naked
An uncovered position such as the position of a writer of an option which is not covered by an opposite position in the underlying instrument (for example shares, commodities etc).

See also option;
   narrow market
A market in which the trading of shares is only light. Slight movement in activity can result in exaggerated price fluctuations.

See also
   NASDAQ (NASDAQ)
The first electronic stock market, which uses computers and telecommunications to trade shares rather than a traditional trading floor. NASDAQ is owned and operated by the National Association of Securities Dealers (NASD). It is the fastest growing major stock market in the world with well over 5,000 companies listed. Market makers compete to buy and sell NASDAQ-listed stocks of US and non-US based companies via a worldwide computer network for large and small investors.

   national debt
The total debt accumulated by a government through the issue of government bonds, Treasury bills and Treasury notes. The government has to pay interest on its borrowings, and this obligation is one of the major budget items for many governments.

See also balance of payments; gross domestic product; gross national product;
   National Savings

A variety of savings schemes, backed by the government, in which the public can participate. National Savings publishes a booklet entitled 'Investor's Guide' which describes in detail how it operates and the products it offers. The savings schemes currently include:

  • Capital Bonds
  • Income Bonds
  • First Option Bonds
  • Pensioners Bonds
  • Children's Bonus Bonds
  • Investment Account
  • Ordinary Account
  • Fixed Interest Savings Certificates
  • Index Linked Savings Certificates
  • Premium Bonds


See also income bond; gilt-edged stock;
   net
The return on investments, such as savings accounts and fixed interest securities, after deduction of tax.

See also return on investment; gross;
   net asset value (NAV)

The total assets of a company less all its liabilities including loan capital, and preference shares. NAV is usually expressed on a per share basis. For example:

  • assets of a company = £12,000,000, liabilities = £3,000,000
  • number of ordinary shares = 18,000,000
  • NAV per share = (£12,000,000 - £3,000,000) / 18,000,000 = 50p

How relevant is NAV for investors in companies? For people-based businesses it is not particularly relevant. An advertising agency, for instance, would have a very low NAV because it has little invested in plant and equipment, and its profitability is driven by people and ideas. Elsewhere, NAV is interesting to value investors who want to know what underpins a company's share price. If a company has a NAV of 120p and its share price is 100p, there is a 20p cushion.

The most common use of NAV is in assessing the share price of investment trusts - collective funds which invest in other companies. It is fairly easy to calculate the NAV of investment trusts because their assets are for the most part quoted companies. Investment trusts trade at a discount or premium to their NAV.



See also investment trust;
   net assets
The total assets of a company (current assets plus fixed assets) less its current liabilities.

See also assets; current assets; fixed assets; current liabilities;
   net cash flow
Operating cash flow + dividends received from associates - dividends paid to minorities or preference shareholders +/(-) interest received/(paid) - tax paid.

See also operating cash flow;
   net income
Net profit attributable to ordinary shareholders after the deduction of all other charges.

See also gross income;
   net present value (NPV)

A calculation which is based on the idea that £1 received in ten years' time is not worth as much as £1 received now because the £1 received now could be invested for those ten years and compound into a higher value.

The NPV calculation establishes what the value of future earnings is in today's money. To do the calculation you apply a discount % rate to the future earnings. The further out the earnings are (in years) the more reduced their present value is.

NPV is at the heart of securities analysis. Analysts use predictions of a company's future earnings and dividend payments, appropriately discounted back to current value, to establish a 'fundamental' value for the shares. If the current share price is below that value, then the shares are, on the face of it, attractive, If lower, they are 'overvalued'. In practice the analysis is more sophisticated, but it is based on the concept of NPV.



See also discounted cashflow;
   net profit
The gross profit of a company (total turnover of products sold less costs to purchase or manufacture) less all other expenses. When net profit figures are quoted, the author usually makes it clear whether the figure is before or after tax. In company accounts, the word 'net' is often dropped, so that you simply have 'Profit before tax' and Profit after tax'.

See also gross profit; net profit before tax (pre tax profit); net profit after tax;
   net profit after tax
The net profits of a company after taxation. This is the 'bottom line' that you often hear about. Dividends are paid out of net profits after tax, and the amount that isn't paid out is the retained profit.

See also net profit; dividend;
   net profit before tax (pre tax profit)
The net profits of a company before they are reduced by Corporation Tax.

See also net profit;
   net yield
The yield on a security (such as shares, bonds etc) after the deduction of tax.

See also dividend yield;
   neutral
Analysts neither view a share as a buy or sell, expecting instead a performance in line with the sector or benchmark.

   new issue

Strictly, the issue by a company of new shares, enlarging its share capital and often the number of shareholders on its register. But new issue is often used to refer to an Initial Public Offering (IPO) - the process in which a company is admitted to the Official List of the LSE (or to AIM) for the first time and issues new shares to the public as part of that exercise. New issues which are also IPOs can be handled in four ways:

  • as an 'offer for sale' direct to the public at large, where the shares are offered at a predetermined price.
  • as a tender offer, where the public are invited to make an offer for the new shares, and allocations are made on the basis of price.
  • as a private placing to institutions, which effectively means that private investors can only get shares in the secondary market.
  • as an 'Introduction' where the company is admitted without issuing any new shares.


See also flotation; initial public offering;
   New York Mercantile Exchange (NYMEX)
Following the merger with the Commodity Exchange (COMEX) in 1994, the exchange operates two divisions that is, NYMEX which deals in futures and options on a number of products including crude oil, heating oil and platinum and COMEX which deals in futures and options on copper, gold and silver.

See also NYMEX;
   New York Stock Exchange (NYSE)
The world's largest stock exchange with well over 3,000 companies listed and a market capitalisation of trillions of dollars. The NYSE is a truly international exchange, with nearly 400 non-American companies listed.

See also FTSE 100 Index; CAC 40; Dow Jones Industrial Average;
   Nikkei 225
An index of the average value of the shares of 225 Japanese companies which reflects share price movement on the Tokyo Stock Exchange. The index is unweighted so smaller companies can influence the index as much as the larger ones.

See also Dow Jones Industrial Average; FTSE 100 Index; New York Stock Exchange;
   nil paid
A new issue of shares where no payment has yet been made. This normally applies following a rights issue.

See also new issue; rights issue;
   nil paid shares
A company's newly issued shares which can normally be transferred on a renounceable document.

See also renounceable documents;
   no par value (NPV)
The shares of a company which carry no nominal value or par value.

See also par value;
   nominal account
An account kept in a ledger which itemises revenue and expenditure such as sales and operating costs.

See also operating costs;
   nominal value
The price of a security (stocks, shares, bonds etc) when originally issued This bears no relation to the market price. Also known as face value or par value.

   nominee
A person or company nominated by another to hold shares on his behalf. The most common use of nominee accounts is where execution-only brokers act as nominees for their clients. The shares are registered in the name of the broker, but the client has beneficial ownership of them. The advantage of nominee accounts is that they make settlement quicker and more streamlined. In theory, dealing costs should be lower. There are some disadvantages: because the individual isn't the registered owner of the shares, he doesn't get sent company reports and accounts, and can't take advantage of shareholder perks, unless his brokers provides a special forwarding service.

See also execution only broker;
   nominee account
An account in which the named holder holds the assets in it on behalf of another (the beneficiary). In the stock market, the most common use of nominee accounts is where execution-only brokers act as nominees for their clients. The shares are registered in the name of the broker, but the client has beneficial ownership of them. The advantage of nominee accounts is that they make settlement quicker and more streamlined. In theory, dealing costs should be lower. There are some disadvantages: because the individual isn't the registered owner of the shares, he doesn't get sent company reports and accounts, and can't take advantage of shareholder perks, unless his brokers provides a special forwarding service.

See also nominee company;
   nominee company
A company formed by a bank or other organisation which operates nominee accounts that is, the holding of shares for the beneficial owner.

See also nominee;
   non taxpayer
Someone whose income falls below their annual personal tax allowance - £5,035 in the tax year 2006-2007 for individuals under 65 years old. Although technically, non-taxpayers do not have to pay income tax, if some of their income comes from dividends, the cheques they receive will already have had 10% deducted from them. That tax can only be reclaimed if the investments that generated the dividends were held in a Personal Equity Plan (PEP) or Individual Savings Account (ISA). Otherwise, they are lost for good.

See also income tax;
   normal market size (NMS)

When shares are traded on the London Stock Exchange, the market makers have to quote a bid price and and offer price at which they will deal. But the prices they quote, which are disseminated to brokers via the SEAQ system, only have to be honoured up to a certain size of order. The Normal Market Size defines what that figure is for each company and it is based on a percentage of the share's average daily turnover in the previous year.

To understand the point of NMS, you have to remember that some listed companies have hundreds of millions of shares in issue, and some have low thousands. The effect on the share price of someone buying 5,000 shares will be much greater if the company is a small one than if it is a blue chip, and it would be unfair on a market maker if the offer price quoted had to apply to any buy order no matter how large.

The general rule is that quotes on a n SEAQ screen are really only relevant if the size of an order being placed (whether a buy order or sell order) is within the NMS. If it is higher than the NMS, the market maker will not be obliged to deal at the quoted prices.

The NMS system replaced the previous alpha, beta, gamma, delta shares system which was a reflection of the order of the most actively traded shares but had unintentionally become a measure of corporate strength, status and reliability.



See also market maker; liquidity;
   normal trading unit
The normal size of a securities order. A normal trading unit for shares is 100. Also called a round lot. Known as an odd lots where trades of shares are below 100.

See also
   NYMEX
The division of the New York Mercantile Exchange which deals in crude oil, heating oil and platinum futures and options.

See also New York Mercantile Exchange;