Skip to content
PreStreet
Menu

Glossary

101 finance words from IB1: Introduction to Investment Banking, each with a plain meaning and an example.

Chapter 1

What is investment banking?

Commercial bank
A bank that takes deposits and lends money to people and businesses
e.g. Your savings account at a local bank
Investment bank
A bank that helps companies and governments raise money and do big deals
e.g. Advising a company that wants to buy a rival
Universal bank
A bank that does both commercial and investment banking
e.g. JPMorgan, UBS
Client
The person or organisation that hires the bank
e.g. Nestlé hiring a bank to sell one of its divisions
Capital
Money a company uses to run and grow
e.g. Cash raised to build a new factory
Investor
Someone who puts money into a company hoping to get more back
e.g. A pension fund buying shares
Advisory
Giving expert advice for a fee
e.g. Telling a client what price to offer
Fee
What the client pays the bank for its work
e.g. A percentage of the deal's value
Success fee
A fee paid only if the deal actually happens
e.g. Paid when the acquisition closes
Financial markets
Places where shares, bonds and other assets are bought and sold
e.g. The SIX Swiss Exchange, the NYSE
Deal
A transaction the bank works on
e.g. A merger, a share sale, a bond issue

Chapter 2

How companies raise money

Revenue
All the money a company takes in from sales
e.g. CHF 500,000 of coffee sold
Costs
All the money a company spends
e.g. Rent, staff, coffee beans
Profit
Revenue minus costs
e.g. CHF 500,000 − CHF 420,000 = CHF 80,000
Equity
Ownership in a company
e.g. Holding 10% of a startup
Share (stock)
One small piece of a company's ownership
e.g. One Nestlé share
Shareholder
Someone who owns shares
e.g. A pension fund holding Nestlé shares
Dividend
Part of the profit paid out to shareholders
e.g. CHF 3 per share each year
Dilution
Your ownership % shrinks because new shares are created
e.g. Founder goes from 60% to 45%
Debt
Borrowed money that must be paid back
e.g. A bank loan, a bond
Loan
Money borrowed from one lender, usually a bank
e.g. A 5-year bank loan
Bond
A loan split into small pieces sold to many investors
e.g. A 10-year Apple bond
Principal
The amount borrowed
e.g. CHF 100
Interest / coupon
The yearly price of borrowing, as a %
e.g. 3% per year
Maturity
The date the loan must be paid back
e.g. 5 years from now
Default
Failing to pay back debt
e.g. A company that cannot pay its bondholders
Credit rating
A grade for how likely a borrower is to repay
e.g. AAA (very safe) to C (very risky)
Private company
A company whose shares are not on a stock exchange
e.g. Most family businesses
Public (listed) company
A company whose shares trade on a stock exchange
e.g. Nestlé, Apple
IPO
Initial public offering: the first sale of shares to the public
e.g. A startup listing on the Nasdaq
Stock exchange
A marketplace for buying and selling shares
e.g. SIX Swiss Exchange
Prospectus
The official document describing the company for investors
e.g. Hundreds of pages on risks and finances
Roadshow
Meetings where the company pitches itself to investors before an IPO
e.g. Two weeks of meetings in London and New York
Underwriter
The bank that organises the share or bond sale and finds buyers
e.g. Goldman Sachs leading an IPO
Valuation
What a company is estimated to be worth
e.g. "Valued at CHF 2 billion"

Chapter 3

Buying and selling companies (M&A)

M&A
Mergers and acquisitions
e.g. The M&A team advises on deals
Merger
Two companies combine into one
e.g. Two equal-sized rivals joining
Acquisition (takeover)
One company buys another
e.g. Microsoft buying Activision
Acquirer (buyer)
The company doing the buying
e.g. Disney
Target
The company being bought
e.g. 21st Century Fox
Synergies
Extra value created by combining
e.g. Closing one of two head offices
Premium
How much more than the current share price the buyer pays
e.g. Offering CHF 120 for a CHF 100 share = 20% premium
Buy-side / sell-side advisor
The bank advising the buyer / the seller
e.g. Two banks on opposite sides of one deal
Auction
A sale where several buyers compete
e.g. Five companies bidding for one brand
Teaser
A short, anonymous summary sent to possible buyers
e.g. "Swiss food company, CHF 200m revenue"
NDA
Non-disclosure agreement: a promise to keep information secret
e.g. Signed before seeing any real numbers
Due diligence
A detailed check of the target before buying
e.g. Lawyers reviewing every contract
Bid
An offer to buy at a stated price
e.g. CHF 500m for the whole company
Signing / closing
Agreeing to the deal / the deal officially happening
e.g. Closing often takes months after signing
Antitrust (competition law)
Rules that stop deals which hurt competition
e.g. A regulator blocking a merger of two rivals
Hostile takeover
Buying a company against its management's wishes
e.g. Going directly to the shareholders
Cash vs stock deal
Paying the seller in money or with your own shares
e.g. "$95 per share in cash"

Chapter 4

Inside an investment bank

IBD
Investment banking division: the deal advisors
e.g. The team advising on an acquisition
Coverage group
A team that focuses on one industry
e.g. The healthcare group
Product group
A team that focuses on one kind of deal
e.g. The M&A group
ECM
Equity capital markets: share sales and IPOs
e.g. Running an IPO
DCM
Debt capital markets: bond issues
e.g. Selling a company's new bond
Leveraged finance
Loans and bonds for companies that borrow a lot
e.g. Funding a private equity buyout
Sales & trading
Buying and selling securities for investor clients
e.g. A trader buying bonds for a pension fund
Market maker
A trader always ready to buy or sell, earning the small gap in price
e.g. Quoting CHF 99.90 to buy and CHF 100.10 to sell
Equity research
Analysts who study companies and publish recommendations
e.g. A "buy" rating on a stock
Front / middle / back office
Earning revenue / controlling risk and rules / processing trades
e.g. Bankers / risk managers / operations staff
Compliance
The team that makes sure the bank follows the law
e.g. Checking that a trade is allowed
Insider information
Important secret information that could move a share price
e.g. Knowing about a takeover before it is announced
Insider trading
Illegally trading on insider information
e.g. Buying the target's shares before the deal is announced
Information barrier
Rules that keep deal teams apart from traders
e.g. Separate floors and separate computer systems
Bulge bracket
The largest global banks offering every service
e.g. Goldman Sachs, JPMorgan, Morgan Stanley
Boutique
A smaller bank that focuses on advice
e.g. Lazard, Evercore
Middle market
Smaller deals, often under about $500m
e.g. Selling a regional company

Chapter 5

The people and the career path

Analyst
The entry-level job, usually straight from university
e.g. First 2-3 years at the bank
Associate
The level above Analyst, often after an MBA or a promotion
e.g. Checks the Analyst's model
VP / Director / MD
The senior levels that run deals and win clients
e.g. The MD pitches to the CEO
Deal team
The group of bankers working on one deal
e.g. 1 MD, 1 VP, 1 Associate, 2 Analysts
Staffing
Being assigned to deals
e.g. "I got staffed on a new IPO"
Pitch book
The slide deck used to win a client
e.g. 40 slides on why to choose our bank
Financial model
An Excel file that forecasts a company's numbers
e.g. 5-year revenue forecast
Spring week
A short UK program where first-year students try out banking
e.g. One week in London
Summer internship
A 10-week internship, often the main route to a job offer
e.g. The summer before final year
Off-cycle internship
An internship outside the summer, common in Europe
e.g. 6 months starting in January
Return offer
A full-time job offer given at the end of an internship
e.g. Offered at the end of the summer
Superday
The final round: several interviews in one day
e.g. 4 interviews back to back
Fit vs technical questions
Questions about you vs questions about finance
e.g. "Why us?" vs "What is an IPO?"
Networking / coffee chat
Short talks with bankers to learn and get noticed
e.g. A 15-minute call with an alum
Buy-side vs sell-side
Firms that invest money vs firms that advise and sell
e.g. A PE fund vs an investment bank
Exit opportunities
Jobs bankers move to after banking
e.g. Private equity, a hedge fund, a startup

Chapter 6

Valuation and banker talk

Share price
What one share costs right now
e.g. CHF 50
Market cap
Share price × number of shares
e.g. CHF 50 × 10m = CHF 500m
Net debt
Debt minus cash
e.g. CHF 150m − CHF 50m = CHF 100m
Enterprise value (EV)
Market cap + net debt: the value of the whole business
e.g. CHF 600m
EBITDA
Profit before interest, taxes, depreciation and amortisation: a rough measure of operating profit
e.g. CHF 60m
Multiple
Value divided by a profit measure
e.g. EV / EBITDA = 10x
P/E ratio
Share price divided by profit per share
e.g. 20x
Comps
Comparable companies used to judge value
e.g. Valuing a chocolate maker by looking at Lindt
Precedent transactions
Past deals used as price references
e.g. What buyers paid for similar companies
DCF
Discounted cash flow: value based on future cash (taught in IB2)
e.g. Forecasting 5 years of cash
Pitch
A meeting to win a client's business
e.g. Presenting to a CEO
Deck
A slide presentation
e.g. The pitch deck
Mandate
Being officially hired for a deal
e.g. "We won the mandate"
League table
A ranking of banks by deal volume
e.g. Top 10 M&A advisors of 2025
Tombstone
A small trophy or notice celebrating a closed deal
e.g. A glass cube on a banker's desk
Live deal
A deal currently in progress
e.g. "I'm on two live deals"

Educational content, not financial advice.