Guide to Analysing Companies

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GOVERNMENTS
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Grace period
The time between the granting of a loan and the first repay-
ment of the principal. It is also a period in many loan or in-
surance
contracts during which cancellation of the
contract will not occur automatically, even if a repayment is
overdue.
Greenback
Slang for the world’s favourite currency: the dollar. The expres-
sion arose because the back of US notes is green.
Greenmail
The payment of a sum to a corporate raider as part of an agree-
ment to leave the prey alone. Such agreements, which became
popular in the merger-mad 1980s, are frowned on by most ju-
risdictions where takeovers are possible because they inter-
fere with the smooth working of the capital markets and of
shareholders’ rights. Where such tactics are allowed, they are
usually accompanied by undertakings by the raider not to buy
any more shares in the target company and not to pursue the
takeover attempt for a period of time.
Gresham’s Law
One of the oldest laws in economics, named after Sir Thomas
Gresham, financial adviser to Queen Elizabeth I of England in
the 16th century. Sir Thomas noted that when a currency has
been debased (if, for instance, the metal becomes mutilated)
and a new one is introduced to replace it, the new one will be
hoarded (and thus taken out of circulation) and the old one will
be used for transactions (to use it up). Hence Gresham’s Law:
that bad money drives out good money.
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GRACE PERIOD
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Grey market
Trading in shares in advance of the official start of dealings.
Shares are traded in the grey market before they have been al-
located to investors. They are traded on the basis of “when
issued”, denoted by the letters wi.
Group accounts
The combination in one balance sheet, and one profit-
and-loss account, of the reports of a number of interrel-
ated companies (a group). A group usually consists of a
parent or holding company and several subsidiaries. The
consolidated accounts of a group eliminate intra-group trans-
actions. Anybody looking at the accounts of just one sub-
sidiary would be misled if, say, most of the company’s sales
were with other companies in the group. This subsidiary may
be providing a service or supplying a product only to others
within the group.
Group insurance
insurance obtained by an individual as a member of a group
rather than as a single individual. An insurance company might,
for instance, offer cheaper car insurance to the over-50s (a
group) on the grounds that they drive more carefully and are
therefore less of a liability than the under-30s (another group).
Growth stock
A share in a company whose earnings are growing at a
faster rate than the average for the stockmarket as a whole
and, often, for its industry. Such companies rarely pay divi-
dends, preferring to reinvest the income in order to feed the
machine. So investors must look to capital gain, not income,
for their profit. A growth fund, therefore, is a unit trust