THE TIMES 100 : The Language of Finance : Don’t let all the fancy jargon throw you off base. Here’s a guide to the investment terms that can help you make an informed choice about where to put your money.

New investors--and new employees--are often thrown by the lingo of finance, a nearly incomprehensible language used by brokers, analysts and accountants to signal what’s happening in corporate America.

While the words are arcane, an understanding of them is vital for anyone who wants to evaluate a potential investment--or the viability of the company where they work.

Now, as companies are making annual reports and proxy statements more available to their shareholders and employees, it may be worth reviewing the important elements of financial jargon, what they mean, which words signal health and which are signs of trouble.

It is worth noting that many financial terms refer to ratios--comparisons between debt and equity, sales and earnings, market price and the value of the company’s assets, for example. These are all considered key figures when stock analysts determine whether a company’s shares are worth buying. However, no one figure is used alone.

Instead, analysts look at an array of signals--return on equity, profit margins, market value as a percentage of book, dividend yields and price to earnings ratios--when seeking a complete picture of a company’s success and its prospects.

They also compare how these figures stack up in relation to past years. Are assets, profits, dividends and market prices rising? Is the company increasing or reducing its debt load? Is the company paying its bills easily with the cash that’s rolling in from sales, or is it forced to borrow to meet day-to-day expenses?

Finally, analysts consider how one company’s finances stack up when compared to other companies in the same industry. If you’re investing--or if you want to know whether your employer is an industry leader or laggard--you should do the same.

Here’s a glossary of valuable financial words and phrases that are likely to figure prominently in analysts’ reports, annual statements to shareholders and in this section and the financial pages of The Times.

Assets: The sum total of what the company owns in property, equipment, inventory and investments before accounting for any debt.

Board of directors: A group of individuals elected by shareholders and charged with looking out for shareholder interests. Members of the board are consulted on matters of great import to the company, but they generally are not given authority over day-to-day operations. Directors usually meet several times a year and are paid for their services. Some directors may also be members of the company’s management team.

Book value: Equity per share--the company’s assets minus debt, divided by the number of shares outstanding. In other words, if the company has $1 million in equity and has issued 500,000 common shares, its book value amounts to $2 per share.

Cash flow: This is how much cash the company has coming in from day-to-day operations compared to the amount it pays out on its bills. Cash flow has little meaning unless proceeded by another adjective. Strong cash flow is good, indicating that the company has more than enough money coming in to cover its debts. Negative cash flow is another way of saying the company is borrowing to pay its monthly bills. Left unabated, negative cash flow is frequently a precursor to two very unpleasant terms: Chapter 7 and Chapter 11.

Chapter 7: A corporate liquidation--that is, closing or selling all operations--under protection of U.S. bankruptcy laws. This means employees are likely to be laid off, suppliers may be left unpaid, and shareholders are likely to see their stock lose its value.

Chapter 11: A corporate reorganization under protection of U.S. bankruptcy laws. This is better than a liquidating bankruptcy because the company plans to stay in business, which means it must continue to make at least partial payments to both suppliers and employees. However, it still spells uncertainty, particularly for shareholders, who get few guarantees in bankruptcy proceedings.

Closely held: A closely held company’s common shares are owned by a small number of individuals. Typically, these shares are not available to the general public. Companies listed in this section are publicly held and trade on exchanges. Much more information is available on a publicly held company.

Controlling shareholder(s): A shareholder or shareholders who have enough votes to determine whether proposals win or lose, regardless of the wants of so-called minority shareholders. Gaining voting control usually requires owning more than 50% of the common stock. However, in some companies where there are two or more classes of stock, controlling shareholders can own less than 50% of the shares and still have voting control. That’s because in dual-class voting arrangements, some shares carry more votes than others.

Debt-to-equity ratio: Long-term debt divided by total equity. This is a snapshot indication of whether the company is overextended. However, companies that are growing rapidly can usually carry a higher level of debt than slower-growing firms, just as individuals who get large raises every year can afford more debt than those who do not.

Dividend: Payments to shareholders, typically at regular intervals (usually every three months). These payments can be made in either cash or stock.

Dividend yield: The value of annual dividends paid to shareholders as a percentage of the company’s current market price. For example: Company X pays $1 in cash dividends each year and its shares sell for $30 each on the New York Stock Exchange. Its dividend yield would be 3.3% of its stock price.

Earnings estimate: Analysts estimate the earnings they believe the company will report next year--and several years into the future--by talking to the company’s management and analyzing its financial reports. These estimates are used by brokers and analysts to determine whether a company’s shares will be worth owning in the future.

Earnings per share: The company’s total earnings divided by the number of shares it has outstanding. A company with $1 million in earnings and 250,000 shares would report earnings per share of $4.

Equity: The value of what the company owns once debts are taken into account. It is similar to equity in your home. If the home is worth $100,000 but you owe $50,000 on the mortgage, you have $50,000 in equity.

Exchange (or stock exchange): The market where the company’s shares are sold. This can be an actual place such as the American Stock Exchange (Amex), the New York Stock Exchange (NYSE), the Pacific Stock Exchange (PSE), where traders shout out their intention to buy or sell various company shares, or it can be the National Assn. of Securities Dealers Automated Quotations (Nasdaq), where shares are bought and sold by computer.

Extraordinary dividend: A one-time payment to shareholders, made in either cash or stock.

Extraordinary item: A one-time profit or loss, usually from the sale or liquidation of a subsidiary that didn’t cut the mustard.

Golden parachute: Contractual severance agreements with executives that would give them large payments--often three to five times their annual salary--if they quit, were fired or demoted following a hostile takeover.

Goodwill: A value given to intangible assets, such as trademark names or company reputation.

Hostile takeover: A company buyout that is completed (or attempted) without the agreement of the target company’s management or board.

Income: Usually refers to a company’s net earnings after taxes. However, it can also be used to refer to pretax income and income “before extraordinary items.”

Initial public offering (IPO): The first-time sale of a company’s shares to the public. The term is also used to refer to the new companies that went public within the past year or so.

Market value: The value of a company based on the selling price of its cumulative shares on the open market. In other words, if the company had 2 million shares outstanding and its shares sold on the New York Stock Exchange for $4 each, its market value would be $8 million.

Market value as a percentage of book: This ratio gives an indication of the company’s selling price compared to the value of its assets. It helps analysts determine whether the company’s stock is overpriced or a relative bargain. However, it can be deceiving in some instances where the value of certain assets--such as goodwill--is hard to quantify.

Poison pill: One of a variety of techniques that companies may use to discourage an unfriendly buyout. These can involve requiring that prized corporate assets be sold to a friendly third party if a takeover succeeds, which would make the remaining company less attractive.

Price-earnings ratio: Comparison of the company’s per-share market price to its current or estimated per-share earnings. For example: Company Y’s shares sell for $10 each and earnings were, or are expected to be, $1 per share. Its price-earnings ratio is 10, or $10 divided by $1. A high PE usually indicates confidence in the future earnings potential of the company. Average PE varies by industry and country, but as a benchmark, many U.S. companies trade at 15 to 20 times earnings.

Privately held: A company that is owned by one or a handful of related individuals. The company’s shares are not available to the general public or sold on any public exchange.

Profit margin: A ratio indicating how a company’s profit compares to its sales or revenue. Generally speaking, the higher the profit margin, the better.

Public company: A company that offers its shares to the general public by listing them on an exchange or offering them for sale over-the-counter.

Over-the-counter: The sale of a company’s shares through computerized trading but not through a formal exchange, such as the Amex or NYSE.

Return on assets: A measure of profitability, usually used for banks and savings and loans, calculated by dividing annual net income by total average assets.

Return on equity: A measure of profitability calculated by dividing annual net profit by total equity. However, this measurement can be deceiving because the smaller the company’s equity, the more profitable it seems.

Revenue: Net sales of goods, products or services.

Symbol (or stock symbol): A three- or four-letter code used by brokers to call up a company’s financial information and stock price. It is used in trading shares.