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| Stock Market Important Topics |
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| Basic Ides Of Stock Market Important Topics |
Allotment of shares
After a company has issued a prospectus & application forms for shares, it receives applications from the investing public for varying numbers of shares. If the total numbered of shares applied for equals, or is less than the number offered, full allotment is made. If, however, more shares are applied for than were offered, a basis of allotment is finalized in consultation with the stock exchange where the company's is primarily listed.
Broker
Broker is a member of the stock exchange as financial intermediary who got license from SEC to buy or sell securities on behalf of its client. He charges commission on the gross value if the deals.
Bonus Share / Stock Dividend
When a company's free reverses are high, it may choose to capitalize part of it by issuing bonus shares to existing shareholders in proportion to their holdings to convert the reserves into equity. Bonus shares are issued free or cost, but since the number of shareholders remains the same and their proportionate holdings do not change.
Book Building
Firm allotment of a debt instrument to a syndicate created by lead managers. This is done to ensure success of the issue in a tight liquidity situation in the market.
Book Closure
Before a company declares a dividend or issues bonus or right shares, it closes it's register of members for a certain period, from one week to a month, during which no transfer of shares is registered. Only those shareholders whose names appear on the register after the book closure are eligible to receive dividends and bonus shares and entitlement to right shares.
Book Value
The value which an asset is carried on a balance sheet is known as book value. Since the asset is subject to depreciation, the book value is lower every year. By dividing the shareholders' fund by the number of shares issued will result in the book value of a share.
Bear
A stock market operator who expects share price to fall and keeps selling, causing selling pressure and lowering the prices further. Term derived from the attacking posture of the bear, pushing downwards.
Bear Market
Prolonged period of falling share prices, dominated by selling pressure in the market place, bought about by BEARS, or adverse economic or political factors, e.g. a change in the industrial policy of the government, imposition of price control, drought or flood, free imports, etc, or a changer in the government, Income Tax raids etc.
Bull
The bull refers to a stock market operator who believes that share prices are going to rise, and keeps buying to sell later at a profit. The bull's action causes buying pressure in the market place and pushes up share prices.
Blue Chips
Shares of particularly well-known and established companies which have sham consisted growth over the years, have bright future prospects, and are expected to continue sustained growth in the future. Where the blue chip is usually the one widi the highest value.
Bond
An instrument of loan raised by the government or a company, against a specified interest rate and a promised date of repayment. Company bonds are called DEBENTURES, which are secured by mortgage against company assets, as distinguished from fixed deposits accepted by companies, which are unsecured.
Book Entry Shares
Shares for which no certificate is issued, and which are merely recorded on holders' account. The practice is sometimes followed in closely held companies.
Buy/sell Back
Repurchase of convertible or non-convertible debentures or the non-convertible part of partly convertible debentures before the stipulated period, at par or at a discount, by companies or banks. Buy back promised, however, should be lightly taken, as companies devise methods to keep the sellers at bay.
Buy Order
An order to the stock broker to buy a share or shares, either at the BEST PRICE, or within a particular price limit (LIMIT ORDER).
Bull Market
Bull market is symbolized rise in the price of shares; sustained by buying pressure of actual investors or BULLS News of favorable economic growth, decontrol, political developments, lifting of price controls, budgetary concessions, etc. can trigger of a bull market.
Capital Market
Sources from which long-term capital is raised for the setting up and sustained growth of companies. The stock exchange is a part of the capital market, not only because it readily provides money for new or existing ventures, but also because it helps investors to trade in their shares and maintains the liquidity of investments. 'Investment in further public and rights issues, convertible and non-convertible debentures, therefore, becomes an attractive proposition and companies are able to raise the resources they need.
Capital Reserves
Distinguished from FREE RESERVES or reserves distributable through of dividends or bonus shares. The capital reserves of the company are retained indefinitely as part of the capital of a company. These reserves arise out of share premium, capital redemption reserve, and revaluation of assets.
Closing Price
Closing Price refers to the price at which the last transaction of a particular share was concluded in the stock exchange on a specified date.
Capital Gains
Capital gains represents profit on the sale of any assets. Which have appreciated in value. Capital gain con either be short terms or long term.
Derivatives
A financial institution so called because it derives its value from an underlying asset which can be anything i.e. company's stocks or bonds or commodity or a currency used to hedge or maintain an open position.
Dividend
Payments made to shareholders, usually once or twice year out of a company's profits after tax. Dividend payments do not distribute the entire net profit of a company. Dividend is declared on the face value of a share, and not on its market price.
Dividend Yield
Dividend per share divided by its market price, multiplied by 100 Institutional Broker. A broker, who buys and sells shares and bonds from the stock market for mutual funds. He usually deals in large volumes and charges a lower commission than ordinary investors do pay wholeheartedly if they could have some one else to worry on their behalf. This service is provided by the underwriters.
Equity Shareholders
They are the owners of the company, sharing its risks, profits & losses. They have a residual claim on the earnings & assets of the company. They are paid for their share of the company's profits after all other claims are met. Only equity shareholders are entitled to vote at the company's meetings. Thus controlling the management.
Equity Share Capital
Equity share capital means with reference to any such company, which is not preference share capital.
Fixed Assets
This entry on a company's balance sheet represents land, plants and machinery, furniture and fixture which are not meant to be converted into cash in the normal course of events. These are shown at their current depreciated value on the balance sheet.
Forward
It's a contract to buy or sell specific quantities of goods, currency, freight at a stated price and a stated time in the future.
Future Market
It's a market where future contracts are traded. Such contracts are for buying and selling at a particular price on a future date. These can be a number of such markets for trading in different types of goods.
Fundamental Analysis
Fundamental Analysis refers to scientific study of the basic factors. Which determine a share's value. Fundamental Analysis is more effective in fulfilling long - term growth objectives rather than short term price fluctuations.
Financial Ratios
Ratios of values obtained from a firm's financial statements used to study the firm's health and price of its shares. The more important among these are current ratio, P/E ratio, earnings to equity ratio, price - book value ratio, profit before tax to sales ratio and quick ratio.
Issued Capital
The amount of authorized capital issued by a company. A part of the authorized capital may be withheld for subsequent issue, at part or at a premium.
Initial Public Offering (IPO)
IPO represents the initial Public Offer of shares by a company in the primary Market to raise funds / capital from the institutional players/investors. The IPO can be through Book Building Route or fixed price route.
Institutional Investors
Mutual funds, Unit Trust, Life Insurance, Pension funds and portfolio manager members' money in shares and bonds, are institutional investors.
Institutional Broker
A broker, who buys and sells shares and bonds from the stock market for mutual funds. He usually deals in large volume and charges a lower commission than ordinary investors do pay wholeheartedly if they could have some one else to worry on their behalf. This service is provided by the underwriters.
Index Option
It's a call or put option on a financial index. This allows investors to trade in a particular market or industry group without having to buy all of the stocks individually.
Merchant Bank
Although historically merchant banks, as distinguished from commercial banks which deal with the general public, have been concerned with export and import trade, they have expanded their activities by raising finance, at home and abroad, for industry, including high - risk - purchase financing.
Mutual Funds
These are operated by investment companies and banks, which raise money from shareholders and invest in a large variety of securities like shares, debentures, bonds and money market instruments set up for a limited period, or with no winding - up date
Market Capitalization
The total market value, at the current stock exchange list price of the total number of equity shares issued by a company.
Market Lot
A fixed minimum number, in which or in multiples of which, shares are bought and sold on the stock exchange.
Market price
The market price is the last reported price of a share at which it was sold on the stock exchange.
Manipulation
Artificially rising or lowering the price of shares, either alone or in collaboration with others, by creating an appearance of active buying and selling, Illegal.
Margin Account
An account with a brokerage firm which will allow the client to buy shares with money borrowed from the broker. Margin requirements can be met with a deposit in cash or shares.
Merger
An amicable getting together of two or more companies to form one unit, for increased overall efficiency. The shareholders of merged companies are offered equivalent holdings in the new company, and old employees are generally retained. TAKEOVERS, which are quite another matter, generate a lot more heat and ill will. A horizontal merger combines direct competitors in the same products and markets, while a vertical merger combines supplier and company or customer and company.
Narrow Market
An-inactive or sluggish market in which there is a low volume of trading and great fluctuations in prices compared to the trading volume.
Net Income
Profit after tax (sometimes shown as PAT)
Net Asset Value
It is calculated by dividing the total market price of all the shares held by mutual funds, less any liabilities, by the total number of shares, on a particular date.
Ordinary Share
An ordinary share represents the form of fractional ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture.
OddLot
Any number of shares less than the market lot makes an odd lot. Also, if the market lot of a share is 100, a single share certificate of a different denomination - whether smaller (e.g. 50 shares) or bigger (500 shares, for instance) - is an odd lot. Odd lots, typically, arise from BONUS or RIGHTS issues. Apart from the difficulty in buying or selling odd lots, there is another disadvantage: you may have to sell an odd lot at a price lower than the price quoted for the market lot.
Panic Selling
A condition of the stock market in which not only inexperienced investors, h* who sturdy bulls, take fright and start selling. It may be caused by sudden unfavorable news or rumor or a RANDOM WALK by shares downwards or simply in bear natal conditions the absence of financial institutions from the market.
Port Folio
Combined holding of many kinds of financial securities-shares, debentures. government bonds, Unit Trust certificates, and other financial assets. Making a portfolio is putting one's eggs in different baskets with varying elements of risk and return. Reducing risk by diversification and maximization of gains are the primary objects of making a portfolio.
Premium
A price above the face value of a share or any other financial securuty.
Public Offering
Offering shares to the investing public as distinguished from rights offering to existing shareholders or private placement.
Price - Earning Ratio
An indicator of how highly a share is valued in the market. Arrived at by dividing the price of a share by the earnings per share. The ratio tends to be high in the case of highly rated shares.
Prospectus
A formal public offer to sell ordinary shares, preference shares or debentures, highlighting the details an investor needs to know to make an investment decision.
Primary Market
Primary market comprises of a market for new issue of shares, and debentures, where investors apply directly to the issuer/company for allotment & pay application money to the issuer's/company's account. Primary market is where a issuer/company makes its contact directly with the public at large in search of capital Distinguished from the secondary market, where investors buy/sell listed shares on the stock exchange.
Paid - up Capital
Capital acquired by selling shares to investors, as distinguished from capital accumulated from earnings or from secured or unsecured loans.
Quoted Price
The price at which a share was last bought and sold on the stock exchange.
Record Date
For the purpose of dividend distribution and entitlements to BONUS or RIGHTS ISSUES, a company fixes a date on which a shareholder must officially own shares to qualify. If a share has changed hands after the declaration of dividend, bonus or rights before this date but the transfer has not been entered in the register of the company, the transferee can get the benefit of the dividend etc. only through the stockbroker.
Reserves
Setting aside of a part of a company's earnings for expansion, modernization, payment of future dividend, bonus to shareholders, redemption of debentures and preference shares and to meet any contingencies.
Right issue
Whenever an existing company makes fresh issue of equity capital or debentures the existing shareholders or convertible debenture holders have the first right or subscribe to the issue in proportion to their existing holdings. The price of the security before the right issue is known as the cum - rights price & the price after the rights.
Secondary Market
Secondary market comprises of the buyer and seller of shares and debentures subscribed to the share or debenture of the company, if one wishes to sell the same, it will be done in the secondary market Similarly one can also buy the shares or debentures of a company from the secondary market (if the company is listed on the stock exchange) without having to wait for the company to come out with a new public issue.
Shareholder
A person or a legal entity that owns an equity or preference share of a company is called as a shareholder. The proof of his ownership is the share certificate, which he may hold in multiple numbers, each certificate, which he may hold in multiple numbers, each certificate may comprise of a certain quantity of shares.
Shareholder Equity
It is a team used in a company's financial statement to identify its net worth, which is its residual value after all its liabilities are subtracted from its assets.
SWAP
An exchange of streams of payments over time according to specified terms. The most common type is an interest rate swap in which one partly agrees to pay a fixed interest rate in return for receiving an adjustable rate from another party.
Underwriters
Making public issue of securities is risky. There is always a chance that the issue may not be fully subscribed. This chance may be high or low. Companies would like to free themselves of this worry and attend to their operations.
Working Capital
It is the difference between current assets and current liabilities. It reflects the liquidity position of a company.
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