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+ Techno World Inc - The Best Technical Encyclopedia Online! » Forum » THE TECHNO CLUB [ TECHNOWORLDINC.COM ] » Technical Terms
 Stock Exchange - Glossary of Terms for investors
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Stock Exchange - Glossary of Terms for investors
« Posted: February 19, 2007, 10:13:50 AM »


Stock Exchange - Glossary of Terms for investors

Account
When a brokerage firm admits a client, an account must be opened in the name of the client. The account will reflect activities of the client such as the buying and selling of securities.

Account Statement
A statement that includes all transactions, positions and open orders and indicates the status of a client,s account with a brokerage firm.

Accumulated Dividend
A dividend due to stockholders of cumulative preferred stock that has not been paid to them. Until the dividend is paid, it is carried on the corporation,s books as a liability.
 
Acknowledgment
Authentication of a signature on a brokerage document to ensure it is valid and has been sanctioned by an authorized individual. Acknowledgment, for example, is needed when a client wishes to transfer an account from one broker to another.

Across The Board
Movement, up or down, in the stock market that affects nearly all stocks in the same direction. That is, nearly all stocks are gainers (or losers).

Active Market
An active market occurs when a security, or the exchange as a whole, experiences heavy trading volume. The spread between the securities bid and asked price is usually narrower in an active market than in an inactive market.

Agent
"Agent" means a person appointed by a member of a Stock Exchange to act on his behalf for the purposes recognized by a Stock Exchange and includes a sub broker or head of a branch office. Source: Members Agents and Traders (Eligibility Standards) Rules, 2001

Annual Report
Formal financial statements, the Auditors' Report, together with the Directors' Report issued by a company. These financial statements are usually prepared at the close of the company's financial year.

Arbitrage
The simultanceous purchase and sale of the same security on different stock exchanges at prices which yield a profit.

Assets
What the company owns and various debts owing to it.
 
Balance Sheet
The Balance Sheet is a statement of the Company's financial position at a specific date.
 
Bear
An investor who anticipates for a decline in stock prices.

Bear Market
A market in which stock prices are declining in general. A serious decline is called a depression. A short decline in a generally rising market is looked upon as a technical correction.

Bid and Asked
The bid is the highest price anyone has offered to pay for a security at a given time; the asked is the lowest price anyone has offered to accept for a security at a given time.

Blue Chip
A large well-established company with a history of profitable operation.

Bonds
Fixed-income securities, which entitle the holder to a pre-determined return during their life and repayment of principle at maturity.

Book Closing
The closure of books by a company to determine the shareholders' rights to receive bonus, dividend, rights, etc. No transfers are recorded during this period.

Boom
Denotes greater activity on the stock exchange.

Bull
An investor who anticipates for a rise in stock prices.

Bull Market
A market in which stock prices are rising in general. If the market is recovering from a deep decline, the early stage of the up trend is called an up reversal, turnaround, rally or recovery.
 
Buying Power
The Rupees amount available to purchase securities on margin. The amount is calculated by adding the cash held in the brokerage accounts and the amount that could be spent if securities were fully margined to their limit. If an investor uses their buying power, they are purchasing securities on credit.

Capital Adequacy
"Capital Adequacy" means Trading Limits assigned to the members equivalent to 25 times of their respective certified Net Capital balance. Source: Margin Trading Regulations

Capital gain or Capital loss
Profit or loss from the sale of a capital asset, including securities.

Capital Gain Tax
Tax payable on profit arising from appreciation in value of investment, realized at the time of selling or maturity of investment.

Carry-over Trades
Equity repurchase transactions, better known, as "Badla"; are an established form of transactions used in the stock market for temporary financing of trades by speculators and jobbers.

Clearing
Settlement or clearance of accounts in stock exchanges.

Collateral
Securities or other properties pldged by a borrower to secure the repayment of a loan.

Commision
The fees payable by a client to the sharebroker for buying or selling securities on his behalf.
 
Consumer Price Index (CPI)
A measure of price changes in consumer goods also known as the "cost of living index." Some CPI components are food, housing costs and transportation.

Contract
A statement sent to a client by the stockbroker, giving details of securities purchased or sold.
 
Convertible
A bond, debenture, or preferred share that may be exchanged by the owner for common stock or other security, usually of the same company, in accordance with the terms of the issue.

Corner
To have control of supply of a security by buying on such large scale that the entire market is affected. It strongly influences the market prices in a way that the person with the corner may make undue profit or forces other with a short position to cover at a loss.

Cum-dividend
The term implies taht the buyer is entitled to the dividend currently declared.

Cum-right
Shares having the right to receive the upcoming rights issues offered by the company.

Debt-to-Equity Ratio
The ratio of a company's securities with fixed charges to the company's common stock equity. To calculate, divide the total amount of preferred stock and bonds by the amount of common stock equity. a) In the case of liquidation, the ratio indicates the extent owner's equity can cover creditors' claims. It is calculated by dividing total liabilities by total shareholders' equity. b) A ratio that is used to measure leverage. Leverage is the use of borrowed money to increase the return on owners' equity. To calculate, divide the total amount of long term debt by the total amount of shareholders' equity.

Director updated
An individual elected by corporate shareholders to serve on that corporation,s Board of Directors. The Board of Directors decide when dividends will be paid, appoint the corporation,s president, vice president and all other officers.

Dividend
That part of a company's profits which is distributed among shareholders, usually expressed in rupee per share or percentage to paid up capital. It could be in the form of cash or stock (Bonus Share).

Earnings per share (EPS)
A profitability indicator calculated by dividing the net after tax earnings available to common stockholders during a period by the average number of shares outstanding at the end of that period.

Equity
The owners' interest in a company's capital, usually referred to as ordinary shares.

Ex-dividend
A synonym for without dividend. The buyer of a stock selling ex-divident does not receive the recently declared dividend.

Exposure
Exposure means at any point in time, scrip-wise cumulative net unsettled amount of purchases and sales, added together, of a member, under Ready Counter.

Face value
The value of a security that appears on the face of the certificate unless the value is otherwise specified by the issuing company. It is also termed as par value.

Floatation
The occasion when a company's shares are offered on the stock market for the first time.

Fund managers
A company, which invests and manages investors' money, with the aim of maximizing capital growth.

Gamble
To bet on uncertain outcome.

Initial Public Offering (IPO)
The offering of equity shares of a company to the general public for the first time.

Insider Trading
Insider trading normally occurs when an insider, that is, a director, an officer, a banker or a favored customer, due to his access to special information about the company's affairs, which has not been made available to the market influence the value of shares to his advantage.
 
Investment
To commit (money) in order to earn a financial return.

Investment company
A company, which issues shares and uses its capital to buy securities and shares in other companies.

Investor
An individual whose principal objective in the purchase of a security is regular dividend income, safety of the original investment and, if possible, capital appreciation.

Letter of Renunciation
Usually sent with the letter of right. A shareholder may renounce the shares offered in favour of some other individuals. The shareholder transfers the right to take up the shares offeed to him.

Letter of Right
A letter sent by a company to shareholders offering them the right to subscribe in a specified number of shares.

Liabilities
What the company owes to its shareholders and creditrs.

Listed company
A company whose securities are admitted for listing on a stock exchange.

Market capitalization
The total value of a company's equity capital at the current market price.

Market maker
A person who commits itself to always being ready to deal in a range of securities for his own account taking temporary position.

Market price
In case of a security, market price is usually considered the last reported price at which the security is sold.

Net change
The change in the price of a security between the closing price on one day and the closing price on the following day on whichthe stock is traded. In case of a stock that is entitled to dividend one day but is traded ex-dividend the next, the dividend is considered in computing the change.

Nominee
A person or company holding securities on behalf of others, but who is not the owner of such securities.

Odd Lot
"Odd Lot" means any lesser quantity of shares or stock than the marketable lot is called Odd Lot. Source: Clearing House Procedural Manual

Odd-lot
An amount of stock less than the established unit of trading.

Option
The right (but not the obligation) to buy or sell securities at a fixed price within a specified period.

Ordinary shares
The most common form of shares, which entitle the owners to jointly own the company. Holders may receive dividends depending on profitability of the company and recommendation of directors.

P/E Ratio
The relationship between a stock's price and its earnings per share. It is calculated by dividing the stock's price per share by earnings per share for a twelve month period. For instance, a stock selling for Rs.25 a share and earning Rs.5 a share is said to be selling at a P/E ratio of 5. The ratio, also known as the "multiple", gives an investor an approximation of how much they are paying for a corporation's earning power. Low P/E stocks are usually in mature industries. They may be blue chip or out of favor companies. In either case, their growth potential is limited. Companies with high P/E ratios are usually up-and-comers that are fast growing. These companies are riskier investments.

Payment Date
Date on which declared stock dividend or bond interest is paid to holders of record.
 
Payout Ratio
The percentage of a corporation's earnings that are paid to shareholders as dividends. For example, a corporation that pays a R.s.12 dividend out of every R.s.1.00 of earnings has a payout ratio of 12%.
 
Portfolio
A collection of investments.

Price Change
The difference in a security,s price at the close of a trading session as compared to its previous session,s closing price. In the case of an average (or index), all of its components price changes are taken into account.

Price/earning ratio (P/E ratio)
The P/E ratio is a measure of the level of confidence (rightly or wrongly) investors have in a company. It is calculated by dividing the current share price by the last published earnings per share.

Price/Earnings Ratio (P/E)
The relationship between a stock,s price and its earnings per share. It is calculated by dividing the stock,s price per share by earnings per share for a twelve month period. For instance, a stock selling for RS.25 a share and earning RS.5 a share is said to be selling at a P/E ratio of 5. The ratio, also known as the "multiple", gives an investor an approximation of how much they are paying for a corporation,s earning power. Low P/E stocks are usually in mature industries. They may be blue chip or out of favor companies. In either case, their growth potential is limited. Companies with high P/E ratios (over 20) are usually up-and-comers that are fast growing. These companies are riskier investments. See: Price Range. The high and low price that a security traded at during a designated period. In annual reports, a corporation will show the price range for its fiscal year. In daily newspapers, the period is a rolling 52 weeks.

Primary Market
Where a company issues new shares, either for the first time, or at the time of issuing additional securities.

Principal Amount
The face value of a bond, or other obligation, that is required to be paid to the holder at maturity. 

Private Limited Company
A company that is not a public company and which is not allowed to offer its shares to the general public.

Privatization
Conversion of a state-owned company to a public limited company (plc) status.

Proceeds
An amount received from selling a security after commissions are deducted.

Profit & Loss Account
A financial statement which shows the amount of a company has earned during the period.

Profit Taking
Selling securities that have appreciated in value since purchase, to realize the profit. In a rising market, profit taking temporarily pushes down prices. 

Proxy
A person who represents the shareholder, on the basis of written authorization, in the annual meeting of a company. A proxy does not have the right to speak, though he may vote on behalf of the shareholder. Proxy is also used to refer to the instrument by which the shareholder authorizes another individual, who may not be a shareholder, to so represent him.
 
Public Limited Company (plc)
A company whose shares are offered to the general public and trade freely on the open market and whose share capital is not less than a statutory minimum.

Retained Earnings
Profits earned and retained in the business to meet operating expenses or of acquiring additional assets or for any other purpose.

rights Issue
The issue of additional shares to existing shareholders when companies want to raise more capital.

Securities
A broad term for shares, corporate bonds or any other instrument of investment in the capital market.

Settlement
Once a trade has been executed, the settlement process transfers stock from seller to buyer and arranges the corresponding exchange of money between buyer and seller.

Short covering
Buying stock to return stock previosly borrwed to make delivery on a short sale.

Short sale
It occures when a person sells shares that he does not own. A short sale is usually made in the hope that a subsequent market decline will enable the seller to 'cover his position' at a profit, that is, to buy at a later date and at a lower price the shares he needs to deliver against his original short sale.

Speculate
To assume a business risk in hope of gain, especially to buy or sell in expectation of profit from market fluctuations.

Split
The division of shares of a large denomination into shares of smaller denominations.

Spread
The difference between the bid and offer price of a market maker.

Stock
Securities that represent an ownership interest in a company. If the company has also issued preferred stock, both common and preferred having ownership rights, but the preferred stock normally has prior alaim on dividends and in the event of liquidation on assets.

Stock dividend
A dividend paid in securities rather than cash.

Stock Market
The market place where shares of public listed companies are bought and sold.

Stockbroker
A member of the stock exchange who deals in shares for clients and advises on investment decisions.

Unit trust
An open-ended mutual fund that invests funds in securities and issues units for sale to the public. It can repurchase these units at any time.

Yield
Also known as return. The dividend or interest paid by a company expressed as a percentage of the current price or, if you own the security, of the price you originally paid. The return on stock is calculated by dividing the total of dividend paid in the preceding 12 months by the current market price.

Yield Advantage
When an investor buys a corporation's convertible security instead of its common stock, the yield advantage is the additional amount of return an investor can earn. For example, if XYZ Corporation's convertible security yields 12% and XYZ common share yields 7%, the yield advantage is 5%.

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