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