Financial Glossary
A
American Depositary Receipt (ADR)
Physical certificate proving ownership in one or several American Depositary Shares (ADS). The terms ADS see American Depositary Share and ADR are often used interchangeably. Fresenius Medical Care’s ordinary and preference shares are listed on the New York Stock Exchange (NYSE) in the form of ADR.
D
Days Sales Outstanding (DSO)
Indicates the average number of days it takes for a receivable to be paid. A shorter DSO results in less interest for the creditor and a lower risk of default.
DAX
Acronym for “German stock index – calculated on the basis of the weighted prices of the 30 largest (by market capitalization and market turnover) German stock corporations.
Debt/EBITDA ratio
Important indicator in corporate management. It compares a company’s debt to earnings before interest, tax, depreciation and amortization and other noncash charges.
Dividend
Portion of a company’s profits. The profit to be distributed divided by the number of outstanding shares shows the dividend per share. The dividend is paid to shareholders usually once a year in the form of cash, stock or tangible assets.
E
EBIT (Earnings Before Interest and Taxes)
This is used to assess the company’s earnings position. More precisely, it is the operating result before earnings from financial activities and investments.
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
Corresponds to operative cash flow before taxes.
Economies of scale
Reduction in cost per unit resulting from increased production. Economies of scale can be accomplished because as production increases, the cost of producing each additional unit falls.
F
Free float
The proportion of a company’s listed shares that are freely available for trading. According to the definition of Deutsche Börse, block ownership (as opposed to free float) is considered to be shares held by a shareholder which, cumulatively, make up at least five percent of the registered share capital in one class of share.
K
Kommanditgesellschaft auf Aktien (KGaA)
A German legal form meaning partnership limited by shares. An entity with its own legal identity in which at least one general partner has full liability (personally liable shareholder, or Komplementäraktionär), while the other shareholders have an interest in the capital stock divided into shares without being personally liable for the debts of the company.
M
Market capitalization
Total value of all outstanding shares of a company calculated by the number of shares multiplied by the share price.
O
Operating margin
Earnings before interest and taxes (EBIT) divided by revenues.
Ordinary and preference shares
The capital stock of the Company consists of ordinary and preference shares, both of which are bearer shares. Preference shares are non-voting, but are entitled to a dividend exceeding that of ordinary shares. The distribution of the minimum dividend on preference shares takes precedence over the distribution of a dividend on ordinary shares.
R
Rating
The rating is a classification of the creditworthiness of a company accepted on the international capital market. It is published by independent rating agencies such as Standard & Poor’s, Moody’s or Fitch based on a company analysis.
Return on Equity (ROE)
The Return on Equity is an indicator of company profitability related to the shareholders’ financing.
Return On Invested Capital (ROIC)
The return on a Company’s adjusted invested capital divided by average invested capital. Invested capital consists of current and noncurrent assets plus accumulated goodwill amortization less cash and cash equivalents, deferred tax assets, accounts payable (including those due to related parties), accrued expenses and other liabilities (including income tax accruals).
Return On Operating Assets (ROOA)
EBIT divided by average operating assets. Operating assets consist of cash and cash equivalents, accounts receivable (including those due from related parties), inventories, prepaid expenses and other current assets, noncurrent assets, less noncurrent deferred tax assets and accounts payable (including those due to related parties).
S
Sarbanes-Oxley Act (SOX)
A law aimed at corporations and their auditors designed to improve financial accounting. The intention of SOX is to strengthen the confidence of shareholders and other stakeholders by extending regulations which relate to financial reporting and internal monitoring systems. SOX requirements include strict obligations for a company’s management regarding the provision of complete and correct information. The new and expanded rules apply for all U.S. exchangelisted companies.
Securities and Exchange Commission (SEC)
A federal agency that regulates and monitors the U.S. financial markets.
Share index
Indicates the development of the stock market as a whole and / or of individual groups of shares (e. g. DAX, DOW JONES, STOXX). Share indices act as a guide for investors to help them identify trends in the stock market. The index calculation is based on a weighted value for the average development of the stock corporations that make up the index. Share indices can be calculated as price indices or performance indices.
U
U.S. GAAP
United States Generally Accepted Accounting Principles.
V
Volatility
This means the price fluctuation of a security or currency. Often this is calculated from the form of standard deviation from the share price history or implicit from a price-setting formula.
W
Working capital
Current assets less current liabilities. The higher the working capital, the more secure a company’s liquidity position.