Earning powerAn assessment of the future profitability of a company based on its discounted present value.
EBITDA (Earning before interest, tax, depreciation and amortisation)It is calculated by taking the pre-tax profit of a company and adding back total interest charges paid on debt, depreciation and amortisation.
Economic book valueAn analysis where company assets are adjusted to match their market value.
Economic entityIn terms of accounting this refers to a method that enables accountants to gain a ‘point of view’ on the different economic events that have influenced their recorded financial records.
Economic lifeSee ‘useful economic life’.
Economically feasibleWhere the benefits and activity are greater than the cost of implementing it.
Effective tax rateCalculated as tax liability divided by taxable income.
Efficient market theoryTheory that states the current price of a share reflects all known information about the company and its future earnings potential, and therefore that is it impossible to beat the market consistently.
Efficient portfolioPortfolio that provides the greatest expected return for a given level of risk, or the lowest risk for a given expected return.
EGM (Extraordinary general meeting)Special meeting of a company and its shareholders that can be called by company directors or anyone with at least 10% of the voting rights.
EIS (Enterprise Investment Scheme)Tax incentive scheme designed to encourage investors to invest in qualifying unquoted companies by offering certain tax reliefs.
Emerging marketsThe stock markets of countries which have a low per head income compared with the developed world.
EmolumentsTotal remuneration of an employee or director which includes salary and bonuses.
Enterprise zoneRegion in which businesses receive special tax advantages as an incentive to set up business there.
EntityIn accounting a seperate economic unit that is subject to financial measurements i.e. corporation, partnerships and trusts.
Entrepreneurs reliefIntroduced on 6 April 2008 allowing relief to be claimed on the first £1 million of gains made on the disposal of all or part of a business, or a disposal of a business’s assets after a business has ceased.
Ex dividendPurchase of shares without entitlement to recently declared dividends.
Ex rightsPurchase of shares without entitlement to current rights issues.
Exceptional itemCosts which materially affect a company’s results which are associated with normal activities.
Excise dutyTax levied on certain products, including alcohol and tobacco, which are produced in the UK.
Exempt items (VAT)Goods and services that are not taxable for VAT. Sale or supply of exempt items prevents an individual or company registering for VAT. Sale or supply of some exempt items and some VATable items means the business is partially exempt and will only be able to reclaim VAT related to the VATable items sold.
Exercise pricePrice at which an option or warrant holder can buy or sell the underlying instrument
Exit strategyThe termination of an individual’s ownership of a business or part of a business’s operation, usually with the aim of recouping the original investment or realising a gain.
Extraordinary itemCosts which materially affect a company’s results which are associated with non-recurring events and not arising from normal activities.