Equity
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
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[ + ] Above par
Above par means current price above face value.
[ +
] Absolute priority rule
It is the rule, which gives priority to creditor to get their payment back before
the payment is made to shareholders of the company in the case of liquidation or
reorganization of the company.
[ + ] Acid-test
ratio
It is the ratio of
current assets minus inventories divided by total current
liabilities. It is also called Quick Ratio. It measures the ability to meet current
debts with most – liquid current assets.
[ + ] ADR
ADR is an abbreviation of American Depositary Receipt. It is a negotiable instrument
issued by U.S stock exchange, which paves the way to Americans to invest in foreign
companies. There are various Indian companies that have issued ADRs in US market.
[ + ] Alpha
It is the coefficient measuring the risk-adjusted performance, considering the risks
that are specific to the security, rather than the overall market. A large alpha
indicates that the stock has performed better what would be predicted given its
volatility.
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[ + ] Basket
Basket symbolizes a group of stocks formed to do simultaneous buying and selling
of all stocks in the Basket usually to perform index arbitrage or a hedging program.
[ + ] Bearer
share
Bearer share is a negotiable share, which is the asset of the person who possesses
it at any given time. It is on the name of the bearer & not in the name of a
particular person. The issuing company does not maintain any record of ownership
of such share.
[ + ] Below par
Below par means having current price below the face value.
[ + ] Best ask
Best ask means the lowest price of the order a seller is ready to accept at a given
time for a given security.
[ + ] Best bid
Best bid means the highest price of the order a buyer is ready to pay at a given
time for a given security.
[ + ] Beta
Beta is a quantitative measure of a stock’s volatility relative to the market. If
Beta of any stock is more than 1 then it is more volatile in respect of the market
and is supposed to be riskier than the market portfolio. If the Beta of any stock
is less than 1, then it is less volatile in respect of the market and is supposed
to be less riskier than the market portfolio.
[ + ] Bid
Bid is the Price at which broker or a dealer is willing to buy stock.
[ + ] Bid size
Bid size is the number of share a broker or a dealer is willing to purchase in the
stock.
[ + ]
Blue Chip Stocks
Large, credit-worthy company well known for the quality and wide acceptance of its
products or services and its ability to make money and often pay dividends.
[ + ] Buy Back
Companies, which have surplus of cash to invest, can offer to buy back shares from
shareholders, thereby investing back into the company.
[ + ] Buyer
The investor who wants to purchase security and has placed the order to that effect.
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[ + ] Call price
The price at which an issuer may redeem a bond or a preferred stock is called
Call price. It is also known as Redemption Price.
[ + ] Capital Asset Pricing Model
A Model that describes the relationship between risk & required return. In this
model a security required rate of return is the risk free rate plus a premium based
on the systematic risk of the security.
[ + ] Cash cycle
The length of time from the actual outlay of cash for purchase until the collection
of receivables resulting from the sale of goods or services.
[ + ] Cash
dividend
Cash distribution of earning to stockholders usually on a quarterly basis.
[ +
] Capital Gain (loss)
The amount by which the proceeds from the sale of a capital asset exceeds (is less
than) the asset’s original cost.
[ + ]
Compound Interest
Interest paid on any pervious interest earned, as well as on the principal borrowed.
[ + ] Capital
market
The market where for relatively long term, debt or equity securities are traded.
[ + ]
Commercial Paper
Short term, unsecured promissory notes, generally issued by large corporations.
[ + ] Capital
stock
The total number of shares authorized as per the Memorandum of Association of the
company for the issuance, including both common stock and preferred stock.
[ + ]
Capital structure
The proportion of a firm’s permanent long term financing represented by debt, preferred
stock, common equity stock & retained earnings.
[ + ] Capital
turnover
Capital turnover calculates the rate of return of equity. It is calculated by dividing
total sales by stockholder equity. Higher the ratio, more efficiently the management
can utilize its capital.
[ +
] Capitalization stock
The sum of a company’s capital, long-term debt, and retained earnings.
[ + ] Custodian
Bank or other financial institution that keeps custody of stock certificates and
other assets of a mutual fund, individual, or corporate client.
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[ + ] Debenture
A long term, unsecured debt instrument.
[ + ] Depreciation
The value of assets keeps on decreasing with the passage of time and usage. That
decrease in value is termed as depreciation. Every business is required to write
off the depreciation over time for tax purposes.
[ + ] Date
of issue
The date on which a bond, insurance policy or stock offering is issued.
[ + ] Deferred
share
A share of stock that receives no rights to a company’s remaining assets in the
event of bankruptcy until all common and preferred shareholders have been paid.
[ + ] Delisting
A share is said to be delisted when a share is removed from any exchange mainly
due to non-fulfilment of exchange norms.
[ + ] Day Order
A day order is an order, which is valid for the same session on which it is entered.
If the order is not matched during the session, the order gets cancelled automatically
at the end of the trading session.
[ + ] Depository
It is an institution, which keeps the shares in, demat (Electronic) form on behalf
of the investors, where investor is the beneficial owner of the stocks held.
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[ + ] Earnings
Earning is the difference between revenue & cost of sales. We can interpret
various types of earning from the balance sheet data for analysis.
[ + ]
Earnings per Share
: EPS refers to the earnings available for the equity holders divided by the number
of equity shares outstanding.
[ + ] EBIDTA
Earnings Before Interest, Taxes, Depreciation and Amortization.
[ + ]
Economies of scale
The benefits arise due to increase in production size in which the average unit
cost falls as volume increases.
[ + ] Employee Stock Ownership Plan
ESOP is a trust established by a company for the allocation of shares to employees.
It is a tax efficient way to provide this motivational benefit to the employees.
[ + ] Exchange
rate
The number of units of one currency that may be purchased with one unit of another
currency is termed as the exchange rate between the two currencies.
[ + ]
Ex – dividend date
The first date on which a stock purchase is no longer entitled to receive recently
declared benefit, dividend in this case.
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[ + ] Face value
It is the value of an asset that is written on the face of the instrument. In case
of stocks, it is the original cost of the stock shown on the certificate & in
case of bonds, it is the amount paid to the holder at maturity.
[ +
] Fair market value
The price at which an asset can be sold in market.
[ + ] Financial
Lease
A long-term lease that is not cancellable.
[ +
] Financial management
Concern the acquisition, financing & management of assets with some overall
goal in mind.
[ + ]
Financial markets
A system consisting of institution & procedures for bridging the gap between
buyers & sellers of financial instruments.
[ +
] Financial instrument
An instrument having monetary value and can be traded or transferable or recording
a monetary transaction.
[ + ] Financing
flows
It means Cash flows generated through debt and equity financing.
[
+ ] First preferred stock
That preferred stock which gets preference in the payment of the dividend or for
the assets before the payment is made to other preferred stockholder & equity
stockholder.
[ + ] Future
value
The value at some future time of a present amount of money, or a series of payment,
evaluated at a given interest rate.
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[ + ] GDR
GDR is the abbreviation of Global Depositary Receipt .A bank certificate issued
in more than one country for shares in a foreign company.
[ + ] Going
Private
Making a public company private through the repurchase of stock by current management
&/ or outside private investor.
[ + ] Goodwill
There are certain intangible assets in the form of present reputation of the company/firm
generated through the continuous and efficient supply of quality product and services.
This is known as the goodwill of the company. Goodwill must be amortized. In case
of merger or acquisition, the extra consideration paid by the acquiring firm to
the acquired firm is recorded in the books as goodwill.
[
+ ] Gross working capital
This is capital required to run the day to day expenses of the company. This is
the money invested in the various current assets like inventory, bills payable,
pre paid expenses etc. In all it refers to the firm’s investment in current assets.
[ + ] Going
public
Offering public to invest in the company & for this the share need to be listed
& this procedure is called performing an initial public offering.
[ + ] Governments Securities
Any securities issued by the government or its agencies.
[ +
] Good Till Cancelled
This order remains in the system until the user cancels it. It will therefore be
able to valid for various trading sessions if it does not get matched. However,
the Exchange may set an upper limit to the number of working days for which an order
can stay in the trading system. At the end of this period, the orders are cancelled
automatically from the system.
[ + ] Good
Till Day
This order allows the user to specify the number of days up to which the order should
stay in the trading system. At the end of this period, the order gets cancelled
automatically from the system if it is not traded or is not cancelled by the investor.
[ + ] Gross
Exposurey
The net cumulative outstanding in various stocks at a time that has not been squared
off is called Gross exposure.
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[ + ] Hedge
It is tool used to reduce the risk of future price movements.
[ + ] Holding
Company
A parent company holding maximum number of share of the company. This number should
be at least 51%.
[ + ] Hurdle
rate
The minimum required rate of return on an investment in a discounted rate at which
a project is acceptable.
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[ + ] Income
stock
A stock with a history of paying consistently high dividends.
[ + ] Inflation
This refers to the situation in which there is rise in the general level of prices
of goods & services.
[ + ]
Income statement
A summary of a firm’s revenue & expenses over a specified period, generally
one year, ending with net income or loss for the period.
[ + ]
Intraday Turnover
Total value of buy & Sell trades executed on an exchange in a single session
is called as Intraday Turnover.
[ + ] IPO
Also called initial public offer. A company’s first offering of equity stock to
the general public.
[ + ] Interest
Money paid or earned for the use of money.
[ + ] Intrinsic
value
The price a security ought to have based on all factors bearing on valuation.
[ + ] Interest coverage ratio
Earnings before interest & taxes divided by interest charges. It indicates a
firm’s ability to cover interest charges.
[
+ ] Immediate or Cancel
Order allows an investor to buy or sell a security as soon as the order is released
into the system, failing which the order is cancelled from the system.
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[ + ] Joint
Venture
A business venture jointly owned & controlled by two or more independent firms.
Each venture partner continues to exist as a separate firm & the joint venture
represent a new business enterprise.
[ +
] Joint Stock Company
A company, which has some features of a corporation and some features of a partnership.
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[ + ]
Know your Client
Compulsory Form, known as the know your client agreement form to be filled by an
investor who wishes to trade through a trading member of a recognized stock exchange.
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[ + ] Leverage
Leverage is property rising or falling at a proportionally greater amount than comparable
investments. For example, an option is said to have high leverage relative to the
underlying stock because a price change in the stock may result in a relatively
large increase or decrease in the value of the option. In general, in finance, leverage
is the use of debt financing. Leverage, within a corporation, is the use of borrowed
money to increase the return on investment. For leverage to be positive, the rate
of return on the investment must be higher than the cost of the money borrowed.
[ + ] Leverage
Ratio
Leverage Ratio measures the relative contribution of stockholders and creditors,
and of the firm’s ability to pay financing charges. Value of firm’s debt to the
total value of the firm.
[ + ] Limited Liability Company
A business form that provides its owners with corporate style limited personal liability
& the tax treatment of a partnership
[ + ] Liquidation
The sale of the assets of a firm, either voluntarily or in bankruptcy.
[ + ] Liquidity of an asset
The ability of an asset to be converted into cash without a significant price concession.
[
+ ] Liquidity of a firm
This refers to the ability of the firm to pay off its debt as and when it becomes
due.
[ + ]
Liquidity ratio
Ratio that measure a firm’s ability to meet short-term obligation.
[ + ] Listing
Admission of a security for trading on an organization exchange. A security so admitted
is referred to as a listed security.
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[
+ ] Majority rule voting
A method of electing corporate directors, where each common share held carries one
vote.
[ + ] Market
value
The market price at which an asset trades.
[ + ] Management buyout (MBO)
A leveraged buyout in which pre buyout management ends up with a substantial equity
position.
[ + ] Management’s Discussion & Analysis
A section in the Annual report in which the company describes about the performance
of the prior period and the outlook for present & future.
[ + ] Merger
The combination of two or more companies in which only one firm survives as a legal
entity.
[ + ] Market capitalization
The market value of a quoted company, which is calculated by multiplying its current
share price by the number of shares in issue.
[
+ ] Marketable security
Security that has ability to be converted into cash quickly and easily at fair price.
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[ + ] Nominal
value
The value of a share when issued or the face value.
[
+ ] Net Operating Income
Net Operating Income is equal to the difference between Net Sale & Net expenditure
including financial charges & depreciation.
[
+ ] Net working Capital
Current assets minus current minus current liabilities. (also see gross working
capital)
[ +
] Net present value
The Net present value of an investment is the project’s net cash flows over and
above the project’s initial cash outflow.
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[ + ] Operating profit margin
Operating profit for a certain period is calculated by dividing the difference between
Net Sale & Net Expenditure by Net Sales. Operating profit margin indicates how
effective a company is at controlling the costs and expenses associated with their
normal business operations.
[ + ] Operating
Cycle
The length of time from the commitment of cash for purchase until the collection
of receivable resulting from the sale of goods or services.
[ + ] Order
point
The quantity to which inventory must fall in order to signal that an order must
fall in order to signal that an order must be placed to replenish an item.
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[ + ] Payback
period
The period of time required for the cumulative expected cash inflow from an investment
project to equal the initial cash outflow.
[ + ] Preferred
stock
A type of stock that promises a fixed dividend but at the discretion of the board
of directors. It has preference over common stock in the payment of dividends &
claims on assets at the time of liquidation.
[ + ] Present
Value
The current value of a future amount of money or a series of payments, evaluated
at a given interest rate.
[ + ] Price / earnings ratio
The market price per share of a firm’s common stock dividend by the most recent
12 months of earning per share.
[ + ]
Panic Selling
It refers to the market conditions when all investors take fright and start selling
due to sudden unfavourable news or rumours, or a Random Walk by shares downwards.
[ + ] Portfolio
It refers to the list of financial assets that are held by an investor. The idea
of a portfolio is that investor should invest in a diversified selection of investments.
[ + ] Price sensitive information
Price sensitive information is information about a company’s trading or other affairs
having an influence on its share price.
[ + ]
Primary market
It refers to the market place where companies from the investors raise fresh money.
The money raised may be utilized in paying for expansion or paying off debt etc.
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[ + ] Qualitative analysis
Determining the value of an investment, especially a stock, by examining its non-numeric
characteristics, such as management, employee morale, customer loyalty, and brand
value.
[ + ] Quantitative analysis
It refers to the process of determining the value of a security by examining its
numerical, measurable characteristics such as revenues, earnings, margins, and market
share.
[ + ] Quote
The highest bid or lowest ask price available on a particular security at any given
point of time.
[ + ] Quote
size
The number of shares that are being offered for purchase at the bid price or the
number of shares that are being offered for sale at the ask price
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[
+ ] Regular Lot Order
It is the minimum quantity of an order that can be entered into the different markets
namely Normal , Spot and Auction.
[ + ] Record
dat
Date, set by the issuing in order to be eligible to receive a declared dividend
or capital gains distribution. Record date is the date on which the company provides
the benefits to the security holders. Those who are having the securities in their
name in their account are eligible to receive the benefit.
[ + ]
Rights Issues
The issues of new shares to existing shareholders in a fixed ratio a price that
is generally below the market price of the existing shares. The rights are offers
to the existing shareholders on a pre-emptive basis.
[ + ] Real
Return
The Real return from any investment is the return earned on an investment after
adjusting for the rate of inflation.
[ + ] Real Interest Rate
Real rate of interest is the excess of interest rate over the rate of inflation.
[
+ ] Redeemable shares
Shares that may be redeemed at the option of the issuer and/or the shareholder on
or after the pre specified time
.
[ + ] Redemption
The return of an investor’s principal in a security, such as a bond, preferred stock
or mutual fund shares, at maturity.
[
+ ] Redemption price
The price, specified at issuance, at which a bond or preferred stock can be redeemed
by the issuer.
[ + ] Registrar
The organization that maintains a registry of the shareowners and number of shares
held for a mutual fund, bond or stock, and makes sure that more shares are not issued
than are authorized.
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[ + ]
Short selling
When an investor anticipates that the prices of a particular share will fall, then
he may sell that share without even owning with an intention of purchasing the shares
at lower price at any time in future. This strategy is known as short selling.
[ + ] Slump
This refers to the bottom of a trade cycle when prices and employment are at their
lowest level reflected in the downward movement of share prices. Overall mood of
the market is depressed during the slump.
[ + ] Stag
A stag is an investor or speculator who subscribes to an IPO with the intention
of selling them soon after allotment to earn a quick profit.
[ +
] Secondary Market
This refers to the market place where the investors can transact in the existing
securities. The market in existing securities provided by the Stock Exchanges. The
market provides the liquidity in the existing securities.
[ + ] Settlement
This refers to the payment of cash for securities or the delivery of securities
against payment i.e. securities transaction by delivery. It is the payment or receipt
of an outstanding due at the end of the settlement period.
[ + ]
Settlement Day
It is the day on which purchased securities are due for delivery to the buyer and
the buyer is required to pay necessary consideration for the same.
[
+ ] Share certificate
This is a legal document that represents the ownership of a shareholder in the company.
In today’s advanced stage the concept of physical share is replaced by the dematerialization
of securities.
[ + ] Security
An investment instrument, other than an insurance policy or fixed annuity, issued
by a corporation, Government, or other organization, which offers evidence of debt
or equity.
[ + ] Seller
The investor who has placed the order for selling a particular security. (also see
buyer)
[ + ] Settlement guarantee
Settlement guarantee means that the trade will be settled even if one of the parties
to the trade i.e. the buyer or the seller defaults. In India , the clearing corporation
provides Settlement guarantee for all trades held. This prevents a cascading effect
in the market due to the default of one party.
[ +
] Specified Shares
For the purpose of trading, stock exchange authorities categorised the securities
as either ‘specified’ shares or ‘non-specified’ shares.
[ + ] Share
swap
This refers to a financial arrangement by which shares of one company are swapped
for another in a specified ratio known as swap ratio.
[ + ] Screen Based Trading
Screen based trading uses the modern telecommunications and computer technology
to combine information transmission with trading in stock market. Trading members
are connected to the Exchange from their workstations to the central computer located
at the Exchange via satellite using VSATs (Very Small Aperture Terminals).
[ + ] Stock
split
This refers to the splitting shares of the company by way of reducing face value
of the share. The equity capital remains the same after the split. The total numbers
of outstanding shares get increased and the face value per share gets decreased.
The process is expected to improve liquidity in the stock.
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[ + ] Trade
As soon as a buy order matches with a sell order following the price-time priority
logic, a trade takes place. The system automatically generates a unique trade number
for each trade.
[ + ] Trading for delivery
Trading conducted with an intention to take or make delivery of the shares as opposed
to taking up a position and squaring off within the settlement.
[ + ]
Trading Members
There are the persons authorized to place orders in the Capital Market System and
is a member of stock exchange like BSE/NSE. They are also termed as broker or brokerage
house.
[ + ] Trailing
P/E
Price/earnings ratio, using earnings for the four most recently completed quarters.
[ + ] Trailing
EPS
Earning Per Share for the four most recently completed quarters.
[ + ]
Tick Price/Size
This is the minimum price movement for a futures contract.
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[ + ] Underwriting
Under writing is a kind of guarantee provided by an underwriter wherein the underwriter
agrees to purchase a certain number of shares in the event the issue is under-subscribed.
For this, the underwriter charges a certain fee from the issuer.
[ + ] Unit
A quantity generally accepted as a standard for exchange.
[ + ]
Unlimited risk
This refers to the investment avenue where the loss potential is unlimited. For
example short selling and futures
[
+ ] Unlisted securities
A security, which is not traded on any exchange, may be due to an inability to meet
listing requirements.
[
+ ] Unsystematic Risk
This is the part of the total risk that is peculiar to a particular company. This
risk could arise due to company specific factors like operational factors, financial
distress, labor turnover etc. This type of risk can be reduced to a great extent
with the help of diversification.
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[ +
] Value Investment
This refers to the investment style that attempts to pick those stocks that are
traded below the intrinsic value and, hence, considered as undervalued. Fundamentalists
often make recommendations of value investment.
[ + ] Volatility
This refers to the rate by which the price of a security fluctuates in changing
market conditions. Higher the volatility, the more risky will be the stock.
[ + ] Volumes
This refers to the total number of shares that are traded in a particular counter
in a definite period of time, generally one day. This is important information used
in explaining and interpreting price fluctuations. More volumes indicate the greater
liquidity in the counter.
[ +
] Variation Margin
This is the payment made to the broker in order to restore or maintain initial margin
on adverse positions resulting from adverse price movements in futures/options transactions.
[ + ] Venture capital firm
An investment company that invests money in new ventures and other risky projects
in anticipation of higher returns
[ + ] Voting
right
It is right given to the common stock shareholder to vote, in person or by proxy,
for members of the board of directors and other matters of corporate policy, such
as the issuance of senior securities, stock splits and substantial changes in operations
in the annual general meeting.
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[ + ] Warrant
A relatively long-term option to purchase equity stock & a specified exercise
price over a specified period of time.
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[ + ] Yield
This refers to the annual rate of return on an investment and is expressed as a
percentage. In case of securities, the yield can be calculated as annual dividends
received divided by the purchase price. The only drawback with it is that it does
not take into account the capital appreciation.
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[ +
] Zero Coupon Bond
This is a kind of debt instrument that does not carry any interest or coupon attached
to it. Rather it is sold at a heavy discount to the face value and provides a capital
appreciation to the investor at the time of redemption. The difference between the
discounted price and the maturity value represents the gain to the investor.