This action might not be possible to undo. Are you sure you want to continue?
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. buildings.. permanent staff wages. and that thereafter the buyer assumes responsibility for the goods and the costs of transport and the liability. fixed assets Assets held for use by the business rather than for sale or conversion into cash. rates. Taxes. It's in this listing because it's commonly misunderstood and also has potentially significant financial implications. etc.. Taxes and Depreciation. EBIT = Earnings Before Interest and Taxes. EBIAT = Earnings Before Interest after Taxes. eg. insurance and loading. and Amortization. (Earnings = operating and non-operating profits (eg interest. fixtures and fittings.' ratios and acronyms: EBT = Earnings Before Taxes. until and including the goods being loaded at the (nominated FOB) port. and EBITDA = Earnings Before Interest. depreciation of capital items. building lease costs.There are several 'Earnings Before. From the seller's point of view an FOB price must therefore include/recover his costs of transport from factory or warehouse. Depreciation is the non-cash charge to the balance sheet which is made in writing off an asset over a period.'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). FOB . 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. eg. dividends received from other investments). The FOB expression originates particularly from the meaning that the buyer . EBITD = Earnings Before Interest. because the seller is unable to charge these costs as extras once the FOB price has been stated. 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. FOB Hamburg or FOB Vancouver).. eg. 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. (which is now now often linked to a port name. insurance. fixed cost A cost which does not vary with changing sales or production volumes. Amortisation is the payment of a loan in instalments. An importing buyer would typically ask for the FOB price. equipment.
forecast See 'budget' above.is free of liability and costs of transport up to the point that the goods are loaded on board the ship. goodwill Any surplus money paid to acquire a company that exceeds its net tangible assets value. most commonly 'Freight On Board'. which is a matter for separate negotiation. seller has liability for goods. While technically incorrect also. beware of buyers stipulating 'FOB destination' . If in doubt ask exactly what the other person means by FOB because the applications have broadened. used alone. if you are an exporter. even to the extent that other interpretations are placed on the acronym. gearing The ratio of debt to equity. but the point at which goods are 'FOB' is no longer likely to be just the port of export . the FOB principle does not correlate to payment terms. 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. In recent years the term has come to be used in slightly different ways. In summary: FOB (Free On Board). gross profit . not for agreeing payment terms. which is technically incorrect.it can be any place that it suits the buyer to stipulate. While liability and responsibility for goods passes from seller to buyer at the point that goods are agreed to be FOB.the principle is the same. FOB is a mechanism for agreeing price and transport responsibility.it means the exporter is liable for the goods and pays transport costs up until delivery to the customer. ie. nowadays FOB (Free On Board or the distorted interpretation 'Freight On Board') has a wider usage . usually the relationship between long-term borrowings and shareholders' funds. insurance and costs of transport until the goods are loaded (or delivered).. So. In modern times FOB also applies to freight for export by aircraft from airports. 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). terms such as 'FOB Destination' have entered into common use.
beyond any other assurances or contracts made with the customer. See also 'net profit'. The common system. and often should seek professional advice and guarantees to this effect from their own financial services provider. and 'import letters of credit'. In short.) When an exporter agrees to supply a customer in another country. to the seller. which should obviously reflect the agreement between the seller and buyer. This gives the supplier an assurance that their invoice will be paid. The customer's bank charges a fee to issue a letter of credit. is for the customer's bank to issue a 'letter of credit' at the request of the buyer. Letters of credit are often complex documents that require careful drafting to protect the interests of buyer and seller. The seller should also approve the wording of the buyer's letter of credit. 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. letters of credit These mechanisms are used by exporters and importers. or gross profit. which has been in use for many years. and the customer pays this cost.Sales less cost of goods or services sold. and often abbreviated to simply 'margin'. In other words an IPO is the first sale of stock by a private company to the public. 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 . IPOs typically involve small. (Also called 'export letters of credit. young companies raising capital to finance growth. 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. Also referred to as gross profit margin. An IPO is effectively 'going public' or 'taking a company public'. For investors IPO's can risky as it is difficult to predict the value of the stock (shares) when they open for trading. the exporter needs to know that the goods will be paid for. 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.
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. or both.buyer's bank. letters of guarantee There are many types of letters of guarantee. 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.whereby the bank assures the buyer that the supplier will not refuse a contract if awarded. these are complex documents with extremely serious implications. While a letter of credit essentially guarantees payment to the exporter. Advance Payment Guarantee . and are issued by the supplier's or customer's bank depending on which party seeks the guarantee. It is important therefore for sellers to understand all aspects of letters of credit and to ensure letters of credit are properly drafted. but also the timescales involved. It is also important for sellers to use appropriate professional services to validate the authenticity of any unknown bank issuing a letter of credit. a letter of guarantee provides safeguard that other aspects of 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. failed to meet the terms. These types of letters of guarantee are concerned with providing safeguards to buyers that suppliers will meet their obligations or vice-versa. 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. method for. approved and their conditions met. For this reasons suppliers and customers alike must check and obtain necessary validation of any issued letters of guarantee. Typical obligations covered by letters of guarantee are concerned with: Tender Guarantees (Bid Bonds) . checked. The 'compliance' of the seller's documentation covers not only the goods or services supplied. including obligations concerning customs and tax. format of and place at which the documents are presented. 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. etc. • There are other types of letters of guarantee. then the buyer's bank will pay the seller the amount due. • • Performance Guarantee .
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 . largely due to the interpretation of the 'discount rate' used in the calculations to enable future values to be shown as a present value. by measuring the relationship between current assets (ie those which can be turned into cash) against the short-term debt value. The other side of the balance sheet will show Current Liabilities along with various Assets. While there are many other factors besides a positive NPV which influence investment decisions. showing where the money is now. Logically if a proposition has a positive NPV then it is profitable and is worthy of consideration. along with Share Capital and Reserves make up one side of the balance sheet equation showing where the money came from. net present value (npv) NPV is a significant measurement in business investment decisions. a new product line. also referred to as net benefits) that will be derived from a particular investment (whether in the form of a project. a proposition. net current assets Current Assets less Current Liabilities. NPV is essentially a measurement of all future cashflow (revenues minus costs. minus the cost of the investment. 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. Long term liabilities. liquidity ratio Indicates the company's ability to pay its short term debts.liabilities General term for what the business owes. or an entire business). If negative then it's unprofitable and should not be pursued. Corporations generally develop their own rules for NPV . short-term loans). (current assets/current liabilities) Also referred to as the Current Ratio. NPV provides a consistent method of comparing propositions and investment opportunities from a simple capital/investment/profit perspective. There are different and complex ways to construct NPV formulae.
Obviously whenever the stock price changes. notably after deduction of fixed costs or fixed overheads. not an absolute measure to rely on by itself. Step by step. in which case the term is often extended to 'net profit before tax' or PBT. As earnings per share are a yearly total.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. with other company's P/E ratios in the same market sector. p/e ratio (price per earnings) The P/E ratio is an important indicator as to how the investing market views the health.calculations. performance. More meaningful P/E analysis is conducted by looking at earnings over a period of several years. The P/E ratio is also a highly complex concept . so does the P/E ratio. to calculate the P/E ratio: . opening/closing stock See explanation under Cost of Sales. NPV is not easy to understand for non-financial people . and with the market as a whole. Net strictly means 'after all deductions' (as opposed to just certain deductions used to arrive at a gross profit or margin). Net profit normally refers to profit after deduction of all operating expenses. including discount rate. net profit Net profit can mean different things so it always needs clarifying. 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).wikipedia seems to provide a good detailed explanation if you need one. 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. the P/E ratio is also an expression of how many years it will take for earnings to cover the stock price investment. prospects and investment risk of a public company listed on a stock exchange (a listed company). Net profit normally refers to the profit figure before deduction of corporation tax. P/E ratios are best viewed over time so that they can be seen as a trend. P/E ratios should also be compared over time.
Divide the price of the stock or share by the earnings per share. eg. 4. . generally a gross profit margin (sometimes called 'contribution'). restricted funds These are funds used by an organisation that are restricted or earmarked by a donor for a specific purpose. usually a year. which often has little to do with cash. quick ratio Same as the Acid Test. The P&L typically shows sales revenues. but also can be monthly and cumulative. 3. This gives you the earnings per share.1. overhead An expense that cannot be attributed to any one single part of the company's activities. 5. A sterner test of liquidity. This gives the Price/Earnings or P/E ratio. A fully detailed P&L can be highly complex. The relationship between current assets readily convertible into cash (usually current assets less stock) and current liabilities. which can be extremely specific or quite broad. fixed overheads and or operating expenses. reserves The accumulated and retained difference between profits and losses year on year since the company's formation. 2. profit and loss account (P&L) One of the three principal business reporting and measuring tools (along with the balance sheet and cashflow statement).. Establish total profit after tax and interest for the past year. The P&L is essentially a trading account for a period. endowment or pensions investment. It shows profit performance. cost of sales/cost of goods sold. Basically the P&L shows how well the company has performed in its trading activities. stocks and assets (which must be viewed from a separate perspective using balance sheet and cashflow statement). Divide this by the number of shares issued. and then a profit before tax figure (PBT). but only because of all the weird and wonderful policies and conventions that the company employs.
etc. 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. with which the organisation using the funds must comply. etc and liabilities. The source of restricted funds can be from government.profit depends on various circumstances.maximum return on investment. In simple terms this the profit made from an investment. after all it's what most business is aimed at producing . not least the accounting conventions used in the business. 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. 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.B. (profit before interest and tax/capital employed x 100) return on investment Another fundamental financial and business performance measure. A percentage figure representing profit before interest against the money that is invested in the business. return on capital employed (ROCE) A fundamental financial performance measure.research (in the case of donations to a charity or research organisation). otherise you might as well put your money in a bank savings account. philanthropic organisations. a . In this sense most CEO's and business owners regard ROI as the ultimate measure of any business or any business proposition. private donations. grant-awarding bodies. net of depreciation. 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. which may also entail specific reporting and timescales. such as goodwill. A company's book value might be higher or lower than its market value). but clarify this with the person using the term . liability or activity. foundations and trusts. The practical implication is that restricted funds are ring-fenced and must not be used for any other than their designated purpose. such as debt. A glaring example of misuse of restricted funds would be when Maxwell spent Mirror Group pension funds on Mirror Group development. N. or the investment could relate to a part of a business. trademarks. 'Return' generally means profit before tax. bequests from wills. 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.
The terminology dates from times when such communications were literally 'wired' before wireless communications technology. 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. continually circulating. a new factory. working capital Current assets less current liabilities. and work in progress. commission payments. shareholders' funds A measure of the shareholders' total interest in the company represented by the total share capital plus reserves. to finance stock.new product. commonly used/required for import/export trade. debtors. . a new piece of plant. cable or telex. which needs to be taken into account when arriving at the correct figures. between a bank and an overseas party enabling transfer of local or foreign currency by telegraph. representing the required investment. or any activity or asset with a cost attached to it. share capital The balance sheet nominal value paid into the company by shareholders at the time(s) shares were issued. eg materials. t/t (telegraphic transfer) Interntional banking payment method: a telegraphic transfer payment. Bear in mind that costs and profits can be ongoing and accumulating for several years. fuel.
stock exchange that represents shares of a foreign corpora A person with expertise in evaluating financial investments. Average Maturity Average P/E Ratio Average price/earnings ratio of stocks owned by a mutual fund. The average time to maturity of securities held by a mutual fund. Most analysts specialize in a single industry or business sector.American Depository Receipt (ADR) Analyst A certificate of trading on a U. Changes in interest rates have greater impact on f . usually one year. Annuity Appreciate A contract sold by life insurance companies that guarantees a specified payment at some future time. you should learn to make your own judgments company whose shares are recommended by the analyst's reports. Auction A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. Assets Any possession that has value in exchange in the sense that it has buyers. Approved List The list that tells you which shares are approved for the purpose of pledging them with the bank against loan. etc. Helps in determining the level of activity of currently active stocks. Do not blindly follow analyst's recommendations. For example. 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.S. bonds or real estate. if shares of stock you own in a company have risen from five to ten. Arbitrage Buying in one exchange and selling in another to take advantage of price difference. He performs investment research and makes recommendations to ins hold. Asset Allocation The process of dividing your funds among different classes on investment such stocks. The problem is that no two analysts are usually in agreement is a "Consensus Rating" below. it has " describe your blood pressure after you finds you have just invested in a dud stock. You could further al foreign. u An increase in any investments value. averaged over a period of time. Average Daily Share Volume The number of shares traded per day. money is the medium of all excha stock exchange is always in terms of money. In the stock market. you have to sign a waiver that no liability attaches to the analys true.
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. Bonus Shares Shares allotted to the existing shareholders by capitalizing the reserves into additional capital. This is the reverse of the bull market. A long term promissory note issued by a corporati other entity such as state or municipal governments or the Central Bank of the country. When the market expects a company the shares normally goes up. Book value Bottom line Total shareholder equity from the balance sheet divided by the number of shares outstand . Bonds normally have a set maturity (term them. 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.also known as deferred load. Investment in such stocks is more for capital app most blue chips trade at high market prices. Usually used to describe changes in bond yields. Lo holding on to stocks for a long period. Bear An operator who expects the share price to fall. 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. An opportunity to buy at low prices. Hence.Backend load Balance Sheet Sales charge paid when selling a mutual fund . 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. Blue Chip Stock Shares of well-established and financially strong corporations. 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. 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. Following a bonus issue. (For instance. Bond Rating A grade evaluating the quality of a bond. though the number of total shares increase. 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. in hope (usually) fulfilled if you wait long enough) of an upturn. In simpler word. For instance.01 per cent. 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. a ten basis point increase means th point change is 1 per cent.
equipment and other items with a useful lifetime exceeding one year are categorized as assets to be depreciated over a number of years. Capital Employed Total liabilities and equity less non-interest bearing liabilities. Capital gains distributions (if any) are usually made annually. Capital Gains Distribution Payments to mutual fund shareholders of profits from the sale of securities in a fund's portfolio. Capital Gains Difference between the price at which a financial ashes is sold and its original cost (assuming the price has gone up). Capitalize When costs of items such as buildings.50 is the change in stock price. Cash Settlement Payment for transactions done in one settlement on the due date. Cash Flow per Share Cash flow from operating activities divided by average number of shares. if stock XYZ opened at 10. Capitalization The value of a company as measured by the market price of its common shares. Change in Stock Price The change in stock price is recorded in points. The Exchange may relax the limit after a cooling off period of about half an hour. rather than being expensed in the year of purchase.50. Capital Turnover Annual total Revenue as a percentage of total assets. Circuit Breaker A mechanism used to restrain the market when it gets overheated. multiplied by the total number of shares that have been issued. For example. The change in stock price is the difference between the opening stock price and the current price the stock is selling at. .50 it would be up +1. and is now selling for 11. Carry Forward Settlement where positions are carried forward from one settlement to another settlement.Call Option An option where the buyer gets the right to buy the underlying security at a specified future date. The +1. The fraction amount depends on the security being traded.
sold. shares or goods and titles to immovable assets. Commission A fee charged by brokers for their service in facilitating investment has to be handled through brokers registered on that exchange. you cannot trade your boss here. In a narrow sense. temporarily or permanently. If you feel that your bank works at a snail's pace. That asset be mortgaged. This represents an encumbrance on the title. rented or otherwise transferred. It includes negotiable instruments.S. As many brokers have different ratings systems. Types of commodities include agricultural products. the companies send back the certificates received for transfer citing reasons for their inability to do so. Stockholders participate in a company's profits or losses through dividends and changes in the stock's market value. products traded on an authorized commodity exchange. Banks are reluctant to authorize loans against assets which have encumbrances and prefer a clear title. The netted purchase and sale positions of the trading. their recommendations are standardized so that a consensus can be calculated . Share price is determined by supply and demand for fund shares. metals. to another person. Consensus Rating This method is prevalent in the U. but not (yet) in India . try defaulting on a loan . It is the average of analyst's recommendations for single entity.the bank will encase your collateral so fast you'll never know what hit you till it is too late. Closed-End Fund Investors of such a fund buy shares from other share holders and sell shares to other investors.Clear Title A title to an asset proves your legal ownerships of that asset. No. 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 previous close is the price a stock closed on the previous day. Clearing House It is a legal counter party to both legs of every trade. foreign currencies. Members are settled through the clearing house. Common Stock Equity or ownership in a corporation. Company Objection In some cases. financial instruments and indexes to name a few.A. Commodities Articles of commerce or products that can be used for commerce or used as raw materials in producing other goods. petroleum. Collateral It is used to provide a guarantee for a loan. The letter sent by the company is known as Company Objection. Close The closing price is the last traded price for the stock on a particular day.
Convertible/Equity Related Loan Loan convertible into equity as per pre-agreed terms. A share is described as cum bonus dividend when the purchaser is entitled for current dividend. A street paved with hopes and broken dreams. India. that is. if an organization Tanks the maximum you can lose is the value of your equity holding. Cum Rights A share is described as cum rights when the purchaser is entitled for current rights Dalal Street A street in Mumbai. maintained by I/B/E/S. Hold Under perform. Cost of Sales Cost of materials and labour required to produce products or services. Strong Buy 2. . The owners are liable only to the extent of their investment. Assigning a numeric value to the broker text enables I/B/E/S to calculate a consensus recommendation. where the Mumbai Stock Exchange building is located. 4. and 5.The I/B/E/S ratings are calculated using a standard set of recommendations. for tax. Corporation A business organization that. not moving significantly up or down. A corporation has limited stock liability. Coupon Rate The interest rate on a bond. Convertible Bond A bond that can be exchanged for shares of stock. Cum Bonus A share is described as cum bonus when the purchaser is entitled for current bonus. A corporation's owners are the shareholders. This consensus recommendation appears as the mean (average) of the assigned values. each with an assigned numeric value: 1. Sell Each recommendation received from the analysts is mapped to one of the I/B/E/S standard ratings. Buy 3. Gross profit is sales minus cost of sales. 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.
Depositories An organization which holds securities of investors. Deferred revenue When a share is bought or sold for the purpose of receiving or effecting deliveries. 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). financial institutions (FI's). Default Failure to pay back a debt. It holds securities in an account. According to SEBI regulations. 100 crore. . transfers securities between accounts on the instruction of the account holder. on request in electronic from through a registered Depository Participant (DP). etc. Debt to Equity (Total) Total (short and long term) debt divided by total shareholder equity. Depreciation A non-cash accounting charge representing the loss in value of hard assents such as buildings and machinery over the accounting period. Depository Participant (DP) A DP is a representative of the depository in the system. It is comparable with a branch of a bank if a Depository is likened to a bank.Day Order The quantity that remains untraded is not cancelled until the end of the day. low ratio may indicate low risk. the shares are 'dematerialized'. Debt to Equity (long term) Total long term debt divided by total shareholder equity. stockbrokers. Deferred Expense Balance sheet liability reflecting expenses shown on the income statement that haven't actually been paid. Debt to Equity Ratio Long-term debt divided by shareholders' equity. A DP is offered depository services only after it gets proper registration from SEBI. showing the relationship between long-term funds provided by creditors and funds provided by shareholder. The DP maintains the client's securities account balances and keeps him informed about the status of holdings. In other words. a high ratio may indicate high risk. Minimum net worth stipulation required by SEBI for registering a DP is Rs. It can be compared with a bank. banks. custodians. can become DPs. facilitates transfers of ownership without having to handle securities and facilitates safe-keeping of shares.
'highs' and 'lows' are relative not absolute.Derivatives A financial contract between two or more parties based on the future value of an underlying asset. currency. even zero. For example. Any increase over your purchase price is a gain. don't allow them to accumulate too long. option. Of course. Dividend Yield Total of 12-months' dividend paid (historical or forecast) divided by the latest share price. The price used is usually the market price at the end of the period under review. Dip A drop in the price of a stock that is temporary making it the ideal time to buy the stock. The value is totally 'derived' from the value of the underlying asset such as securities. trucking and automobile manufacturing because each industry is significantly affected by oil prices and interest rates. Dividend Per Share The amount of dividend paid out per share. rather than cash. in turn. . if a company is stingy on its dividend policy. the value of a call option on reliance (derivative) fluctuates with the price of reliance stock. (Dividend rate x nominal value of share)/100. linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities. A precept common to all businesses: buy low sell high. but you should also learn to recognize factors that may impact a particular industry. An investor seeking diversification for a securities portfolio would purchase securities of firms that re not similarly affected by the same variables. Book your profits (or cut your losses) as you go. where the corporation keeps its entire earnings. requires that you take into an account innumerable factors that could affect the health of the industry. future. This. but many times it is less. for instance. Cash dividends are paid out of corporate earnings and the percentage of earnings paid out varies from corporation to corporation. the end of a financial year. commodities. A stock dividend gives the shareholders additional shares of stock or a fraction thereof. you can always take an analyst's help. It is not mandatory for accompany to distribute dividends. At the same time. You can do it! Dividend Cash payment made to the shareholders out of the profits of the company. Never forget.or mid-term future. Of course. and vice versa. Proper investment diversification is intended to reduce the risk inherent in particular securities. etc. the percentage of corporate earnings paid out runs from 40 to 80 per cent. bullion. it is any hybrid contract of a pre-determined fixed duration such as forward. it is not going to find many investors. 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. Generally. 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). live stock. diversification is essentially for investors not traders. Diversification The acquisition of a group of assets in which returns on the assets are not directly related over time. Discount The difference between a bond's face value and when to trade a security. This calls for clear thinking and common sense. an investor would not want to combine large investment positions in airlines. For instance. etc. Options and similar other instruments are examples.
Chevron. You will not be directly concerned at what happens on the Dow. Just a few of the 30 companies in the DJIA are: American Express. transportation stocks and bonds. Due Diligence The process whereby an in-depth examination of a company's business prospects is conducted. It is like an overdraft limit. But remember.Documentation The papers that are needed to process your loan application. 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 . In this index. Bethlehem Steel. . Disney. Boeing. the Dow average is global leader and is usually reflected by exchange around the world. But in this case it is based on the market values of shares put up as collateral against a loan. 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. Coca-Cola. The limit fluctuates in line with the market price of the shares. you also have to keep in touch with global trends. Usually when a merger. The wonders of globalization! You don't have enough problems trying to understand the trend of Mumbai stock prices. there are 30 industrial stocks thought to be representative of industrial stocks in general. General Motors and IBM. a financial and investment publisher based in New York . Dow Jones & Company. also calculates averages for utility stocks. sale or acquisition of a company is intended. AT&T.
Ex Bonus A Share is described as ex dividend when the buyer is not entitled for the dividend. the market believes that the by number of shares at the close of the period. The seller remains the beneficiary. Effective Interest Rates The compounded interest rate calculated on the actual inflows and outflows of cash. In the bizarre world of loan finance. Exposure When the value of your asset/product pledged with a bank against loan is reduced by market price fluctuation or for other reasons. The limit allowed to the broker by his exchange or to the customer by broker. If the market price is greater than the equity per share. And when a bank feels insecure. The Ex Rights A share is described as ex rights when the buyer is not entitled for the Rights. EMI Equated monthly installments to be paid by the borrower in repayment of the loan taken (includes principal and interest). Ex rights shares are cheaper than investment oriented players. EBIT Effective before interest and taxes. Also known as operating income. If you think you can save s EMI agreement does not contain a pre-payment penalty. lenders prefer that you do not repay your loan befo Equities Another name for shares. Expiry Date The date and time after which a writer of an option cannot exercise his rights. 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. The seller remains the beneficiary.Earning Per Share (EPS) Profit after tax and minority interest divided by average number of shares. It is the total value up to which one is allowed to hold o . Emerging Markets Developing countries. it increases you the return of the loan. Equity per Share Shows how much of a company's equity one share represents.
don't want to work at all period. While there is nothing wrong in depending on an analyst. A futures contract is a legally binding agreement to buy financial securities at fixed time in the future at a price agreed upon today.Fiscal year is often abbreviated FY with a date. If you are among them. past and projected financial and profitability. British Babus didn't want to work throug babus. if you opt for a floating bank rate it could be either good with a rise in the bank rate. 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. quantity and quality of a futures contract is standardiz contract is opened and is negotiated between buyers and sellers. 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. this has been known to happen in th Forex Foreign currency exchange markets. Do you know how to read a people who play the market cannot analyze a balance sheet or cannot draw valid conclusions from it. In India . b stores find it easier to wind up their yearly accounting on January 31 instead of December 31. in many English speaking countries. treasury bo Capital provided to an entrepreneur who has a proven product. 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. Futures are traded either electronically or via open outcry on a traded either electr Exchange offering the particular contract. find a good analys understand a balance sheet and profit and loss account. Flat Rate of Interest Percentage representation of the amount of annual interest on the total loan amount. This is a British legacy. . to start commercial production and marketing.Face Value The nominal value of a security. Fundamental Analysis A method of stock analysis based on the management of the company. Futures Contract An agreement between parties for specified asses for performance on a fixed day in future. most of the time. For example. it will add immensely to your co conclusions. bonds stocks. it is also reduced when the interest rates falls (yes. The delivery period. not covering market expa Any Consecutive 12-month period of financial accountability for a corporation or government. Financial Futures First Stage Capital Fiscal Year Legally binding agreements to buy or sell financial instruments at a future date (for example. Remember. For ex year covers the period June 1 to May 31 of the following year.
This can be expressed daily.10. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market. Gross profit is sales minus cost of sales. For example. since there is no win or place. or wait for a further increase. In securities trading. hand on to him. but the high for the year can be 50. but are expected to grow. High The highest price that was paid for a security during a certain time period. weekly. 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. on the first day of listing on the exchange it is quoted at Rs. . Guarantor A person who promises to pay your debts if you are unable to pay them yourself. and monthly or for a 52-week period. What would you do if. Let's say you buy a new offering at Rs. With a little paper work. For example using a futures a contract to reduce the impact of price fluctuations in a cash or physical market. but not transferring legal ownership to the lender . He's like money in a bank.which does not mean that you will not lose your collateral if you default on repayment. Never let him down. Growth Stocks Stocks that pay low dividends. If you find a good guarantor. Hot Stock A stock whose price rises quickly the day it goes public. Strictly for long term investors who have a vision for the future and are not interested in maximizing short term profits. Gross Profit Profit a company makes on goods and services before considering overhead expenses. 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 high for the day can be 20. 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. Gross Margin Gross profit divided by sales. the lender can sell your collateral to realize his payments.25? Sell. Like when you may like to cover possible loss by also backing the horse for a place. Hedging A practice of taking one market position to offset potential losses in another.Goodwill The amount by which a company's shareholder equity exceeds the value of its hard assets.
But remember you have to keep an eye on th mean ?for ever?. These 30 stocks. this means he pays more for what he uses. etc. Income Stocks Stocks that have consistently paid high dividends. 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. Insider Information Any knowledge about a company. Utili particular sector. The rate at which prices are rising. Industry Group Companies in related businesses. financial institutions. are a miniscule percent of the total lis capitalization. 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. If you are holding cement shares. Sectored indices like Industrial. its products.Income Statement A record of a company's sales and expenses over a particular year or quarter. which it's numerous levels of appeals. banks. in number. mutual fund. stocks of that exchange. 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. they represent anything up to 85 per cent. should you hold on to them. Interest Interest Coverage Intraday Stock trading tracked in periods shorter than one day. banking. 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 . Contrary to what you might think after some time on the stock exchange. Intangibles Soft assets such as patents. there really are such stocks. Usually they represent about 80 to 85 percent of the market capitalization and trading. Index/Indices An index is managed and publishes either by a stock exchange or a professional financial and investment body. trademarks. a surge in construction activities or higher government taxes? There could be a number of reasons. when the inflation rate is 2 percent. For the stock market player. it could be both because there is a shortage in output. each of them havin industry. It is representative of the market sentiment. If you can't le Inflation Rate An important economic indicator. Institutional Ownership Shares of a company owned by pension funds. So. or securities not generally available to the public gained from a source inside the company. so time consuming and cumbersome that most system is being tightened up so think twice before you place that buy order for XYZ shares. Inflation Increase in the prices for goods and services. etc. In but the system is so widespread and disparate and the judicial system. The BSE Sensex is based on 30 stocks as is New York 's Dow average. you can afford to speculate in higher risk stocks. W inflation do you part if you have good base of income stocks. buy more or sell? Try and figure it out.
) only if the price rises to a specified level. The downside: most individuals pledge existing stocks with their bankers or brokers for the loan. Now suppose the market value of the pledged stocks goes down to Rs. Load A sales commission paid when you buy (front-end) or sell (back-end) a mutual fund. Liquidity is one of the most important characteristics. If the stock goes up. . Long Position A bull position in a security. For corporations. or money value of shares traded daily.100 on the market against which you are given a loan of Rs. Leverage Any means of increasing value and return by borrowing funds or committing less of one's own money. contact. which is a percentage of the market value of the stocks pledged. The market value of the company rises and so do its shares. not through debt but by offering the prospect of a high return for little or no investment. leverage can involve debt. Load Funds Mutual funds that carry a sales commission. the greater the financial leverage. For individuals. he repays the broker the loan amount and keeps the profit himself. Say you have pledged stocks worth Rs. 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.75. This decision-making is necessary to cut losses due to lower prices or sudden reverses in rising share prices. It is the opposite of a short position. or commodity. 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. 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. By borrowing money he has achieved a higher return on his investment than if he had paid for all the stock himself. The more long-term debt there is. warrants. Mutual funds and other institutional buyers prefer high liquidity stocks so they can easily move in and out of positions. Liquidity A measure of the number of shares. 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. financial leverage is popularly called ?trading on the equity'.Lead Underwriter Brokerage house in charge of IPO. Rights. Because of this effect. etc. security. Limit Order A market order that specifies the highest or lowest price at which the customer is willing to trade securities.50 (50 per cent). Depth of market to absorb buy and sell activity of even large orders at prices appropriate to supply and demand. Liability A financial obligation or debt. The market must also adapt quickly to new information and incorporate that information into the stock's price. Multiply this instance by thousands and you can imagine the margin pressure that is exerted on the market. This is when the market falls and we have what is known as a ?bear' market. An order to a broker to buy a certain stock (future.
Long-term Investments Balance sheet item reflecting investments in other companies. can make more money on an investment on the BSE than the U.S. So is taxation based on those classifications? This is one of the reasons investors buy and sell stocks around the world.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.S. Lot A fixed minimum number in which shares are bought and sold. The day-even minute . That's where the money will go. etc. Helps you understand whether today's price is an aberration or a logical extensive of a trend. today. 10. The legal definition of short term and long term capital gains varies from country. Trading lots can comprise 5. For example. anything less makes odd lots. . monthly. 50 or 100 shares depending on the face value of shares. A U. bourse. but the low for the year can be 5.the FII sees a better opportunity elsewhere in the world. weekly. investor (FII). 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 low for the day can be 10. or for a 52 week period. Such number makes round lots. This can be expressed daily.
Authorization for a broker to buy or sell securities at t Market Sentiment A measure of the bullish or bearish attitude of the crowd. Additionally. 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. Momentum Analysis Money Supply Money -market Funds Mutual funds that invest in short -term securities.On compulsorily dematerialized shares for all classes of investors. In today's The amount of money in circulation. If one shares worth Rs. if the value of some shares drop in the market they may be offset also profitability of a 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. 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. 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. whose shares have to be offered as security for obtaining loans. Market Capitalization Total market value of the company on the stock exchange. His exposure limit is fixed based on the margin money brought in by him. The Reserve Bank of India attempts to control the growth of the economy by regulating the increas Moving Average . The minimum trading lot on a stock exchange. The margin for demat shares is35 percent. Minimum Number of Companies Accepted The minimum number of companies. and increasing earnings forecasts. Usually involves looking for stocks in a strong uptrend (high relative strength). The di amount sanctioned. 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. Total number of shares multiplied by the official price quoted on Market Liquidity Use to track money flow into and out of the markets. An order where no price specification is mentioned at the time of placement and market prices apply. 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. strong earnings growth.200. For example.Margin An upfront payment made by the customer to take a position in the market.
The Clearing Corporation of the National Stock Exchang .NASDAQ Composite Index The NASDAQ Composite Index measures all NASDAQ domestic and non-U.The Index is mar security affects the Index in proportion to its market by total shares outstanding.To simplify. the NAV Net Asset Value per Share Equity excluding minority interests. 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. if you hold a unit in a mutual fund. No-load Funds Mutual funds that do not carry a sales commission. Non-operating Expense Expenses not due to the basic business of company. is calculated throughout the trading day. based common stocks listed on the NASDAQ stock Market.S. divided by number of shares.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. 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. Net Profit Ratio Profit from operations as a percentage of revenue.
Order Cancellation A facility available in the trading system where one is allowed to cancel the order placed earlier. For example. Operating Earnings Earnings without considering certain expenses such as inventory write downs. and if XYZ st maximum or minimum opening price the following day will be 22. or just about anythin earnings look better. Also known as core earnings. Usually. ongoing earnings.Odd Lots Stocks sold in quantities of less than a specified minimum number.00. and is based on a percentage of the last traded of the previous day. Order Modification A facility available in the trading system where one is allowed to modify an earlier order. Opening Price Opening price is normally determined by the price at which a stock finished selling on the previous day. earnings excluding special items or operatin Operating Income Sales minus all expenses except income taxes and other items not relaxed to basic business.00 and 18. A single security or a market which. 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. Generally. Operating Margin Operating income divided by sales. Also see Free Cash Flow. Most exchange has limits of how high or low the sto circuit. is the stock exchange has a upper or lower limit of 10. 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. Open Order A limit order that does not expire at the end of the trading day. depreciation and amortization charges. it is believed has declined to an unreasonable level. this is where everybody starts s starts a probe. severance pay. it is sometimes s The reverse of over-bought. Changes in levels of i also affect cash flow. Offer Price The price at which a company offers its shares to the public through issue of a prospectus. . it costs less to trade in round Offer The price at which a share is available in the market. Also applies sometimes to overbought situations.
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 The designated day on which the members pay securities and fund to the clearin Payout Ratio Percentage of earnings paid out in dividends. 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. selling at less than $1 a share. 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. For a portfolio. A collection of stocks. The figure illustrates expectations of future company growth. These stocks offer larger returns b Pledge To deposit securities with a lender as security for money borrowed.P/E (Price/Earnings Ratio) Shows a share's market price in proportion to its earnings. 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. Penny Stocks This term is typical to the USA stock markets. debenture. or bond that is written on the certificate. you can congratulate yourself on a wise de Premium . the ratio is the weighted average P/E. For instance. If interest rates fall. often highly speculative. It is like a fixed deposit in a bank. Mostly these types of stocks pay a fixed dividend regardless of corporate earnings dividends. Calculated by dividing the share price by the reported or forecast ann the P?E ratio is 10. Frequen stocks have developed into investment-caliber issues. Co stock according to predetermined conditions. Poison Pill Steps taken by a corporation to thwart a hostile takeover attempt. the price is equivalent to ten years earnings. In c same field. 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. You are stuck with a fi the other hand. However. Low-priced issues. it carries no voting rights. Preferred shareholders are paid a head of common stock holders in the event the corporation is liquidated.
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. a loan. or par value.Not fully established in India . after all. It is very difficult to judge initially whet activity or price rigging.which. Publicly Held Corporation A corporation that allows anyone in the public to purchase its stock. 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. In effect. 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).For bonds and preferred stock. It is based on the previous days trading closing price set limits. 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. Private place lending institutions from whom the issuing company takes or intends to take. Price Rigging A process where persons collude to artificially increase or decrease the price of a security. The private placement results in the len Profit Margin Bottom line (after tax) earnings divided by sales. In a bear market this cause . This probably the nearest you can get to a co buy and sell to the alternative with the highest price . A measure to check price volatility. Private Placement The sale of securities to a small group of investors that is exempt from the elaborate requirements of a public issue. Price Earnings Growth (PEG) Ratio Commonly used for growth stocks. 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. the company seeks temporary delega contains details on the corporation's executive compensations plans. the premium is the amount by which the price exceeds the face. the PEG ratio takes into consideration growth by dividing the P/E ratio by current annual gro estimates. For options marke other words.
The highest bid to buy and the lowest offer to sell any stock at a given time. .Quick Ratio Cash and cash equivalents plus accounts receivables divided by current liabilities. Quote Prices at which a share can be bought or sold.
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). Rematerialisation Process of converting the shares from electronic form to physical form. and then reverses the up or down trend convin . Issue of new shares to the existing shareholders at a price which is normally lower than the current market price of the old shares. Resistance Return on Assets Return on Equity Return on investments Revenue A company's sales. if you have not held the fund for the prescribed minimum time. it is issued in a fixed ra Road Show Rollover Round Lots Stocks sold in specified share quantities. 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. Historical price level at which rising prices have stopped rising and either moved sideways or reversed direction. or risen to resistance. 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.Record Date The date on which the beneficial owner of the corporate benefits is determined.
or healthcare. they are said to be sold on a secondary market. Secondary Market When stocks or bonds are traded or resold. Later on the person may withdraw some shares and pledge new ones to replace the shares he has withdrawn. SEBI The Securities Exchange Board of India. technology. it is a permitted practice. such as healthcare. Sector (or industry) fund groupings usually focus on a single industry. This index is used as a measure of performance of the overall market. Securities Documents proving debt or ownership that may be bought or sold. Secular Trend A very long-term trend. This is popularly called security swapping. Scrip A holding in securities. (Unlike wife swapping. Sales and revenue mean the same thing. Sector Funds Mutual funds specializing in particular industry sector such as computers. The majority of all securities transaction takes place on a secondary market. Sales per Share Annual sales divided by the number of shares outstanding. Sector Sector is another word for industry.) . Sales Charge A transaction fee or commission paid for an investment instrument. Commonly referred to as the "load" in a mutual fund.S&P 500 (Standard & Poor's 500 Stock Index) An index of 500 stocks widely traded on the New York Exchange. or utilities. Considered by many to be a much more accurate picture of the market in general. They are normally conducted through the relevant exchange on which they are listed. 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. Sales Services and products sold by a company. Security Swapping One has to pledge one's shares when availing of "loan against shares". the regulatory body and watchdog controlling the functioning of Stock Exchange in India .
unless you are very sure of yourself. . and therefore becomes a part owner of the corporation. pilot projects. Short-term Investments Stocks and other liquid securities. Short Covering Buying stock to return stock previously borrowed to make delivery on a short sale. You will get the water as a matter of courtesy.Book value is the shareholders equity divided by the number of outstanding shares. Short sellers lose when the price of the stock ascends rather than descends. and make a profit. Short-term Gain The profit realized from the sale of securities or other capital assets held twelve months or less. however.00 a share. or 1500. but it will be accompanied by some odd looks. commercial production or marketing.00. Not for the common investor. This does not mean you should walk into a Reliance office and ask for a glass of water.00 a share can. The player should ascertain these rules from a registered broker of the exchange. or future contracts sold and not covered as of particular date. with the intent to buy the stock back at a lower price than you had initially sold it for. short selling is based on the anticipation that a particular security price will go down. The practice of short selling involves borrowing shares of a security from your broker and immediately selling them at the current price.00 a share and the price of the stock drops to 35. Shareholders Equity The difference between the totals of assets and liabilities shown on a company's balance sheet. Short-term Debt Borrowing that must be repaid within one year. only fall to zero and that is the maximum loss that would be incurred. Carefully check all tips on short sales before deciding to act on them. usually for product development. Most stock transactions must be settled within three business days. A stock purchased at 10. not covering launch expenses. Theoretically.00. your profit is 15. if you sell short 100 shares of XYZ Corporation at 50. For instance. Settlement The process of paying for stocks you purchase.Seed Capital A small amount of capital provided to an entrepreneur. or receiving credit from your broker for the stocks you sell. Then as the price of that security declines. Shareholder A person who buys stock in a corporation. 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. Short Sale To sell a stock you do not currently own. Selling Short The reverse of the usual stock market technique. as of a particular date. typically provided by angel (venture) investors. then sell the stock. A short sale can only take place on an "up tick"" or 'zero-plus tick'. Most stock exchange have a rigid rules regarding short selling. beta stage development. Short position also means the total amount of stock an individual has sold short and has not covered. Short Position Stock options. you buy back an equal number of shares on the open market and use them to cover the shares you borrowed from your broker. To go short you "borrow" stock from the broker/dealer. Shares A unit representing a measure of ownership in a corporation. etc.
Stock Certificate The actual document that is evidence of stock ownership. Sub-accounts A sub-account includes institutions (established or incorporated outside India ) and those funds. Stops Can be either a buy or a sell stop. (Also called cash trading) Spread The spread is the difference between the bid price and the offer price. This increase in the number of shares result in the proportionate decrease of share price. The shareholders equity does not change. For example. a company declares a "3 for 1 " stock split. Speculators Investors who seek large capital gains through relatively risky investments. A reverse split is where the total number of shares is decreased and the stock price increases proportionally. Standard Deviation A measure of a mutual fund or stock's historical volatility. a shareholder with 100 shares before the split would have 300 shares after the split with a value of 20 a share. Spot Trading Trading in commodities that will be delivered immediately. Alternately. 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 .Solvency Ratio Equity excluding minority interests as at year-end as a percentage of liabilities and equity at year-end. This is usually n\brought about by the division of existing shares. Stop Order An order to buy or sell a security conditioned on a specific price. a reverse stock split brings about the decrease in the number of shares in a corporation. Stop Loss Order An order placed with a "trigger price". usually watermarked and patterned to make it hard to forge. This order is very often referred to as a "stop loss" order. It is placed to minimize the losses and the order cab be either for a purchase or a sale. making a total of three. a two-for-one split means that shareholders will receive two new shares for each old share.These order types instruct the broker to execute at market once a specific price level is reached and traded at. A buy is placed above current prices and a sell is placed above current prices and a sell is placed below current prices. As in a split the total stock holders equity remains the same. 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. For examples. Split An increase in the number of shares outstanding. because it prevents the security from falling below a certain price. Stock Split An increase in the number of outstanding shares in a corporation. the price of the stock is currently 60 a share.
usually seen as a price chart pattern. product development etc. acquisitions. Tick The tick is the direction in which the price of stock moved on its last sale. option etc.S. Technical Analysis An analysis of a stock or future based strictly on numbers. The method includes analysis of price patterns. option. 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. Ticker Symbol A ticker symbol represents a particular security (company. etc of a particular stock. Ticker A ticker is a trading screen information display showing the current price. and (2) Foreign corporate and foreign individuals who are not allowed to exceed 5 percent of the issued capital. volume. 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. ?ONGC? will show you the information of the Oil and Natural Gas Commission on the National Stock Exchange of India. Support Historical price level at which falling prices have stopped falling and either moved sideways or reversed direction. The tick becomes especially important when large market movements trigger the implementation of certain circuit breakers meant to stabilize the market. Third Stage Capital Capital provided to an enterprise that has an established commercial production and basic marketing set-up. For example. NRIs and overseas Corporate Bodies (OCB) are not eligible for registration as sub-accounts. 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. A zero-plus tick means the transaction was at the same price as the one before. The best measure of a firm's total debt. Today. Ticker symbols can be used to retrieve information from a financial publication such as your daily paper's business section. ticker symbols can be submitted to an electronic ticker quote retrieval system to find information about a particular security instantly. typically for market expansion. etc.) on the exchange it is trading on and is used to retrieve information about that security from that exchange. Tangible Book Value Book value minus goodwill and intangible assets. . future. the symbol ?f? on the New York Stock Exchange (U. Top A technical analysis term meaning the stock price is going down from here. Total liabilities All monies owed regardless of how classified on the balance sheet. Don't try to understand it unless you are a maths gold medalist.Institutional Investor. Trailing Twelve Months (TTM) The last four reported quarters. but still higher than the nearest preceding price.A) will bring you information about Ford Motor Company.
without security/charge on assets) but also brings onto the table extremely Valuable domain knowledge. The higher the turnover rate. whom the entrepreneurs approach without the risk of ?takeover'. Commission varies with the size of the trade. failing which the firm would take the securities being offered (that is.Transaction Costs The costs of trading securities. Undervalued A stock trading below its fair value. His return is high but. buy) into its own books. Offsetting the high risk the investor takes is the promise of high return on the investment. strategic advice. he's taking all the risks on an untried idea. sold at a discount and redeemed at full face value. He is a fixed interval investor. on average. including the broker's commission and taxes. Turnover Ratio How often a mutual fund changes its portfolio holdings. in exchange for an ownership percentage. or other units of a security traded in a certain time period . volatility is the annualist standard deviation of returns. Treasury Bills Shorts-term debt issued by the central government. Volatility A measure of the fluctuation in the market price of the underlying security. Turnover Rate Turnover is the relationship between the float and the average monthly volume of a stock. then. bonds. the more volatile the stock and the greater potential for wider swings in price (both ways). Value Traded This is the total monetary value of all trading in a security for the market day. Volume The total number of shares. It is calculated by multiplying the volume traded by the average sale price. etc. changes all the stocks in its portfolio once a year. more risky venture. the venture capitalist will nurse you through. brand-equity. Some countries also provide for underwriting on best effort basis. 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. A venture capitalist not only brings in moneys as ?equity capital' (that is. business contacts. 100 per cent turnover means a fund. Treasury Notes Debt securities issued by the central government that mature over a specified number of years. Venture Capitalist An investor involved in financing a company's operations before going public. Mathematically. Underwriter An investment banking firm committed to successful distribution of a public issue. Venture Capital Professional moneys co-invested with the entrepreneur usually to fund an early stage.
Also known as rate of return. the yield is (1. 3.00 interests annually.Usually mistaken for commercial invoice. Acceleration . and is selling for 10. obligation of its customer. For instance. Dalal Street is the Indian counterpart in Mumbai.00) 10 per cent.00/10.Bank Guarantee could be a finance guarantee or a performance guarantee.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 . an index or a commodity. if its customers fail to deliver. Bill . 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.The payment history of an account over a specified period of time. even in the later case. if a bond pays 1. the bank guarantees the beneficiaries (The person named in the guarantee to receive the guaranteed sum under stated circumstances). Bank Guarantee . Warrants may be issued over securities such as shares in a company. including the number of times the account was past due or over limit.00. New York where several major brokerage firms and stock exchanges are located. Also the effective interest rate on a bond. Under performance guarantee. showing all transactions recorded for the period in question. Interest and dividends paid to mutual fund shareholders as a percentage of share price (Net Asset Value). 1. Working Capital Current assets minus current liabilities. the bank guarantees performance of a contract or goods/ services supplied under a contract by its customers. .A periodic record of a customer's account that is issued at regular intervals. 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. However. it settles the claim of the beneficiary in money terms only. Yield In stocks and bonds. Commercial invoice is a part of the document submitted to the bank by the seller. which is traded on a Stock Exchange's equity market. certain amount on behalf of its customers who has commercial relationship with the beneficiary.Wall Street A street in the city of Manhattan . 2. Such a transaction is also referred to as a credit transaction. Warrant A warrant is a financial instrument issued by a bank or other financial institutions. a currency. Bank Statement . The bill is routed through the bank for collection of amount from the buyer. 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. the amount of money returned to investors on their investments. 4. 5. the bank does not fulfil the contract. Under finance guarantee.
8. 9. 5 Bn. 73. The difference between an overdraft and cash credit account is that while the former is extended more to individuals. This means that the bank should maintain in current accounts with the central bank or any other approved bank balances. These abbreviations are commonly used in such reports. like loan. Bankers report also means the same.000/. Credit Report .98. 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.a. subject to availability of sufficient security with the bank. You can seek confidential informations about your prospective customers about whom you do not have sufficient knowledge.10.for 45 days at 6% p. Step No 1. The banker provides good platform for knowing something about the business enterprise with which you are likely to deal. And the bank cannot lend this money. 450000/365=Rs.for 45 days is equivalent to drawing Rs. Further the cash credit facility is more or less on a permanent basis so long as the business is going on. Calculation of interest at 6% p.a is equal to 1233*0. This much amount is impounded and kept in the free form. e. There is no hard and fast rule in this behalf.A credit facility under which a customer draws up to the preset limit. 7. not less than Rs. overdraft. most of the times.g A bank has given a customer an overdraft facility to the extent of Rs. the latter is extended only to business bodies. The operations are similar to overdraft. Daily Product Basis . as in most of the countries it is called overdraft.6. In India.through out the year. At times it is referred to as credit information report. held by the bank. cash credit etc. i. At other times it is also called customer?s confidential report. the basis is 365 days in a year. 10000/. RBI decides from time to time and at present it is 5% of the deposits.Called in short CRR. trade is done with the organizations about which you are in the dark. 1233/. There are accepted abbreviations internationally for denoting the soundness or the lack of it of a business enterprise. Determination of annual average as rate of Interest is on annual basis i.e. Suppose a bank has total deposits of Rs.06= Rs. 10000*45 days= known as product= 450000 Step No 2. This means that on a 365 days per year basis. 1233/-. on a daily product basis the interest is determined as under. Cash Reserve Ratio . This acts as a buffer to the bank. on annual basis. The purpose of cash credit is for working capital. Step No 3.100 Bn and is required to maintain a CRR of say 5%. .It is called by different names. drawing Rs. The banker provides this information for a fee which includes the fees that they have to remit to international credit agencies.This is the basis on which interest is usually determined on credit facilities. for this. The cash credit facility is unique to India.e. Some banks do take 360 days in a year also. Cash Credit . With the growth of commerce within a country and abroad. and less for business.
The conditions are: The seller should furnish proof of dispatch of goods or services and submit all the documents required under the L/C. If the value of the bill is Rs. 12. agrees to extend this facility. while the difference of Rs. Loans against property and for the purpose of owning flats/ apartments/ houses are known as mortgage loans. Rs 98 is the discounted value of the bill for Rs.is known as ? discount?. or half yearly or annual (very rarely) installments. Discount is the interest recovered upfront. The buyer approaches his bank. The percentage of margin requirements varies as per RBI guidelines. This means that any credit to the account after the tenth of the month is ignored for the particular month. Discount .A lump-sum amount given to the customers. .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. either in one installment or in two or three installments. ?irrevocable? (cannot be cancelled by the buyer without the consent from the seller). Loan .Seller ?A? enters into contract with Buyer ?B?. the buyer?s bank will pay the amount of bill drawn by the seller on the buyer under this agreement. Monthly Product Basis . 100/-. on certain conditions. say Rs. 100/-. 2/. 100/and in case the bank gives the finance against the same. 10. Interest may be recovered separately from the customer who is called borrower or combined with the installment. Then. especially in the case of those bills for which payment will be forthcoming after a specific or extended period.In India. the amount of finance will be less than Rs. the product is taken on a monthly basis. 14. International letter of credit are by and large. 98/-. the buyer?s bank gives commitment of payment to the seller through his bank. which. Letter of Credit . Under this facility. The banks sanction the credit limit after retaining a margin on the value of the security offered. in the savings account. In case it is combined with the installment it is called equated installment. 11. and repayment over a period of time in monthly or quarterly. which is universally on annual basis can be applied to determine the quantum of interest. Margin Money Margin money is like a security deposit retained by the bank till the loan is fully settled. the rule is interest is paid on the minimum balance in the account between the 10th and the last day of every month. One of the terms of supply is that buyer will establish a letter of credit in favour of the seller through his bank.Less than face value. The following minimum credit balances 13. The commitment is dependent upon the seller fulfilling specific conditions as per the L/C. Accordingly let us say for example. If interest is recovered separately it is usually on a quarterly basis. while debit is taken into account.
by which its customers at one place makes funds available to the bank and the bank in exchange. the repayment does not start immediately. 18. mail Transfer (MT).An extension of current account in which the customer is allowed to withdraw more than the credit balance lying in the account.in the savings account earning 1000 3. Again if this is the case interest on interest is recovered. RTGS refers to the settlement system where. This is not so in the case of personal loans. settlement of payments on an individual order basis are done on continuous basis. Electronic mail transfer (EMT) through computer networking (or satellite channel). Telegraphic Transfer (TT). The annual equivalent amount is RS 233. This may be a temporary accommodation to tide over temporary cash crunch or on a regular basis. 2005 March.33 and the interest at 3. Thus we can say that RTGS system 16. Although there may be a period of non-recovery of Interest. Interest is charged and there is no period on non-levy of interest. The period during which there is no repayment is known as repayment holiday period.Whenever a loan is taken especially for acquiring fixed assets. Remittance ? A facility. for the half year on this work out to be Rs 8. In order to determine the correct half yearly interest.a. on real time basis). 2005 May. without netting debits with credits across the books of a central bank. not recovered for a specific period. Remittance can be in the form of Demand Draft (DD). This is also known as moratorium period. 2005 June. RTGS system is also defined as a gross settlement system. 15. In case the overdraft is given to the business enterprises and it is for day-to-day operations.17. It starts after the fixed assets starts giving a return especially in the case of business enterprises.e. The period is longer in the case of industrial loans and minimum or absent in case of personal loans. in which both processing and final settlement of funds transfer instructions take place continuously (i. 2005 April. Then divide the sum of the monthly products by 12. subject to availability of sufficient security with the bank. Overdraft . This is the way the interest is found out on a monthly product basis. withdrawals are allowed up to a ceiling (called ?a limit?). 2005 February. That is interest although levied.75 % for the half year ending June 2005. makes the funds available to the customer or any other specified party at the required place. within the same country or abroad. International Money Order (IMO) etc.5 800 150 250 300 300 % pa interest in India January. 17.5% p. 2005 Suppose the Interest is payable every half-year and accordingly this customer will be entitled to 1. . Repayment Holiday . it is known as ?working capital?. you need to find out the annual equivalent of the deposit that the customer has kept in his savings account. If permitted on a regular basis. It should be noted that during this period.
g. Stock & Receivables Audit is one of the most important aspects of the overall exercise of audit of any organization. The bank may or may not participate in the loan process. or so-called finality.reduces settlement risk because inter-bank settlements are done throughout the day. This can happen due to various reasons. Should not be confused for granting of loans. 21. settlement risk consists of two components namely credit and liquidity risks. one party may default on its clearing obligations to one or more counter parties. composition and actual value of the stock and the debtors. Thus. Syndication ? Making arrangement for loans for borrowers. by granting a portion of it. syndication is different from it. during the day. suppose the bank is supposed to maintain SLR of 25%. In the above example. but would assume responsibility for getting ?in principle? sanction from all participating banks and financial institutions. This will be kept in easy-to?encash securities like. One of the main attraction of the RTGS systems is that payee banks and their customers receive funds with certainty. 20. Settlement risk refers to the risk when a settlement (in a transfer system) does not take place as expected. In India at present it is 25%. It gets paid separately for this activity. RTGS is a system where both the processing and final settlement take place on real time basis. An Indian company wants a foreign currency loan of 100 mn Rs. treasury bills of the government and any other approved securities. In stock and receivable audit. auditor ensures himself about the quantity. this means that over and above CRR the bank is expected to keep aside an amount of Rs. e. 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. Statutory Reserve Ratio ? Called in short SLR. . rather than just at the end of the day. Credit risk arises when a counter party fails to meet an obligation for full value on due date and thereafter 19. enabling them to use the funds immediately without exposing themselves to risk. For example. Making arrangement for this is known as syndication. 25 Bn. RTGS is regarded as the centerpiece of an integrated payments system. Even if the arranging bank participates in the loan. quality. Syndication fees are part of non-interest income as no funds are involved in the activity.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.