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A stern measure of a company's ability to pay its short term debts, in that stock is excluded from asset value. (liquid assets/current liabilities) Also referred to as the Quick Ratio.
Anything owned by the company having a monetary value; eg, 'fixed' assets like buildings, plant and machinery, vehicles (these are not assets if rentedand not owned) and potentially including intangibles like trade marks and brand names, and 'current' assets, such as stock, debtors and cash.
Measure of operational efficiency - shows how much revenue is produced per £ of assets available to the business. (sales revenue/total assets less current liabilities)
The Balance Sheet is one of the three essential measurement reports for the performance and health of a company along with the Profit and Loss Account and the Cashflow Statement. The Balance Sheet is a 'snapshot' in time of who owns what in the company, and what assets and debts represent the value of the company. (It can only ever nbe a snapshot because the picture is always changing.) The Balance Sheet is where to look for information about short-term and long-term debts, gearing (the ratio of debt to equity), reserves, stock values (materials and finsished goods), capital assets, cash on hand, along with the value of shareholders' funds. The term 'balance sheet' is derived from the simple purpose of detailing where the money came from, and where it is now. The balance sheet equation is fundamentally: (where the money came from) Capital + Liabilities = Assets (where the money is now). Hence the term 'double entry' - for every change on one side of the balance sheet, so there must be a corresponding change on the other side - it must always balance. The Balance Sheet does not show how much profit the company is making (the P&L does this), although pervious years' retained profits will add to the company's reserves, which are shown in the balance sheet.
In a financial planning context the word 'budget' (as a noun) strictly speaking means an amount of money that is planned to spend on a particularly activity or resource, usually over a trading year, although budgets apply to shorter and longer periods. An overall organizational plan therefore contains the budgets within it for all the different departments and costs held by them. The verb 'to budget' means to calculate and set a budget, although in a looser context it also means to be careful with money and find reductions (effectively by setting a lower budgeted level of expenditure). The word budget is also more loosely used by many people to mean the whole plan. In which context a budget means the same as a plan. For example in the UK the Government's annual plan is called 'The Budget'. A 'forecast' in certain contexts means the same as a budget - either a planned individual activity/resource cost, or a whole business/ corporate/organizational plan. A 'forecast' more commonly (and precisely in my view) means a prediction of performance - costs and/or revenues, or other data such as headcount, % performance, etc., especially when the 'forecast' is made during the trading period, and normally after the plan or 'budget' has been approved. In simple terms: budget = plan or a cost element within a plan; forecast = updated budget or plan. The verb forms are also used, meaning the act of calculating the budget or forecast.
The value of all resources available to the company, typically comprising share capital, retained profits and reserves, long-term loans and deferred taxation. Viewed from the other side of the balance sheet, capital employed comprises fixed assets, investments and the net investment in working capital (current assets less current liabilities). In other words: the total long-term funds invested in or lent to the business and used by it in carrying out its operations.
The movement of cash in and out of a business from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments.
One of the three essential reporting and measurement systems for any company. The cashflow statement provides a third perspective alongside the Profit and Loss account and Balance Sheet. The Cashflow statement shows the movement and availability of cash through and to
the business over a given period, certainly for a trading year, and often also monthly and cumulatively. The availability of cash in a company that is necessary to meet payments to suppliers, staff and other creditors is essential for any business to survive, and so the reliable forecasting and reporting of cash movement and availability is crucial.
cost of debt ratio (average cost of debt ratio)
Despite the different variations used for this term (cost of debt, cost of debt ratio, average cost of debt ratio, etc) the term normally and simply refers to the interest expense over a given period as a percentage of the average outstanding debt over the same period, ie., cost of interest divided by average outstanding debt.
cost of goods sold (COGS)
The directly attributable costs of products or services sold, (usually materials, labour, and direct production costs). Sales less COGS = gross profit. Effetively the same as cost of sales (COS) see below for fuller explanation.
cost of sales (COS)
Commonly arrived at via the formula: opening stock + stock purchased - closing stock. Cost of sales is the value, at cost, of the goods or services sold during the period in question, usually the financial year, as shown in a Profit and Loss Account (P&L). In all accounts, particularly the P&L (trading account) it's important that costs are attributed reliably to the relevant revenues, or the report is distorted and potentially meaningless. To use simply the total value of stock purchases during the period in question would not produce the correct and relevant figure, as some product sold was already held in stock before the period began, and some product bought during the period remains unsold at the end of it. Some stock held before the period often remains unsold at the end of it too. The formula is the most logical way of calculating the value at cost of all goods sold, irrespective of when the stock was purchased. The value of the stock attributable to the sales in the period (cost of sales) is the total of what we started with in stock (opening stock), and what we purchased (stock purchases), minus what stock we have left over at the end of the period (closing stock).
Cash and anything that is expected to be converted into cash within twelve months of the balance sheet date.
The relationship between current assets and current liabilities, indicating the liquidity of a business, ie its ability to meet its short-term obligations. Also referred to as the Liquidity Ratio.
Money owed by the business that is generally due for payment within 12 months of balance sheet date. Examples: creditors, bank overdraft, taxation.
The apportionment of cost of a (usually large) capital item over an agreed period, (based on life expectancy or obsolescence), for example, a piece of equipment costing £10k having a life of five years might be depreciated over five years at a cost of £2k per year. (In which case the P&L would show a depreciation cost of £2k per year; the balance sheet would show an asset value of £8k at the end of year one, reducing by £2k per year; and the cashflow statement would show all £10k being used to pay for it in year one.)
A dividend is a payment made per share, to a company's shareholders by a company, based on the profits of the year, but not necessarily all of the profits, arrived at by the directors and voted at the company's annual general meeting. A company can choose to pay a dividend from reserves following a loss-making year, and conversely a company can choose to pay no dividend after a profit-making year, depending on what is believed to be in the best interests of the company. Keeping shareholders happy and committed to their investment is always an issue in deciding dividend payments. Along with the increase in value of a stock or share, the annual dividend provides the shareholder with a return on the shareholding investment.
Depreciation is the non-cash charge to the balance sheet which is made in writing off an asset over a period. Logically FOB also meant and still means that the seller is liable for any loss or damage up to the point that the goods are loaded onto the vessel at the FOB port. Amortisation is the payment of a loan in instalments. because the seller is unable to charge these costs as extras once the FOB price has been stated. buildings. fixed assets Assets held for use by the business rather than for sale or conversion into cash. and Amortization. EBIT = Earnings Before Interest and Taxes. insurance and loading.There are several 'Earnings Before. insurance. FOB . fixed cost A cost which does not vary with changing sales or production volumes. The FOB expression originates particularly from the meaning that the buyer . It's in this listing because it's commonly misunderstood and also has potentially significant financial implications. An importing buyer would typically ask for the FOB price. permanent staff wages. eg. building lease costs. From the seller's point of view an FOB price must therefore include/recover his costs of transport from factory or warehouse. etc.. and EBITDA = Earnings Before Interest. (Earnings = operating and non-operating profits (eg interest. EBITD = Earnings Before Interest. until and including the goods being loaded at the (nominated FOB) port. Depreciation. fixtures and fittings. eg. eg. FOB Hamburg or FOB Vancouver). rates. (which is now now often linked to a port name.' ratios and acronyms: EBT = Earnings Before Taxes.. FOB meant originally (and depending on the context stills generally means) that the seller is liable for the goods and is responsible for all costs of transport. EBIAT = Earnings Before Interest after Taxes. knowing that this price is 'free' or inclusive of all costs and liabilities of getting the goods from the seller to the port and on board the craft or vessel. Taxes and Depreciation. Taxes.'free on board' The FOB (Free On Board) abbreviation is an import/export term relating to the point at which responsibility for goods passes from seller (exporter) to buyer (importer). dividends received from other investments). equipment. depreciation of capital items.. and that thereafter the buyer assumes responsibility for the goods and the costs of transport and the liability.
seller has liability for goods. which is a matter for separate negotiation. In recent years the term has come to be used in slightly different ways. most commonly 'Freight On Board'. the FOB principle does not correlate to payment terms. beware of buyers stipulating 'FOB destination' . if you are an exporter.it means the exporter is liable for the goods and pays transport costs up until delivery to the customer. FOB is a mechanism for agreeing price and transport responsibility. In summary: FOB (Free On Board). which is technically incorrect. gearing The ratio of debt to equity. meaning that the insurance liability and costs of transportation and responsibility for the goods are the seller's until the goods are delivered to the buyer's stipulated delivery destination. While technically incorrect also. goodwill Any surplus money paid to acquire a company that exceeds its net tangible assets value. If in doubt ask exactly what the other person means by FOB because the applications have broadened. forecast See 'budget' above.it can be any place that it suits the buyer to stipulate.the principle is the same. So. even to the extent that other interpretations are placed on the acronym.is free of liability and costs of transport up to the point that the goods are loaded on board the ship. In modern times FOB also applies to freight for export by aircraft from airports. nowadays FOB (Free On Board or the distorted interpretation 'Freight On Board') has a wider usage . ie. not for agreeing payment terms. usually the relationship between long-term borrowings and shareholders' funds. used alone. While liability and responsibility for goods passes from seller to buyer at the point that goods are agreed to be FOB. terms such as 'FOB Destination' have entered into common use.. originally meant that the transportation cost and liability for exported goods was with the seller until the goods were loaded onto the ship (at the port of exportation). insurance and costs of transport until the goods are loaded (or delivered). gross profit . but the point at which goods are 'FOB' is no longer likely to be just the port of export .
An IPO is effectively 'going public' or 'taking a company public'. beyond any other assurances or contracts made with the customer. The seller should also approve the wording of the buyer's letter of credit. In short. (Also called 'export letters of credit. IPOs typically involve small. and often abbreviated to simply 'margin'. This gives the supplier an assurance that their invoice will be paid. and usually provided by the importing company's bank to the exporter to safeguard the contractual expectations and particularly financial exposure of the exporter of the goods or services. the exporter needs to know that the goods will be paid for. The common system. to the seller. and 'import letters of credit'. See also 'net profit'. Letters of credit are often complex documents that require careful drafting to protect the interests of buyer and seller. The customer's bank charges a fee to issue a letter of credit. young companies raising capital to finance growth. In other words an IPO is the first sale of stock by a private company to the public. is for the customer's bank to issue a 'letter of credit' at the request of the buyer.) When an exporter agrees to supply a customer in another country.Sales less cost of goods or services sold. initial public offering (ipo) An Initial Public Offering (IPO being the Stock Exchange and corporate acronym) is the first sale of privately owned equity (stock or shares) in a company via the issue of shares to the public and other investing institutions. a letter of credit is a guarantee from the issuing bank's to the seller that if compliant documents are presented by the seller to the . which has been in use for many years. which should obviously reflect the agreement between the seller and buyer. The letter of credit essentially guarantees that the bank will pay the seller's invoice (using the customer's money of course) provided the goods or services are supplied in accordance with the terms stipulated in the letter. For investors IPO's can risky as it is difficult to predict the value of the stock (shares) when they open for trading. and the customer pays this cost. and often should seek professional advice and guarantees to this effect from their own financial services provider. Also referred to as gross profit margin. letters of credit These mechanisms are used by exporters and importers. or gross profit.
or both. • There are other types of letters of guarantee. These types of letters of guarantee are concerned with providing safeguards to buyers that suppliers will meet their obligations or vice-versa. these are complex documents with extremely serious implications. format of and place at which the documents are presented. checked. and are issued by the supplier's or customer's bank depending on which party seeks the guarantee.whereby the bank assures the buyer that the supplier will not refuse a contract if awarded. etc. approved and their conditions met. It is important therefore for sellers to understand all aspects of letters of credit and to ensure letters of credit are properly drafted. and as with letters of credit.This guarantees that any advance payment received by the supplier will be used by the supplier in accordance with the terms of contract between seller and buyer. Typical obligations covered by letters of guarantee are concerned with: Tender Guarantees (Bid Bonds) . . While a letter of credit essentially guarantees payment to the exporter. a letter of guarantee provides safeguard that other aspects of the supplier's or customer's obligations will be met. It is common for exporters to experience delays in obtaining payment against letters of credit because they have either failed to understand the terms within the letter of credit. It is also important for sellers to use appropriate professional services to validate the authenticity of any unknown bank issuing a letter of credit. and in the event of the supplier's or customer's failure to meet obligations to the other party then the bank undertakes the responsibility for those obligations. The supplier's or customer's bank is effectively giving a direct guarantee on behalf of the supplier or customer that the supplier's or customer's obligations will be met.This guarantees that the goods or services are delivered in accordance with contract terms and timescales. For this reasons suppliers and customers alike must check and obtain necessary validation of any issued letters of guarantee. then the buyer's bank will pay the seller the amount due. failed to meet the terms. The 'compliance' of the seller's documentation covers not only the goods or services supplied. but also the timescales involved. including obligations concerning customs and tax.buyer's bank. letters of guarantee There are many types of letters of guarantee. Advance Payment Guarantee . method for. • • Performance Guarantee .
(current assets/current liabilities) Also referred to as the Current Ratio. The other side of the balance sheet will show Current Liabilities along with various Assets. by measuring the relationship between current assets (ie those which can be turned into cash) against the short-term debt value. Corporations generally develop their own rules for NPV . net assets (also called total net assets) Total assets (fixed and current) less current liabilities and long-term liabilities that have not been capitalised (eg. net current assets Current Assets less Current Liabilities. liquidity ratio Indicates the company's ability to pay its short term debts. Logically if a proposition has a positive NPV then it is profitable and is worthy of consideration. There are different and complex ways to construct NPV formulae. largely due to the interpretation of the 'discount rate' used in the calculations to enable future values to be shown as a present value. a proposition. minus the cost of the investment. Liabilities are long-term loans of the type used to finance the business and short-term debts or money owing as a result of trading activities to date . net present value (npv) NPV is a significant measurement in business investment decisions. While there are many other factors besides a positive NPV which influence investment decisions. or an entire business). a new product line. along with Share Capital and Reserves make up one side of the balance sheet equation showing where the money came from.liabilities General term for what the business owes. NPV is essentially a measurement of all future cashflow (revenues minus costs. also referred to as net benefits) that will be derived from a particular investment (whether in the form of a project. If negative then it's unprofitable and should not be pursued. showing where the money is now. NPV provides a consistent method of comparing propositions and investment opportunities from a simple capital/investment/profit perspective. Long term liabilities. short-term loans).
p/e ratio (price per earnings) The P/E ratio is an important indicator as to how the investing market views the health. The P/E ratio is arrived at by dividing the stock or share price by the earnings per share (profit after tax and interest divided by the number of ordinary shares in issue). Step by step. Net strictly means 'after all deductions' (as opposed to just certain deductions used to arrive at a gross profit or margin). NPV is not easy to understand for non-financial people . opening/closing stock See explanation under Cost of Sales. with other company's P/E ratios in the same market sector. in which case the term is often extended to 'net profit before tax' or PBT. Net profit normally refers to profit after deduction of all operating expenses. prospects and investment risk of a public company listed on a stock exchange (a listed company). More meaningful P/E analysis is conducted by looking at earnings over a period of several years. so does the P/E ratio. not an absolute measure to rely on by itself.calculations. A steadily increasing P/E ratio is seen by the investors as increasingly speculative (high risk) because it takes longer for earnings to cover the stock price. P/E ratios should also be compared over time.wikipedia seems to provide a good detailed explanation if you need one. including discount rate. Obviously whenever the stock price changes. The P/E ratio is also a highly complex concept . P/E ratios are best viewed over time so that they can be seen as a trend. and with the market as a whole. to calculate the P/E ratio: . notably after deduction of fixed costs or fixed overheads. performance. As earnings per share are a yearly total. net profit Net profit can mean different things so it always needs clarifying. Net profit normally refers to the profit figure before deduction of corporation tax. the P/E ratio is also an expression of how many years it will take for earnings to cover the stock price investment.it's a guide to use alongside other indicators. This contrasts with the term 'gross profit' which normally refers to the difference between sales and direct cost of product or service sold (also referred to as gross margin or gross profit margin) and certainly before the deduction of operating costs or overheads.
2. This gives the Price/Earnings or P/E ratio. The P&L is essentially a trading account for a period. .. quick ratio Same as the Acid Test.1. restricted funds These are funds used by an organisation that are restricted or earmarked by a donor for a specific purpose. Divide this by the number of shares issued. usually a year. 5. 3. The P&L typically shows sales revenues. eg. cost of sales/cost of goods sold. The relationship between current assets readily convertible into cash (usually current assets less stock) and current liabilities. overhead An expense that cannot be attributed to any one single part of the company's activities. which can be extremely specific or quite broad. fixed overheads and or operating expenses. but only because of all the weird and wonderful policies and conventions that the company employs. but also can be monthly and cumulative. Divide the price of the stock or share by the earnings per share. and then a profit before tax figure (PBT). 4. Basically the P&L shows how well the company has performed in its trading activities. profit and loss account (P&L) One of the three principal business reporting and measuring tools (along with the balance sheet and cashflow statement). endowment or pensions investment. A sterner test of liquidity. It shows profit performance. stocks and assets (which must be viewed from a separate perspective using balance sheet and cashflow statement). generally a gross profit margin (sometimes called 'contribution'). A fully detailed P&L can be highly complex. reserves The accumulated and retained difference between profits and losses year on year since the company's formation. which often has little to do with cash. Establish total profit after tax and interest for the past year. This gives you the earnings per share.
philanthropic organisations. N. liability or activity. The 'investment' could be the value of a whole business (in which case the value is generally regarded as the company's total assets minus intangible assets. A percentage figure representing profit before interest against the money that is invested in the business. but clarify this with the person using the term . Strictly speaking Return On Investment is defined as: Profits derived as a proportion of and directly attributable to cost or 'book value' of an asset. otherise you might as well put your money in a bank savings account. return on capital employed (ROCE) A fundamental financial performance measure. etc and liabilities. net of depreciation. or a particular project with agreed terms of reference and outputs such as to meet the criteria or terms of the donation or award or grant. after all it's what most business is aimed at producing .maximum return on investment. Many business managers and owners use the term in a general sense as a means of assessing the merit of an investment or business decision. In this sense most CEO's and business owners regard ROI as the ultimate measure of any business or any business proposition. The source of restricted funds can be from government.research (in the case of donations to a charity or research organisation). such as debt. which may also entail specific reporting and timescales. A company's book value might be higher or lower than its market value). This term means different things to different people (often depending on perspective and what is actually being judged) so it's important to clarify understanding if interpretation has serious implications. A glaring example of misuse of restricted funds would be when Maxwell spent Mirror Group pension funds on Mirror Group development. a . or the investment could relate to a part of a business. private donations. (profit before interest and tax/capital employed x 100) return on investment Another fundamental financial and business performance measure. In simple terms this the profit made from an investment. not least the accounting conventions used in the business.B. foundations and trusts. etc. trademarks.profit depends on various circumstances. 'Return' generally means profit before tax. bequests from wills. The practical implication is that restricted funds are ring-fenced and must not be used for any other than their designated purpose. with which the organisation using the funds must comply. such as goodwill. grant-awarding bodies.
eg materials. to finance stock. cable or telex. Also called a cable transfer. The main point is that the term seeks to define the profit made from a business investment or business decision. variable cost A cost which varies with sales or operational volumes. a new piece of plant. commission payments. a new factory. The terminology dates from times when such communications were literally 'wired' before wireless communications technology. . shareholders' funds A measure of the shareholders' total interest in the company represented by the total share capital plus reserves. working capital Current assets less current liabilities. commonly used/required for import/export trade. debtors. and work in progress. continually circulating.new product. fuel. between a bank and an overseas party enabling transfer of local or foreign currency by telegraph. t/t (telegraphic transfer) Interntional banking payment method: a telegraphic transfer payment. representing the required investment. Bear in mind that costs and profits can be ongoing and accumulating for several years. or any activity or asset with a cost attached to it. which needs to be taken into account when arriving at the correct figures. share capital The balance sheet nominal value paid into the company by shareholders at the time(s) shares were issued.
you have to sign a waiver that no liability attaches to the analys true. Do not blindly follow analyst's recommendations. Annuity Appreciate A contract sold by life insurance companies that guarantees a specified payment at some future time. Average Maturity Average P/E Ratio Average price/earnings ratio of stocks owned by a mutual fund. Asset Allocation The process of dividing your funds among different classes on investment such stocks. Most analysts specialize in a single industry or business sector. The problem is that no two analysts are usually in agreement is a "Consensus Rating" below. etc. it has " describe your blood pressure after you finds you have just invested in a dud stock. Only these shares wil This list of approved securities is periodically revised. It is done when the seller is unable to d question is offered by a member who has ready possession of the script. Approved List The list that tells you which shares are approved for the purpose of pledging them with the bank against loan.American Depository Receipt (ADR) Analyst A certificate of trading on a U. you should learn to make your own judgments company whose shares are recommended by the analyst's reports. For example. if shares of stock you own in a company have risen from five to ten.S. You could further al foreign. The average time to maturity of securities held by a mutual fund. usually one year. u An increase in any investments value. averaged over a period of time. Arbitrage Buying in one exchange and selling in another to take advantage of price difference. Average Daily Share Volume The number of shares traded per day. He performs investment research and makes recommendations to ins hold. Assets Any possession that has value in exchange in the sense that it has buyers. Changes in interest rates have greater impact on f . bonds or real estate. Helps in determining the level of activity of currently active stocks. In the stock market. Auction A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. money is the medium of all excha stock exchange is always in terms of money. stock exchange that represents shares of a foreign corpora A person with expertise in evaluating financial investments.
Best to allocate a portion of your annual income for the purchase of inves Bond A bond is a debt instrument issued by an entity for the purpose of raising capital. In simpler word. When the market expects a company the shares normally goes up.01 per cent. This is the reverse of the bull market. Bonds normally have a set maturity (term them.also known as deferred load. An opportunity to buy at low prices. though the number of total shares increase. Usually used to describe changes in bond yields. alimony can be sai A financial statement listing a company's assets (what it owns) and liabilities (what it owes) as of a specific date. A long term promissory note issued by a corporati other entity such as state or municipal governments or the Central Bank of the country. the strategy would also be reversed but be cau stock is going to reverse direction than to predict when a rising is likely to fall. usually the last day between a company's assets and liabilities is termed its net worth or shareholder's equit Basis Points One basis point is 0. Bear An operator who expects the share price to fall. a ten basis point increase means th point change is 1 per cent. Blue Chip Stock Shares of well-established and financially strong corporations. in hope (usually) fulfilled if you wait long enough) of an upturn. For instance. Hence. Book value Bottom line Total shareholder equity from the balance sheet divided by the number of shares outstand . Lo holding on to stocks for a long period. Investment in such stocks is more for capital app most blue chips trade at high market prices. Following a bonus issue. you are in effect lending money to the entity which issues the bonds for a specified period in return for a fixed point you get back your principal investment. Bear Market A weak and falling market where buyers are absent (Usually because they burnt their fingers when they held on too long to their sh correlates with recession. (For instance. Bonus Shares Shares allotted to the existing shareholders by capitalizing the reserves into additional capital. Bond Rating A grade evaluating the quality of a bond. the proportional ownersh Book Closure A company closes its register of members for updating the records to facilitate payment of dividends or issue of tights of bonus sha this process is done and deliveries are not affected in the clearing house. with little investment risk and a history of earnings and dividend paym a portfolio and allow for higher gain (and higher risk) speculation in other stocks.Backend load Balance Sheet Sales charge paid when selling a mutual fund .
50. The Exchange may relax the limit after a cooling off period of about half an hour. and is now selling for 11. multiplied by the total number of shares that have been issued. Capitalization The value of a company as measured by the market price of its common shares. Carry Forward Settlement where positions are carried forward from one settlement to another settlement. Change in Stock Price The change in stock price is recorded in points.Call Option An option where the buyer gets the right to buy the underlying security at a specified future date. Capital Employed Total liabilities and equity less non-interest bearing liabilities. Cash Flow per Share Cash flow from operating activities divided by average number of shares. rather than being expensed in the year of purchase. Capital Gains Difference between the price at which a financial ashes is sold and its original cost (assuming the price has gone up). . Cash Settlement Payment for transactions done in one settlement on the due date. The change in stock price is the difference between the opening stock price and the current price the stock is selling at. Capitalize When costs of items such as buildings. equipment and other items with a useful lifetime exceeding one year are categorized as assets to be depreciated over a number of years. The fraction amount depends on the security being traded. For example. if stock XYZ opened at 10.50 is the change in stock price. Capital Turnover Annual total Revenue as a percentage of total assets. The +1. Capital Gains Distribution Payments to mutual fund shareholders of profits from the sale of securities in a fund's portfolio.50 it would be up +1. Circuit Breaker A mechanism used to restrain the market when it gets overheated. Capital gains distributions (if any) are usually made annually.
The netted purchase and sale positions of the trading. shares or goods and titles to immovable assets. Common Stock Equity or ownership in a corporation. financial instruments and indexes to name a few. Stockholders participate in a company's profits or losses through dividends and changes in the stock's market value. foreign currencies. Close The closing price is the last traded price for the stock on a particular day. sold. No. but not (yet) in India . Types of commodities include agricultural products. That asset be mortgaged. As many brokers have different ratings systems. The previous close is the price a stock closed on the previous day. Consensus Rating This method is prevalent in the U. Can be encased by the bank if you default in any way on repayment of interest or principle of your loan or other obligations.the bank will encase your collateral so fast you'll never know what hit you till it is too late. Collateral It is used to provide a guarantee for a loan. the companies send back the certificates received for transfer citing reasons for their inability to do so. It is the average of analyst's recommendations for single entity. to another person. If you feel that your bank works at a snail's pace. Commodities Articles of commerce or products that can be used for commerce or used as raw materials in producing other goods. their recommendations are standardized so that a consensus can be calculated . Company Objection In some cases. It includes negotiable instruments. temporarily or permanently.S. In a narrow sense. Clearing House It is a legal counter party to both legs of every trade.Clear Title A title to an asset proves your legal ownerships of that asset.A. Closed-End Fund Investors of such a fund buy shares from other share holders and sell shares to other investors. rented or otherwise transferred. you cannot trade your boss here. Members are settled through the clearing house. metals. This represents an encumbrance on the title. Banks are reluctant to authorize loans against assets which have encumbrances and prefer a clear title. petroleum. products traded on an authorized commodity exchange. try defaulting on a loan . The letter sent by the company is known as Company Objection. Share price is determined by supply and demand for fund shares. Commission A fee charged by brokers for their service in facilitating investment has to be handled through brokers registered on that exchange.
A street paved with hopes and broken dreams. Convertible/Equity Related Loan Loan convertible into equity as per pre-agreed terms. Cum Bonus A share is described as cum bonus when the purchaser is entitled for current bonus. A share is described as cum bonus dividend when the purchaser is entitled for current dividend. for tax. Convertible Bond A bond that can be exchanged for shares of stock. A corporation has limited stock liability. . India. Cum Rights A share is described as cum rights when the purchaser is entitled for current rights Dalal Street A street in Mumbai. Hold Under perform. Sell Each recommendation received from the analysts is mapped to one of the I/B/E/S standard ratings.The I/B/E/S ratings are calculated using a standard set of recommendations. This consensus recommendation appears as the mean (average) of the assigned values. A corporation's owners are the shareholders. Strong Buy 2. Corporation A business organization that. The owners are liable only to the extent of their investment. Gross profit is sales minus cost of sales. maintained by I/B/E/S. Assigning a numeric value to the broker text enables I/B/E/S to calculate a consensus recommendation. not moving significantly up or down. Cost of Sales Cost of materials and labour required to produce products or services. Buy 3. 4. that is. Coupon Rate The interest rate on a bond. and 5. each with an assigned numeric value: 1. if an organization Tanks the maximum you can lose is the value of your equity holding. Consolidation A technical analysis term meaning a stock price is in trading range. purposes is a legal entity and has continuity of existence and easy stock transfer procedure. where the Mumbai Stock Exchange building is located.
showing the relationship between long-term funds provided by creditors and funds provided by shareholder. on request in electronic from through a registered Depository Participant (DP). It holds securities in an account. Minimum net worth stipulation required by SEBI for registering a DP is Rs. According to SEBI regulations. It is comparable with a branch of a bank if a Depository is likened to a bank. In other words.Day Order The quantity that remains untraded is not cancelled until the end of the day. financial institutions (FI's). Deferred revenue When a share is bought or sold for the purpose of receiving or effecting deliveries. Depreciation A non-cash accounting charge representing the loss in value of hard assents such as buildings and machinery over the accounting period. facilitates transfers of ownership without having to handle securities and facilitates safe-keeping of shares. Debt to Equity Ratio Long-term debt divided by shareholders' equity. 100 crore. Deferred Expense Balance sheet liability reflecting expenses shown on the income statement that haven't actually been paid. can become DPs. The DP maintains the client's securities account balances and keeps him informed about the status of holdings. A DP is offered depository services only after it gets proper registration from SEBI. transfers securities between accounts on the instruction of the account holder. . etc. Dematerialisation It is a process by which an investor gets physical certificates converted into electronic balances maintained in his account with the Depository Participant (DP). stockbrokers. low ratio may indicate low risk. banks. Debt to Equity (long term) Total long term debt divided by total shareholder equity. Default Failure to pay back a debt. It can be compared with a bank. Depositories An organization which holds securities of investors. custodians. a high ratio may indicate high risk. the shares are 'dematerialized'. Debt to Equity (Total) Total (short and long term) debt divided by total shareholder equity. Depository Participant (DP) A DP is a representative of the depository in the system.
For instance. The value is totally 'derived' from the value of the underlying asset such as securities. 'highs' and 'lows' are relative not absolute. trucking and automobile manufacturing because each industry is significantly affected by oil prices and interest rates. live stock. Dip A drop in the price of a stock that is temporary making it the ideal time to buy the stock.Derivatives A financial contract between two or more parties based on the future value of an underlying asset. don't allow them to accumulate too long. if a company is stingy on its dividend policy. but you should also learn to recognize factors that may impact a particular industry. the percentage of corporate earnings paid out runs from 40 to 80 per cent. option. You can do it! Dividend Cash payment made to the shareholders out of the profits of the company. . where the corporation keeps its entire earnings. currency. bullion. etc. the end of a financial year. for instance. It is not mandatory for accompany to distribute dividends. Cash dividends are paid out of corporate earnings and the percentage of earnings paid out varies from corporation to corporation. A stock dividend gives the shareholders additional shares of stock or a fraction thereof. Dividend Per Share The amount of dividend paid out per share. A precept common to all businesses: buy low sell high. Of course. Any increase over your purchase price is a gain. but many times it is less. This. diversification is essentially for investors not traders. One usually gets into trouble when giving in to the thoroughly human instinct for the gap to increase (in case of gains) or decrease (in case of losses). Generally. linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities. the value of a call option on reliance (derivative) fluctuates with the price of reliance stock. even zero. rather than cash. The price used is usually the market price at the end of the period under review. Book your profits (or cut your losses) as you go. Discount The difference between a bond's face value and when to trade a security. commodities. in turn. etc. Dividend Yield Total of 12-months' dividend paid (historical or forecast) divided by the latest share price. At the same time.or mid-term future. (Dividend rate x nominal value of share)/100. Of course. A lot of thought goes into deciding on investment avenues because you are not looking so much at the present status of the industry but at its short. For example. future. An investor seeking diversification for a securities portfolio would purchase securities of firms that re not similarly affected by the same variables. Never forget. it is not going to find many investors. and vice versa. an investor would not want to combine large investment positions in airlines. requires that you take into an account innumerable factors that could affect the health of the industry. you can always take an analyst's help. Proper investment diversification is intended to reduce the risk inherent in particular securities. Options and similar other instruments are examples. Diversification The acquisition of a group of assets in which returns on the assets are not directly related over time. it is any hybrid contract of a pre-determined fixed duration such as forward. This calls for clear thinking and common sense.
Dow Jones & Company. Just a few of the 30 companies in the DJIA are: American Express. . you also have to keep in touch with global trends. But in this case it is based on the market values of shares put up as collateral against a loan. AT&T. a financial and investment publisher based in New York . But remember. It is like an overdraft limit. the Dow average is global leader and is usually reflected by exchange around the world. Due Diligence The process whereby an in-depth examination of a company's business prospects is conducted. The limit fluctuates in line with the market price of the shares. sale or acquisition of a company is intended. transportation stocks and bonds.Documentation The papers that are needed to process your loan application. there are 30 industrial stocks thought to be representative of industrial stocks in general. General Motors and IBM. Is that fat fee you are paying your stock analyst looking more reasonable now? Drawing Power Valuation Valuation in stock markets affects your drawing power and hence your loan taking ability as it is reviewed from time to time as per the applicable market value adopted by the bank. Disney. Bethlehem Steel. also calculates averages for utility stocks. You will not be directly concerned at what happens on the Dow. Boeing. Dow Jones Industrial Average (DJIA) A stock index (one of many) commonly used as an indicator of changes in the general level of the stock market prices in United States . Chevron. The wonders of globalization! You don't have enough problems trying to understand the trend of Mumbai stock prices. Usually when a merger. In this index. Coca-Cola.
the market believes that the by number of shares at the close of the period. The seller remains the beneficiary. lenders prefer that you do not repay your loan befo Equities Another name for shares. The Ex Rights A share is described as ex rights when the buyer is not entitled for the Rights. Effective Interest Rates The compounded interest rate calculated on the actual inflows and outflows of cash. It is the total value up to which one is allowed to hold o . The seller remains the beneficiary. The limit allowed to the broker by his exchange or to the customer by broker. Exposure When the value of your asset/product pledged with a bank against loan is reduced by market price fluctuation or for other reasons. Ex rights shares are cheaper than investment oriented players. Also known as operating income. If you think you can save s EMI agreement does not contain a pre-payment penalty. EBIT Effective before interest and taxes. Emerging Markets Developing countries. EMI Equated monthly installments to be paid by the borrower in repayment of the loan taken (includes principal and interest). Ex Bonus A Share is described as ex dividend when the buyer is not entitled for the dividend. Expiry Date The date and time after which a writer of an option cannot exercise his rights. In the bizarre world of loan finance. it increases you the return of the loan. what happens in the famous Hollywood movie 'Indecent Exposure' is nowhere the bank co Exposure Limit Extended Hours Trading Trades executed before or beyond normal market hours. If the market price is greater than the equity per share. And when a bank feels insecure. Equity per Share Shows how much of a company's equity one share represents.Earning Per Share (EPS) Profit after tax and minority interest divided by average number of shares.
For example. Flat Rate of Interest Percentage representation of the amount of annual interest on the total loan amount. Float Floating Rate of Interest The number of shares outstanding minus what is owned by insiders and what the company is holding back (tre The interest rate varies with the change of interest rates over the loan period. to start commercial production and marketing. treasury bo Capital provided to an entrepreneur who has a proven product. British Babus didn't want to work throug babus. past and projected financial and profitability. this has been known to happen in th Forex Foreign currency exchange markets. most of the time. Do you know how to read a people who play the market cannot analyze a balance sheet or cannot draw valid conclusions from it. For ex year covers the period June 1 to May 31 of the following year. not covering market expa Any Consecutive 12-month period of financial accountability for a corporation or government. the Fiscal Year of the Government is 1 st April to the 31 st March of the n fiscal cannot be January 1 to December 31 to correspond with the calendar year. in many English speaking countries. While there is nothing wrong in depending on an analyst. bonds stocks. quantity and quality of a futures contract is standardiz contract is opened and is negotiated between buyers and sellers. Financial Futures First Stage Capital Fiscal Year Legally binding agreements to buy or sell financial instruments at a future date (for example.Face Value The nominal value of a security. Fundamental Analysis A method of stock analysis based on the management of the company. Futures are traded either electronically or via open outcry on a traded either electr Exchange offering the particular contract. The delivery period. don't want to work at all period. Futures Contract An agreement between parties for specified asses for performance on a fixed day in future. it will add immensely to your co conclusions. This is a British legacy. In India . if you opt for a floating bank rate it could be either good with a rise in the bank rate. Remember. b stores find it easier to wind up their yearly accounting on January 31 instead of December 31. find a good analys understand a balance sheet and profit and loss account. Free Cash Flow Operating cash flow minus amounts spent on plant and equipment and minus dividends Front-End Load Sales charge paid when purchasing a mutual fund.Fiscal year is often abbreviated FY with a date. it is also reduced when the interest rates falls (yes. A futures contract is a legally binding agreement to buy financial securities at fixed time in the future at a price agreed upon today. If you are among them. .
10. Strictly for long term investors who have a vision for the future and are not interested in maximizing short term profits. the lender can sell your collateral to realize his payments. High The highest price that was paid for a security during a certain time period. Growth Stocks Stocks that pay low dividends. Gross Profit Profit a company makes on goods and services before considering overhead expenses. weekly. In securities trading. but the high for the year can be 50. . or wait for a further increase. and monthly or for a 52-week period. It helps to know the price history of a security over a period of time as an additional support for current buy or sell decision. The same old choice: should I sell now and make a profit or wait for a while in hope that the price will go up further? Hypothecation Pledging assets against a loan using properties such as securities as collateral for loan. Like when you may like to cover possible loss by also backing the horse for a place.which does not mean that you will not lose your collateral if you default on repayment. but are expected to grow. For example. Green Shoe An agreement allowing the lead underwriter to buy additional shares of an IPO at the offering price after the IPO begins trading. you have to look for another investment avenue where the return is less but the risk is also correspondingly less. Hedging A practice of taking one market position to offset potential losses in another.25? Sell. Hot Stock A stock whose price rises quickly the day it goes public. With a little paper work. on the first day of listing on the exchange it is quoted at Rs. If you find a good guarantor. Gross Margin Gross profit divided by sales. This can be expressed daily. Guarantor A person who promises to pay your debts if you are unable to pay them yourself. For example using a futures a contract to reduce the impact of price fluctuations in a cash or physical market. He's like money in a bank. Let's say you buy a new offering at Rs. Gross profit is sales minus cost of sales. but not transferring legal ownership to the lender . hand on to him. the high for the day can be 20. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market. since there is no win or place.Goodwill The amount by which a company's shareholder equity exceeds the value of its hard assets. Never let him down. What would you do if.
so time consuming and cumbersome that most system is being tightened up so think twice before you place that buy order for XYZ shares. The BSE Sensex is based on 30 stocks as is New York 's Dow average. Institutional Ownership Shares of a company owned by pension funds. If you are holding cement shares. These 30 stocks. when the inflation rate is 2 percent. trademarks. So. you can afford to speculate in higher risk stocks. Interest Interest Coverage Intraday Stock trading tracked in periods shorter than one day. The rate at which prices are rising. For the stock market player. or securities not generally available to the public gained from a source inside the company. For instance the trades during the first two hours or last two hours Money charged by a lender to a borrower for the use of his or her money. each of them havin industry. For instance if yo large public limited organization and lets fall during a family get-together that his company is planning to buy company XYZ and you immediately place a buy o legally in most countries for anyone to make a securities trade based on what they believe to be inside trading result in large fines or imprisonment or both. But remember you have to keep an eye on th mean ?for ever?. Usually they represent about 80 to 85 percent of the market capitalization and trading. this means he pays more for what he uses. Inflation Increase in the prices for goods and services.Income Statement A record of a company's sales and expenses over a particular year or quarter. banks. Index/Indices An index is managed and publishes either by a stock exchange or a professional financial and investment body. Income Stocks Stocks that have consistently paid high dividends. Intangibles Soft assets such as patents. it could be both because there is a shortage in output. it means it is rising at the rate of 2 percent per anything you buy will now cost you 2 percent more than it did last time. a surge in construction activities or higher government taxes? There could be a number of reasons. etc. Utili particular sector. Sectored indices like Industrial. stocks of that exchange. If you can't le Inflation Rate An important economic indicator. its products. there really are such stocks. banking. Industry Group Companies in related businesses. For the common man. Payment made at periodic investments on a A measure of a company's ability to pay interest on its debt (operating income divided by interest expense Intrinsic Value . financial institutions. should you hold on to them. Insider Information Any knowledge about a company. mutual fund. In but the system is so widespread and disparate and the judicial system. W inflation do you part if you have good base of income stocks. are a miniscule percent of the total lis capitalization. etc. It is representative of the market sentiment. buy more or sell? Try and figure it out. which it's numerous levels of appeals. they represent anything up to 85 per cent. in number. Contrary to what you might think after some time on the stock exchange.
he repays the broker the loan amount and keeps the profit himself. Depth of market to absorb buy and sell activity of even large orders at prices appropriate to supply and demand. warrants. financial leverage is popularly called ?trading on the equity'. it refers to the ratio of debt (in the form of bonds and preferred stock outstanding) to equity (in the form of common stock outstanding) In the company's capital structure. contact. The lender is immediately going to ask you to pledge more stocks (or pay cash) to bring the level up to 200 per cent of the loan. To buy or hold a long position is the state of actually owning a stock.Lead Underwriter Brokerage house in charge of IPO. as when an investor borrows money from his broker ?on margin' and so is able to buy more stock than he otherwise could. Leveraged Buy Out Take over of a public corporation using borrowed funds. This is when the market falls and we have what is known as a ?bear' market. Load Funds Mutual funds that carry a sales commission. It is the opposite of a short position. The market must also adapt quickly to new information and incorporate that information into the stock's price. For individuals. For corporations. security. Limit Order A market order that specifies the highest or lowest price at which the customer is willing to trade securities. Rights. Now suppose the market value of the pledged stocks goes down to Rs. Leverage Any means of increasing value and return by borrowing funds or committing less of one's own money. or money value of shares traded daily. or commodity. leverage can involve debt. the greater the financial leverage.75.50 (50 per cent). Say you have pledged stocks worth Rs. Because of this effect. Liquidity is one of the most important characteristics. Load A sales commission paid when you buy (front-end) or sell (back-end) a mutual fund. Shareholders benefit from this financial leverage to the extent that the return on the borrowed money exceeds the interest costs of borrowing it. futures and option contracts also provide leverage. Long Position A bull position in a security. not through debt but by offering the prospect of a high return for little or no investment. This decision-making is necessary to cut losses due to lower prices or sudden reverses in rising share prices. The downside: most individuals pledge existing stocks with their bankers or brokers for the loan. Multiply this instance by thousands and you can imagine the margin pressure that is exerted on the market. etc. Mutual funds and other institutional buyers prefer high liquidity stocks so they can easily move in and out of positions. The more long-term debt there is. . Liquidity A measure of the number of shares. An order to a broker to buy a certain stock (future.100 on the market against which you are given a loan of Rs. If the stock goes up. The market value of the company rises and so do its shares. which is a percentage of the market value of the stocks pledged.) only if the price rises to a specified level. Liability A financial obligation or debt. By borrowing money he has achieved a higher return on his investment than if he had paid for all the stock himself.
but the low for the year can be 5. A U.S. So is taxation based on those classifications? This is one of the reasons investors buy and sell stocks around the world. today. 50 or 100 shares depending on the face value of shares. investor (FII). Helps you understand whether today's price is an aberration or a logical extensive of a trend. Such number makes round lots. Trading lots can comprise 5. bourse. monthly. weekly.the FII sees a better opportunity elsewhere in the world. Long-term Investments Balance sheet item reflecting investments in other companies. That's where the money will go. 10. can make more money on an investment on the BSE than the U. .S. Low (price) The lowest price a security or commodity has reached in a certain period of time such as a daily low or annual low. The legal definition of short term and long term capital gains varies from country. The day-even minute . For example.Long-term Gain A gain on the sale of a capital asset where the holding period was twelve months or more and profit was subject to the long-term capital gains tax. anything less makes odd lots. etc. the low for the day can be 10. Lot A fixed minimum number in which shares are bought and sold. or for a 52 week period. This can be expressed daily.
His exposure limit is fixed based on the margin money brought in by him. The minimum trading lot on a stock exchange. An order where no price specification is mentioned at the time of placement and market prices apply. If one shares worth Rs. Additionally. Momentum Analysis Money Supply Money -market Funds Mutual funds that invest in short -term securities. if the value of some shares drop in the market they may be offset also profitability of a number of companies. The Reserve Bank of India attempts to control the growth of the economy by regulating the increas Moving Average . Positive cash flow can serve as an indicator that fund managers have cash to put into the markets at th flow may indicate that fund managers may need to liquidate some holdings to meet redemption requirements. For example.On compulsorily dematerialized shares for all classes of investors. Total number of shares multiplied by the official price quoted on Market Liquidity Use to track money flow into and out of the markets.Margin An upfront payment made by the customer to take a position in the market. Minimum Number of Companies Accepted The minimum number of companies. IPO's reduce market liquid Market lots Market Open/Close Price It is the last sale price of a particular stock on the previous day. in case of IDBI Bank the shares to be offe It is in your interest to pledge the shares of an number of companies when you take a loan. Market Capitalization Total market value of the company on the stock exchange. The di amount sanctioned. strong earnings growth. Margins are at the sole discretion of the bank and may even Mark to Market A notional profit or loss of a long or short position as compared to the current market price. and increasing earnings forecasts. whose shares have to be offered as security for obtaining loans. The margin for physical shares is 50 percent (that is you can borrow only up to 50 percent of the values of your pledged shares.200. Usually involves looking for stocks in a strong uptrend (high relative strength). The margin for demat shares is35 percent. Authorization for a broker to buy or sell securities at t Market Sentiment A measure of the bullish or bearish attitude of the crowd. In today's The amount of money in circulation. the market Market Order Market Price It is the price a particular stock is currently selling for during the operating hours of the stock market.
The Index is mar security affects the Index in proportion to its market by total shares outstanding. and is related Net Asset Value (NAV) Net Asset Value (NAV) is the market value of the securities held by the scheme of a Mutual Fund.To simplify. if you hold a unit in a mutual fund. based common stocks listed on the NASDAQ stock Market.NASDAQ Composite Index The NASDAQ Composite Index measures all NASDAQ domestic and non-U. Net Profit Ratio Profit from operations as a percentage of revenue. Non-operating Income Income not derived from basic business of company Normalized Earnings NSCCL NSE National Stock Exchange Profits a company can be expected to achieve taking out cyclical effects and unusual events such as one-time write-offs caused by late product re National Securities Clearing Corporation Limited.S. the NAV Net Asset Value per Share Equity excluding minority interests. Non-operating Expense Expenses not due to the basic business of company.NAV varies on a day-to-day basis since the market value o divided by the total number of units of the scheme on a specific date is the NAV. No-load Funds Mutual funds that do not carry a sales commission. The Clearing Corporation of the National Stock Exchang . is calculated throughout the trading day. divided by number of shares.
this is where everybody starts s starts a probe. earnings excluding special items or operatin Operating Income Sales minus all expenses except income taxes and other items not relaxed to basic business. Offer Price The price at which a company offers its shares to the public through issue of a prospectus. is the stock exchange has a upper or lower limit of 10. . Order Cancellation A facility available in the trading system where one is allowed to cancel the order placed earlier. and if XYZ st maximum or minimum opening price the following day will be 22. Opening Price Opening price is normally determined by the price at which a stock finished selling on the previous day. Also see Free Cash Flow. Also known as core earnings. Usually. Most exchange has limits of how high or low the sto circuit. and is based on a percentage of the last traded of the previous day. Operating Earnings Earnings without considering certain expenses such as inventory write downs. it is sometimes s The reverse of over-bought. Overbought Oversold Refers to a stock that has risen sharply in price or to the market as a whole after a period of vigorous buying which.Odd Lots Stocks sold in quantities of less than a specified minimum number. Generally.00 and 18. it is believed has declined to an unreasonable level. or just about anythin earnings look better. it costs less to trade in round Offer The price at which a share is available in the market. Changes in levels of i also affect cash flow. This reduces the scope of overnight off-market Operating Cash Flow Surplus cash generated from a company's basic operations without regard to income tax entries such as depreciation and amortization. A single security or a market which. Order Modification A facility available in the trading system where one is allowed to modify an earlier order. ongoing earnings. Operating Margin Operating income divided by sales.00. Open Order A limit order that does not expire at the end of the trading day. severance pay. For example. depreciation and amortization charges. Also applies sometimes to overbought situations.
the price is equivalent to ten years earnings. In c same field. a company could issue rights to purchase shares preferred shares giving holders the right to redeem their shares at a discount after Portfolio Post-Offering Shares The number of shares that will be outstanding after an IPO. If interest rates fall. Co stock according to predetermined conditions. you can congratulate yourself on a wise de Premium .P/E (Price/Earnings Ratio) Shows a share's market price in proportion to its earnings. it carries no voting rights. mutual funds or other securities that is owned by an inv Power of Attorney Preferred Stock Legal document which gives someone the right to act on your behalf in legal m Debt instruments. debenture. These stocks offer larger returns b Pledge To deposit securities with a lender as security for money borrowed. Preferred shareholders are paid a head of common stock holders in the event the corporation is liquidated. A collection of stocks. Low-priced issues. In India they are called low-Capped stocks and BSE has a separate index find the index for these stocks outpacing the Sensex. It is like a fixed deposit in a bank. or bond that is written on the certificate. the ratio is the weighted average P/E. Calculated by dividing the share price by the reported or forecast ann the P?E ratio is 10. often highly speculative. You are stuck with a fi the other hand. Poison Pill Steps taken by a corporation to thwart a hostile takeover attempt. For a portfolio. The figure illustrates expectations of future company growth. selling at less than $1 a share. For instance. Frequen stocks have developed into investment-caliber issues. It is The designated day on which the members pay securities and fund to the clearin Payout Ratio Percentage of earnings paid out in dividends. the greater the expectations for a com Par Value Pay In Pay Out The designated day on which the Clearing House effects payment and deliveries to The face value or the price of a share. Mostly these types of stocks pay a fixed dividend regardless of corporate earnings dividends. However. Penny Stocks This term is typical to the USA stock markets. and should earnings rise significantly the preferred holder is stuck with the same fix income stream of preferred stock makes it similar in may ways to bonds.
Price Earnings Growth (PEG) Ratio Commonly used for growth stocks. the company seeks temporary delega contains details on the corporation's executive compensations plans.For bonds and preferred stock. In a bear market this cause . the PEG ratio takes into consideration growth by dividing the P/E ratio by current annual gro estimates. Private place lending institutions from whom the issuing company takes or intends to take.which. This probably the nearest you can get to a co buy and sell to the alternative with the highest price . Private Placement The sale of securities to a small group of investors that is exempt from the elaborate requirements of a public issue. It is based on the previous days trading closing price set limits. or par value.Not fully established in India . In effect. you have to pay a little extra upfront if you want to be shielded from the fluctuat Price Band It sets up the upper and lower limits for share's movement on any given day. Price Rigging A process where persons collude to artificially increase or decrease the price of a security. a loan. is the objective o Prospectus Proxy Statement A document circulated to potential investors prior to an IPO describing a company's b Material given to stockholders when the corporation solicits shareholder votes. It involves pledging shares with a banker or broker to raise a loan to buy mor These shares are pledged again to secure a further loan to buy additional shares of the same company in a self-feeding cycle whi price to rise further and increase the operator's profit. after all. the premium is the amount by which the price exceeds the face. A measure to check price volatility. The private placement results in the len Profit Margin Bottom line (after tax) earnings divided by sales. Publicly Held Corporation A corporation that allows anyone in the public to purchase its stock. Programmed Trading Investment strategy that uses computers programmed to buy or sell large numbers of securities to take advantage of price disc stocks represented in those averages (see Arbitrage). It is very difficult to judge initially whet activity or price rigging. Put Option Pyramiding An option where the buyer gets the right to sell the underlying security at a specified future da So called because it is akin to building a pyramid. For options marke other words.
Quote Prices at which a share can be bought or sold.Quick Ratio Cash and cash equivalents plus accounts receivables divided by current liabilities. The highest bid to buy and the lowest offer to sell any stock at a given time. .
Presentations made by underwriters and IPO company officials to institutional buyers to create interest in the offer A point where a stock price has fallen to support. usually seen as a After tax income divided by total assets. Profit from operations plus financial income as a percentage of average capital e After tax income (latest 12 months) divided by shareholders equity (from balance sheet). Issue of new shares to the existing shareholders at a price which is normally lower than the current market price of the old shares. and then reverses the up or down trend convin . plus other long term lia Rights Issue Risk The potential to lose money (principal and any earnings) or not to make on an investment. Redemption Fee Fee charged when you sell a mutual fund. Resistance Return on Assets Return on Equity Return on investments Revenue A company's sales.Record Date The date on which the beneficial owner of the corporate benefits is determined. if you have not held the fund for the prescribed minimum time. Rematerialisation Process of converting the shares from electronic form to physical form. Research and Development (R&D) Costs of developing new products and services.Profit after tax and minority interests as a percentage of aver After tax income (latest 12 months) divided by total of shareholders equity plus long term debt. or risen to resistance. Historical price level at which rising prices have stopped rising and either moved sideways or reversed direction. it is issued in a fixed ra Road Show Rollover Round Lots Stocks sold in specified share quantities.
Sales Charge A transaction fee or commission paid for an investment instrument. Sales and revenue mean the same thing. Later on the person may withdraw some shares and pledge new ones to replace the shares he has withdrawn. Security Swapping One has to pledge one's shares when availing of "loan against shares". Sales per Share Annual sales divided by the number of shares outstanding. Sector Funds Mutual funds specializing in particular industry sector such as computers. it is a permitted practice. This index is used as a measure of performance of the overall market. Sector Sector is another word for industry. technology. Commonly referred to as the "load" in a mutual fund. They are normally conducted through the relevant exchange on which they are listed. The majority of all securities transaction takes place on a secondary market. (Unlike wife swapping. they are said to be sold on a secondary market.S&P 500 (Standard & Poor's 500 Stock Index) An index of 500 stocks widely traded on the New York Exchange. Sales Services and products sold by a company. Sector (or industry) fund groupings usually focus on a single industry. Second Stage Capital Capital provided to expand marketing and meet growing working capital needs of an enterprise that has commenced production but does not have positive cash flows sufficient to take care of its growing needs. Securities Documents proving debt or ownership that may be bought or sold. or healthcare. the regulatory body and watchdog controlling the functioning of Stock Exchange in India .) . such as healthcare. Scrip A holding in securities. or utilities. SEBI The Securities Exchange Board of India. Secondary Market When stocks or bonds are traded or resold. This is popularly called security swapping. Considered by many to be a much more accurate picture of the market in general. Secular Trend A very long-term trend.
only fall to zero and that is the maximum loss that would be incurred. Shareholders Equity The difference between the totals of assets and liabilities shown on a company's balance sheet.00 a share. This does not mean you should walk into a Reliance office and ask for a glass of water. there is more risk involved with short selling because a stock price could continue to rise forever and the short seller's loss could be infinite. unless you are very sure of yourself. you buy back an equal number of shares on the open market and use them to cover the shares you borrowed from your broker. short selling is based on the anticipation that a particular security price will go down. and therefore becomes a part owner of the corporation. usually for product development. typically provided by angel (venture) investors. beta stage development. To go short you "borrow" stock from the broker/dealer.Book value is the shareholders equity divided by the number of outstanding shares. Most stock transactions must be settled within three business days. as of a particular date. You will get the water as a matter of courtesy. and make a profit. Then as the price of that security declines. or future contracts sold and not covered as of particular date. The player should ascertain these rules from a registered broker of the exchange. Theoretically. . The practice of short selling involves borrowing shares of a security from your broker and immediately selling them at the current price. Short-term Debt Borrowing that must be repaid within one year. or 1500. but it will be accompanied by some odd looks.00 a share can. Short-term Investments Stocks and other liquid securities. Short position also means the total amount of stock an individual has sold short and has not covered. Short Covering Buying stock to return stock previously borrowed to make delivery on a short sale. your profit is 15. A short sale can only take place on an "up tick"" or 'zero-plus tick'. or receiving credit from your broker for the stocks you sell. Short sellers lose when the price of the stock ascends rather than descends. Short-term Gain The profit realized from the sale of securities or other capital assets held twelve months or less.Seed Capital A small amount of capital provided to an entrepreneur.00. not covering launch expenses. Short Sale To sell a stock you do not currently own. with the intent to buy the stock back at a lower price than you had initially sold it for.00.00 a share and the price of the stock drops to 35. pilot projects. if you sell short 100 shares of XYZ Corporation at 50. Not for the common investor. commercial production or marketing. Carefully check all tips on short sales before deciding to act on them. Short Position Stock options. Settlement The process of paying for stocks you purchase. Shareholder A person who buys stock in a corporation. however. Selling Short The reverse of the usual stock market technique. Shares A unit representing a measure of ownership in a corporation. then sell the stock. etc. Most stock exchange have a rigid rules regarding short selling. For instance. A stock purchased at 10.
Alternately. Stock Split An increase in the number of outstanding shares in a corporation. a company declares a "3 for 1 " stock split. usually watermarked and patterned to make it hard to forge. a two-for-one split means that shareholders will receive two new shares for each old share. This order is very often referred to as a "stop loss" order. A buy is placed above current prices and a sell is placed above current prices and a sell is placed below current prices. a reverse stock split brings about the decrease in the number of shares in a corporation. As in a split the total stock holders equity remains the same. For examples. the price of the stock is currently 60 a share. Spot Trading Trading in commodities that will be delivered immediately.Solvency Ratio Equity excluding minority interests as at year-end as a percentage of liabilities and equity at year-end. Stock Option Contract allowing holder to buy or sell given number of shares of a particular stock at a given price by a certain date. a shareholder with 100 shares before the split would have 300 shares after the split with a value of 20 a share. Standard Deviation A measure of a mutual fund or stock's historical volatility. making a total of three. Sub-accounts A sub-account includes institutions (established or incorporated outside India ) and those funds. Stop Loss Order An order placed with a "trigger price".These order types instruct the broker to execute at market once a specific price level is reached and traded at. because it prevents the security from falling below a certain price. Speculators Investors who seek large capital gains through relatively risky investments. It is placed to minimize the losses and the order cab be either for a purchase or a sale. This is usually n\brought about by the division of existing shares. (Also called cash trading) Spread The spread is the difference between the bid price and the offer price. The shareholders equity does not change. Stop Order An order to buy or sell a security conditioned on a specific price. or portfolios (established outside India ) whether incorporated or not and corporate and individuals on whose behalf investments are proposed to be made in India by a Foreign . A reverse split is where the total number of shares is decreased and the stock price increases proportionally. Stops Can be either a buy or a sell stop. Split An increase in the number of shares outstanding. For example. This increase in the number of shares result in the proportionate decrease of share price. Stock Certificate The actual document that is evidence of stock ownership.
Third Stage Capital Capital provided to an enterprise that has an established commercial production and basic marketing set-up. ticker symbols can be submitted to an electronic ticker quote retrieval system to find information about a particular security instantly. A zero-plus tick means the transaction was at the same price as the one before. Total liabilities All monies owed regardless of how classified on the balance sheet. An up-tick means the last trade was at a higher price than the one before than the price was at a higher price than one before it and a down -tick means the last sale price was lower than the one before it. Ticker Symbol A ticker symbol represents a particular security (company. Technical Analysis An analysis of a stock or future based strictly on numbers.A) will bring you information about Ford Motor Company. product development etc. option etc. etc. acquisitions. The method includes analysis of price patterns. For example. Tick The tick is the direction in which the price of stock moved on its last sale. Top A technical analysis term meaning the stock price is going down from here. Ticker A ticker is a trading screen information display showing the current price. Support Historical price level at which falling prices have stopped falling and either moved sideways or reversed direction. etc of a particular stock.) on the exchange it is trading on and is used to retrieve information about that security from that exchange. Don't try to understand it unless you are a maths gold medalist. The best measure of a firm's total debt. There are two categories of sub-accounts : (1) broad-based/proprietary sub-accounts which are allowed to individually invest up to 10% of the total issued capital. Trailing Twelve Months (TTM) The last four reported quarters. Tangible Book Value Book value minus goodwill and intangible assets. Ticker symbols can be used to retrieve information from a financial publication such as your daily paper's business section. the symbol ?f? on the New York Stock Exchange (U. and (2) Foreign corporate and foreign individuals who are not allowed to exceed 5 percent of the issued capital.S. but still higher than the nearest preceding price. future. usually seen as a price chart pattern. NRIs and overseas Corporate Bodies (OCB) are not eligible for registration as sub-accounts. Today. Trader An employee of a broker/dealer or other financial institution who specializes in handling purchases and sales of securities for the firm or its clients.Institutional Investor. typically for market expansion. option. The tick becomes especially important when large market movements trigger the implementation of certain circuit breakers meant to stabilize the market. volume. . ?ONGC? will show you the information of the Oil and Natural Gas Commission on the National Stock Exchange of India.
volatility is the annualist standard deviation of returns. in exchange for an ownership percentage. whom the entrepreneurs approach without the risk of ?takeover'. Volume The total number of shares. He is a fixed interval investor. failing which the firm would take the securities being offered (that is. Turnover Rate Turnover is the relationship between the float and the average monthly volume of a stock. Treasury Notes Debt securities issued by the central government that mature over a specified number of years. A venture capitalist not only brings in moneys as ?equity capital' (that is. business contacts. more risky venture. Offsetting the high risk the investor takes is the promise of high return on the investment. Mathematically. then. or other units of a security traded in a certain time period . etc. brand-equity. Underwriter An investment banking firm committed to successful distribution of a public issue. 100 per cent turnover means a fund. Commission varies with the size of the trade. the venture capitalist will nurse you through. Volatility A measure of the fluctuation in the market price of the underlying security. Venture Capitalist An investor involved in financing a company's operations before going public. Undervalued A stock trading below its fair value. If you have a good idea that can be commercialised and you can convince the venture capitalist of the workability of your idea and of your own ability in seeing it through. on average. strategic advice. Value Traded This is the total monetary value of all trading in a security for the market day. including the broker's commission and taxes. sold at a discount and redeemed at full face value. buy) into its own books. he's taking all the risks on an untried idea. Turnover Ratio How often a mutual fund changes its portfolio holdings. Some countries also provide for underwriting on best effort basis. the more volatile the stock and the greater potential for wider swings in price (both ways). It is calculated by multiplying the volume traded by the average sale price. Venture Capital Professional moneys co-invested with the entrepreneur usually to fund an early stage. His return is high but. Treasury Bills Shorts-term debt issued by the central government. without security/charge on assets) but also brings onto the table extremely Valuable domain knowledge.Transaction Costs The costs of trading securities. The higher the turnover rate. bonds. changes all the stocks in its portfolio once a year.
even in the later case. 3.A periodic record of a customer's account that is issued at regular intervals. a currency. A bill of exchange is an order made to the buyer by the seller that in exchange for the goods or services sold by him on credit. Actually bill in the banking parlance means a bill of exchange drawn by a seller on the buyer whenever he sells goods or services on ?payment later? basis.00 interests annually. the buyer is required to pay on a specific date a certain amount with or without interest to him or to any other directed party. it settles the claim of the beneficiary in money terms only. 4. and is selling for 10. Interest and dividends paid to mutual fund shareholders as a percentage of share price (Net Asset Value). Bank Guarantee .00/10. the bank does not fulfil the contract. For instance. The bill is routed through the bank for collection of amount from the buyer. if its customers fail to deliver. showing all transactions recorded for the period in question. Working Capital Current assets minus current liabilities. Commercial invoice is a part of the document submitted to the bank by the seller. Under finance guarantee. the bank guarantees the beneficiaries (The person named in the guarantee to receive the guaranteed sum under stated circumstances). Warrants may be issued over securities such as shares in a company. Bank Statement . which is traded on a Stock Exchange's equity market. including the number of times the account was past due or over limit. the bank guarantees performance of a contract or goods/ services supplied under a contract by its customers. the amount of money returned to investors on their investments.00) 10 per cent. certain amount on behalf of its customers who has commercial relationship with the beneficiary. Under performance guarantee. Such a transaction is also referred to as a credit transaction. 2. Also known as rate of return. an index or a commodity.The payment history of an account over a specified period of time.Wall Street A street in the city of Manhattan .00.A standard clause in a mortgage instrument permitting the lender to demand full payment of principal from the borrower upon default of the obligation Account History . if a bond pays 1. Dalal Street is the Indian counterpart in Mumbai. the yield is (1. Also the effective interest rate on a bond.Bank Guarantee could be a finance guarantee or a performance guarantee. Warrant A warrant is a financial instrument issued by a bank or other financial institutions. 5. . However. Acceleration . New York where several major brokerage firms and stock exchanges are located. 1. obligation of its customer.Usually mistaken for commercial invoice. Bill . Yield In stocks and bonds.
7. The banker provides good platform for knowing something about the business enterprise with which you are likely to deal. With the growth of commerce within a country and abroad. Determination of annual average as rate of Interest is on annual basis i. 10000/. The cash credit facility is unique to India.10.A credit facility under which a customer draws up to the preset limit. 5 Bn. overdraft. not less than Rs. cash credit etc. held by the bank.through out the year. most of the times. on a daily product basis the interest is determined as under. 1233/-. trade is done with the organizations about which you are in the dark. Suppose a bank has total deposits of Rs. Cash Reserve Ratio . This means that on a 365 days per year basis.for 45 days at 6% p.100 Bn and is required to maintain a CRR of say 5%. like loan. 8. the latter is extended only to business bodies. as in most of the countries it is called overdraft.e. Calculation of interest at 6% p. At times it is referred to as credit information report. Step No 1. The purpose of cash credit is for working capital. RBI decides from time to time and at present it is 5% of the deposits. Step No 3.98.for 45 days is equivalent to drawing Rs. This much amount is impounded and kept in the free form. drawing Rs. and less for business. Further the cash credit facility is more or less on a permanent basis so long as the business is going on. Credit Report . This acts as a buffer to the bank. on annual basis. In India. for this. subject to availability of sufficient security with the bank. . i.Called in short CRR. The operations are similar to overdraft. There are accepted abbreviations internationally for denoting the soundness or the lack of it of a business enterprise. There is no hard and fast rule in this behalf.a. 10000*45 days= known as product= 450000 Step No 2. Cash Credit . Bankers report also means the same.e. Some banks do take 360 days in a year also.06= Rs. At other times it is also called customer?s confidential report. Internationally at the end of specific period the overdraft facility is withdrawn and the customer is required to pay back the amount lent by the bank. 73. 9. 1233/. Daily Product Basis .000/. The banker provides this information for a fee which includes the fees that they have to remit to international credit agencies.It is called by different names.g A bank has given a customer an overdraft facility to the extent of Rs. This means that the bank should maintain in current accounts with the central bank or any other approved bank balances. the basis is 365 days in a year. e.6.a is equal to 1233*0. These abbreviations are commonly used in such reports. And the bank cannot lend this money. The difference between an overdraft and cash credit account is that while the former is extended more to individuals.This is the basis on which interest is usually determined on credit facilities. 450000/365=Rs. You can seek confidential informations about your prospective customers about whom you do not have sufficient knowledge.
This means that any credit to the account after the tenth of the month is ignored for the particular month. 100/-. 100/and in case the bank gives the finance against the same.is known as ? discount?. The percentage of margin requirements varies as per RBI guidelines. The buyer approaches his bank. Under this facility. 11. either in one installment or in two or three installments.A lump-sum amount given to the customers. which. ?irrevocable? (cannot be cancelled by the buyer without the consent from the seller). The banks sanction the credit limit after retaining a margin on the value of the security offered. 2/. 14. One of the terms of supply is that buyer will establish a letter of credit in favour of the seller through his bank. Then. the buyer?s bank gives commitment of payment to the seller through his bank. the buyer?s bank will pay the amount of bill drawn by the seller on the buyer under this agreement. agrees to extend this facility. which is universally on annual basis can be applied to determine the quantum of interest. If the value of the bill is Rs. The conditions are: The seller should furnish proof of dispatch of goods or services and submit all the documents required under the L/C. Loans against property and for the purpose of owning flats/ apartments/ houses are known as mortgage loans. 12.This means that by adopting daily product basis we are converting the amount drawn for a period less than a year to its annual equivalent so that the rate of Interest. on certain conditions. .Less than face value.Seller ?A? enters into contract with Buyer ?B?. the product is taken on a monthly basis. the amount of finance will be less than Rs. If interest is recovered separately it is usually on a quarterly basis. Monthly Product Basis . Interest may be recovered separately from the customer who is called borrower or combined with the installment.In India. In case it is combined with the installment it is called equated installment. 10. International letter of credit are by and large. the rule is interest is paid on the minimum balance in the account between the 10th and the last day of every month. and repayment over a period of time in monthly or quarterly. Discount . in the savings account. The following minimum credit balances 13. or half yearly or annual (very rarely) installments. Loan . Accordingly let us say for example. while debit is taken into account. 98/-. The commitment is dependent upon the seller fulfilling specific conditions as per the L/C. Discount is the interest recovered upfront. say Rs. while the difference of Rs. Rs 98 is the discounted value of the bill for Rs. Margin Money Margin money is like a security deposit retained by the bank till the loan is fully settled. especially in the case of those bills for which payment will be forthcoming after a specific or extended period. 100/-. Letter of Credit .
In case the overdraft is given to the business enterprises and it is for day-to-day operations.Whenever a loan is taken especially for acquiring fixed assets. on real time basis).17. This is not so in the case of personal loans. This may be a temporary accommodation to tide over temporary cash crunch or on a regular basis. Interest is charged and there is no period on non-levy of interest.e. This is also known as moratorium period.An extension of current account in which the customer is allowed to withdraw more than the credit balance lying in the account. It starts after the fixed assets starts giving a return especially in the case of business enterprises. Remittance ? A facility. That is interest although levied. Remittance can be in the form of Demand Draft (DD). Then divide the sum of the monthly products by 12. RTGS refers to the settlement system where. Again if this is the case interest on interest is recovered. The period is longer in the case of industrial loans and minimum or absent in case of personal loans. Overdraft .in the savings account earning 1000 3. 2005 May.33 and the interest at 3. 2005 April. It should be noted that during this period. the repayment does not start immediately. 17. 2005 March. makes the funds available to the customer or any other specified party at the required place. by which its customers at one place makes funds available to the bank and the bank in exchange. settlement of payments on an individual order basis are done on continuous basis. If permitted on a regular basis. you need to find out the annual equivalent of the deposit that the customer has kept in his savings account. Although there may be a period of non-recovery of Interest. This is the way the interest is found out on a monthly product basis. withdrawals are allowed up to a ceiling (called ?a limit?). within the same country or abroad. subject to availability of sufficient security with the bank. Repayment Holiday . In order to determine the correct half yearly interest. it is known as ?working capital?. 2005 Suppose the Interest is payable every half-year and accordingly this customer will be entitled to 1. 15. for the half year on this work out to be Rs 8.a. 2005 February. The period during which there is no repayment is known as repayment holiday period. not recovered for a specific period.5% p. International Money Order (IMO) etc. Electronic mail transfer (EMT) through computer networking (or satellite channel). The annual equivalent amount is RS 233.75 % for the half year ending June 2005.5 800 150 250 300 300 % pa interest in India January. 2005 June. mail Transfer (MT). without netting debits with credits across the books of a central bank. Telegraphic Transfer (TT). RTGS system is also defined as a gross settlement system. 18. . in which both processing and final settlement of funds transfer instructions take place continuously (i. Thus we can say that RTGS system 16.
For example. . One of the main attraction of the RTGS systems is that payee banks and their customers receive funds with certainty. In India at present it is 25%. Even if the arranging bank participates in the loan. but would assume responsibility for getting ?in principle? sanction from all participating banks and financial institutions. An Indian company wants a foreign currency loan of 100 mn Rs. In the above example. This again acts as buffer to the bank and prevents the bank from lending the entire amounts of deposits kept with it by various customers. Syndication fees are part of non-interest income as no funds are involved in the activity. Statutory Reserve Ratio ? Called in short SLR. RTGS is regarded as the centerpiece of an integrated payments system. quality. enabling them to use the funds immediately without exposing themselves to risk. 25 Bn. auditor ensures himself about the quantity. 20. treasury bills of the government and any other approved securities. one party may default on its clearing obligations to one or more counter parties. settlement risk consists of two components namely credit and liquidity risks. The bank may or may not participate in the loan process. This can happen due to various reasons. Thus. rather than just at the end of the day. e.g. Making arrangement for this is known as syndication. during the day. In stock and receivable audit. by granting a portion of it. This will be kept in easy-to?encash securities like. It gets paid separately for this activity. RTGS is a system where both the processing and final settlement take place on real time basis. composition and actual value of the stock and the debtors. suppose the bank is supposed to maintain SLR of 25%. this means that over and above CRR the bank is expected to keep aside an amount of Rs. Should not be confused for granting of loans. or so-called finality. Credit risk arises when a counter party fails to meet an obligation for full value on due date and thereafter 19. 21.reduces settlement risk because inter-bank settlements are done throughout the day. syndication is different from it. Stock & Receivables Audit is one of the most important aspects of the overall exercise of audit of any organization. Settlement risk refers to the risk when a settlement (in a transfer system) does not take place as expected. Syndication ? Making arrangement for loans for borrowers.
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