Finance

Finance

Finance Glossary.
Input Tax:
When a company that is registered for value added tax (VAT) buys goods or services from another supplier, VAT is charged and is currently 17.5% of the purchasecost. This is known as input tax. Similarly, when the company sells its own goods or services it charges its customers VAT at the same rate. This is output tax. Once a quarter, the company has tocomplete a VAT return, giving details of its input tax and output tax.
Preference Shares:
Shares in a company which give their holders an entitlement to a fixed dividend but which do not usually carryvoting rights. The important difference between preference and ordinary shares are:

1.The dividend on ordinary shares is uncertain and variable (high when the company does well, poor or non-existentwhen it does badly). Preference shareholders get a fixed dividend which, if not paid, usually accrues until it can be.

2. Each ordinary share usually carries a vote. Preference shares do not usuallycarry a vote unless dividends fall into arrears.

3. In the event of a winding up, preference shares are usually repayable at par value, and rank above the claims of ordinary shareholders (but behindbank and trade creditors).
Preference shares may be issued with the right of conversion into ordinary shares. These are called convertibles.

Statement Of Account
A document, issued by a supplier to itscustomer, listing transactions over a given period, normally monthly. It will include details of invoices, payments received and any credits approved with a resultant balance payable by thecustomer.

Gearing
The most common use of the term 'gearing' is to describe the level of a company's net debt (net of cash or cash equivalents) compared with its equity capital, and usually it is expressed asa percentage. So a company with gearing of 60 per cent has levels of debt that are 60 per cent of its equity capital. The gearing ratio shows how encumbered a company is with debt. Depending on the...