purchase it.

Eligible Securities
These are shares, debentures and bonds which banks will accept as collateral for loans. Most of the shares listed at the Nairobi Stock Exchange are eligible securities.

Employee Share Ownership Plan (ESOP)
It is a program that facilitates the acquisition and distribution of a company's shares to its employees. The employees remain focused on company performance and share price appreciation. These plans are believed to encourage employees to do what's best for shareholders since they are themselves shareholders.

Encumbered Securities
These are the securities that are owned by one party but are subject to a legal claim by another party. This normally happens when the securities are used as collateral for borrowing.

Equity Financing
This is when a company raises money from the capital markets by issuing securities such as shares. The investors purchasing these shares become shareholders and receive ownership interests in the company.

Equity Market
It is also known as the stock market. It is the market in which shares are issued and traded either through the stock exchange or over the counter markets. It is vital in any market economy because it provides an avenue through which companies can raise capital and gives the investing public an opportunity to own a slice of these companies. It can be divided into two. There is the primary market where new issues are first offered e.g. the initial public offerings. And the secondary market where all subsequent trading takes place at the Nairobi Stock Exchange.

Equity Market Capitalization
This is the total market value of an equity market. It is calculated by adding up the market capitalization of all the listed companies in the equity market. It is used to measure the increase or decrease of the size of the market as a whole.

Equity Shareholders
These are the owners of a company sharing in its risks, profits and loss. They are paid a share of the company's profits in proportion to their shareholding after all other claims have been met. In the event of the liquidation of a company they share whatever is left of the company after all its creditors have been paid. Only equity shareholders are allowed to vote in the company's meetings.

Ethical Investing
This is investing that is guided by one's ethical principals and not by financial considerations. One may choose to invest heavily in companies that conform to his/her ethical guidelines and decline to invest in companies in certain industries like gambling, alcohol, tobacco.

Ex Dividend
This means without dividend. The holder of shares purchased ex dividend is not entitled to an upcoming already declared dividend, but is entitled to future dividends.

Ex Right
The holder of shares purchased ex rights is not entitled to an upcoming already declared rights issue, but is entitled to future rights issues.

Exchange
See Stock Exchange

Extra Dividend
An extra dividend is also referred to as a special dividend. It is a dividend paid out to shareholders in addition to the regularly established dividend they receive from the issuer.

Extraordinary General Meeting
This is any general meeting other than the annual general meeting called to seek shareholders' consent on urgent issues. These issues could be the removal of an executive, a takeover, amalgamation, induction of a new director into the board or even large scale borrowing.