JARGON BUSTER: Farmout

Fuel

A farmout is when a company assigns part of an oil, natural gas or mineral interest to a third party to hedge against risk or when the company can’t afford undertaking the operation.

JARGON BUSTER: Junk Bond

This term is frequently bandied about in financial circles and is the colloquial term for a high-yield or non-investment grade bond. More specifically, it is a fixed-income instrument that carries a rating of ‘BB’ or lower from Standard & Poor’s, or ‘Ba’ or below from Moody’s. Junk bonds get their name from the fact that […]

JARGON BUSTER: Sandbagging

This is a term used to describe a nifty tactic employed to conceal or limit expectations of a company’s (or individual’s) position, in order to produce better than anticipated results. As a business strategy, sandbagging is most common when managers cool the expectations of their superiors or shareholders by providing guidance well below what they […]

JARGON BUSTER: Xenocurrency

This refers to a currency that trades in markets outside of its domestic borders. For example, a xenocurrency would be the euro traded in the United States, or the rand traded in Europe. The term is seldom used in markets, probably because of the strong negative connotation of the word ‘xeno’ – especially in the […]

JARGON BUSTER: Inward investments

An inward investment involves an external or foreign entity either investing in or purchasing the goods of a local economy. A common example is a foreign direct investment (FDI), which occurs when one company purchases another business or establishes new operations for an existing business in a country outside of the investing company’s origin. These […]

JARGON BUSTER: Like-for-like sales

This term is used to describe a comparison of the current year’s sales to last year’s sales in a company, taking into account only the activities that were in effect during both time periods. Essentially, like-for-like sales is a method of valuation that tries to exclude any effects of expansion, acquisition or other events that […]

JARGON BUSTER: Unissued stock

As the term suggests, this is stock that a company is authorised to issue but that has never been sold to investors. Unissued stock is usually not a concern for stockholders, except that it presents the possibility of dilution of existing ownership if additional stock is sold in the future. In most cases, there is […]

JARGON BUSTER: Alpha

This is a measure of a stock’s expected return based on the company’s inherent intrinsic value and not as a function of a market. In the calculation of a company’s Alpha, it is assumed that the market if flat. The rise or fall of the share price will not be attributed to the market performance […]

JARGON BUSTER: Beta

This is a measure of the volatility of a stock, also known as systematic risk, in comparison to either its benchmark or the overall market. The calculation of beta assesses how a stock responds to market movements, expressed in numbers 1&2. A beta of 1 means that the stock will move in line with the […]

JARGON BUSTER: Game-changer

In corporate jargon, a game-changer is a company that modifies or changes its business strategy and develops an entirely new business plan. This type of company is innovative and dynamic, and forms a new business strategy in order to compete directly or indirectly with competitors. Essentially, a game-changing firm transforms the way that something is […]