Financial dictionary

An earn-out is an agreed-upon arrangement in a merger or acquisition where the seller receives additional payments from the buyer based on the future performance or results of the acquired company. These payments are often tied to achieving specific financial or operational goals over a set period following the completion of the transaction. The earn-out arrangement helps balance the risk between the seller and the buyer, and it also motivates the seller to continue successfully managing the business post-acquisition.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a financial metric that measures a company's profit before accounting for interest, taxes, depreciation, and amortization. EBITDA provides an insight into a company's operational performance and its ability to generate profit from core business activities without the impact of non-operational costs and accounting practices. This metric is often used to compare the performance of different companies.

An equity fund is a type of mutual fund that invests most of its assets in company stocks. The goal of an equity fund is to achieve investment growth through stock appreciation, either in the form of capital gains (increase in stock prices) or dividends (profit distributions by companies). This type of fund can be focused on specific industries, regions, or company sizes.

ESG (Environmental, Social, and Governance) criteria assess companies based on their environmental, social, and governance practices. Environmental factors relate to a company's impact on the environment, such as greenhouse gas emissions, resource usage, and waste management. Social factors focus on a company's relationships with employees, customers, and communities, including labor conditions, equality, and diversity support. Governance factors concern the way a company is managed, including ethics, transparency, risk management, and leadership. Investors and companies increasingly consider ESG criteria when making investment decisions, as these factors can impact a company's long-term sustainability and performance.

An ETF (Exchange-Traded Fund) is an investment fund that trades on a stock exchange, similar to stocks. ETFs typically contain various assets, such as stocks, bonds, or commodities, and allow investors to buy and sell shares during trading hours. This type of fund provides diversification, as it contains a portfolio of different investments, thereby spreading the risk. ETFs are also liquid, meaning their shares can be traded anytime during the trading day, and they usually have lower fees compared to actively managed funds. There is a wide range of ETFs covering different markets, sectors, and investment strategies.