Glossary

Paper profit

Represents an assets increase in value whilst it remains on the market and therefore would be realised if it were sold.

Per capita income

A measurement of average income earned for a particular group, usually the population of a country. It is calculated as total income divided by total population of the group.

Performing asset

An asset that generates a positive annual return.

Personal pension scheme

A scheme dedicated to those who are self-employed or are employed but are not members of an occupational scheme. Here they can make their own provisions towards their pension.

Phased retirement

A personal pension plan given in segments allowing the recipient to phase the purchase of annuities or income drawdowns.

Pre-emptive rights

Rights given to existing shareholders entitling them to first refusal on the purchase of shares in a new issue. This allows them to maintain their fractional ownership or stake in the company.

Preference shares

Shares in a company with preferential rights over ordinary shares, usually giving the holder an entitlement to a fixed dividend. Preference shares do not usually carry voting rights but do entitle the holders to any balance of proceeds following the liquidation of a company before ordinary shareholders.

Premium bonds

Bonds offered under the National Savings and Investments scheme which do not pay interest but are instead entered into monthly prize draws. Any winnings are exempt from income and capital gains tax.

Prepayments

Costs paid in advance of the accounting period to which they relate and therefore not recognised in the profit and loss account for the current accounting period.

Present value

See ‘net present value’.

Price earning ratio – P/E ratio

Calculated as the current share price of a company divided by its earnings per share. The ratio is used by investors to assess the expected future growth of earnings.

Profit before tax

A company’s net profit before deduction of corporation tax.

Provisions

A present obligation of uncertain timing or amount arising from a past event.

Prudence concept

Exercise of caution when making judgements or estimates required under conditions of uncertainty, in order to prevent the overstatement of assets and/or understatement of liabilities.

Public limited company (plc)

A limited company permitted to offer its shares to the general public which are usually traded on a recognised exchange such as the London Stock Exchange.