Acid Test Ratio: Acid test ratio or Quick Ratio is a liquidity ratio that assess the ability of a company to pay its short term liabilities or current liabilities and is also a great measure to evaluate a firms liquidity.
Allotment: Allotment refers to a situation when the application of an IPO has been accepted and the investor is allotted with the shares of the following company.
Analyst: An analyst is a professional who studies and evaluates stocks for the purpose of providing investors with recommendations or managing a fund or a portfolio management service. Analysts usually work for financial firms and help their clients in making correct investment choices, like to buy or sell a certain share..
Annual General Meeting (AGM): An annual general meeting more commonly known as AGM is a formal gathering of all the shareholders organized by the company, where the operations and outcomes of the past year are discussed and future plans and outlooks are considered. It is mandatory for all public limited companies to have an AGM every year.
Annual Report : An Annual Report is a comprehensive summation of all the activities and operations that took place in a calendar year in a company. Annual reports are published to provide shareholders and other interested parties information about the companies financial and non financial activities.
Annuity : Annuity is a financial product which is designed to have a certain amount of payout over time. This financial product is mostly suitable for individuals considering the financial stability of their retirement years.
Arbitrage : Arbitrage is a form of trading in which the trader exploits the difference in the price of a particular thing in two different markets or different forms.
Ask Price : Ask price is price the seller of the shares is demanding from the buyer of the shares.
If the buyer is willing to pay the particular ask price then the order will be successfully completed.
Asset Allocation : Asset allocation is the process of dividing your funds or capital into different areas in order to diversify risk and hedge your resources. Asset allocation can be done on the basis of many different methods such as time horizon, investment categories, stock market sectors, market capitalization of different companies etc.
Asset Backed Securities : ABS or Asset Backed Securities are basically bonds that are backed with financial assets, these are a substitute for investors who invest in debt instruments.
Audit : It is an inspection done by an outside organization of the various books of accounts of a company and other operations in order to assure the accuracy of returns and declarations.
Bad Debt: A bad debt is a debt that cannot be recovered by the creditor. A bad debt occurs when the company that borrowed the funds goes bankrupt and cannot pay back to the entity it borrowed the money from
Backwardation : Backwardation refers to a situation when the price of a commodities futures is lower then the current market price of the commodity. It is a very infrequent phenomenon and usually tends to last for a very short period of time.
Balance of Payment: Balance of Payment more commonly known as Bop, is a record of all the transactions between the residents of one country and the rest of the world in a given period of time. A balance of payment deficit means that the value of imports is higher then the value of exports.
Balance Sheet : Balance Sheet is basically a financial statement that reviews a companies assets, liabilities and shareholders equity. A balance sheet demonstrates a companies net worth. Balance sheet is one of the prime indicator while analyzing a companies valuation.
Balanced Mutual Fund : Balanced mutual funds are the types of funds that allocate funds in stock market as well as bonds and sometimes in the money market as well. These funds are designed for investors who want both the high returns of equity and the safety of the bond market.
Bank : A bank is a financial institution that is licensed to take deposits and allocate loans or other types of credit facilities. There are two types of banks, the central bank (RBI) that overviews the finances of an economy and is in charge of the money flow of the nation. The other type of banks are the commercial banks (HDFC,SBI) which are private institutions that handle the money of private organizations and individuals.
Bank Fixed Deposit (FD : Bank FD is a financial instrument provided by the commercial banks that provides investors with a fixed interest rate over a period of time until maturity, which tends to be above the nominal savings account interest. The FD rates tends to fluctuate between 4% to 7.5%
Bear : A bear is an investor who predicts the market or a particular share to fall from the particular levels and carries an overall pessimistic approach. A bear is likely to sell his positions.
Bear Market : A bear market is a situation when the aggregate market sentiment is pessimistic and all the participants are predicting a fall or a correction in the overall market. In a situation like this the sellers in the market are much more then the buyers in the market.
Beneficiary : Beneficiary is a person who gains some benefits like profits from a particular operation. Beneficiaries are to be named in all the legal documents like life insurance papers, wills etc. For Example: The person who receives the money from the life insurance company after a person dies is the beneficiary.
Bid Price : Bid Price is the price that a buyer is willing to pay for a particular security. If the bid price matches the ask price then the trade gets completed.
Bid Size : Bid size is the amount or number of shares that the buying entity is willing to purchase.
Block Trade : Block Trade is a significantly large order to sell or buy a particular security at an arranged price between the buyer and seller, manier times outside the open market.
Blue Chip : Blue chip is a type of company that is generally large in size and carries a well recognized image and is also financially sound. Blue Chip companies tend to carry a lower amount of risk and are considered to be fruitful investments in the long run.
Blue Chip Funds : Blue Chip Funds are the mutual funds that only invest in blue chip companies. They cater to the investors who don’t want to allocate money into small companies that carry higher risk.
Bonds : Bonds are a fixed income financial instrument in which an investor loans funds to a corporate or the government that has to pay a fixed or variable amount of interest for a particular period of time.
Bond Rating : Bond Ratings are ratings provided by credit rating agency like ICRA and Crisil that judge and assess the capability of the corporation carrying the bond to paying back the funds borrowed.
Bonus Issue : A bonus issue is simply an issue of additional shares to the existing shareholder in proportion to the shares they already hold. Bonus shares are often used as a substitute to increasing the dividend distributed among the shareholders.
Book Building :Book Building is a process supervised by an underwriter that helps figure out at what price should the IPO of a company be offered.
Book Value : Book Value is the value of an asset after the depreciation has been subtracted from the valuation given on the balance sheet. From the companies point of view, the book value can also be the net asset value of a company that is calculated by subtracting the total assets by the intangible assets and the liabilities.
Breakout : A breakout is a situation when the price of a share break a particular resistance level after which the share can be significantly more volatile. Many day traders and short term trader look for breakout opportunities in order to buy or sell a share as soon as it break its upper or lower resistance levels.
Broker: A Broker is the middle man that initiates the buy and sell orders of an investor. A broker can be an individual or a financial service firm as well. The broker however is likely to charge a brokerage in exchange of the services provided to the investor.
Brokerage fee : Brokerage is the amount of fee the brokerage firm charges in order to execute the trade for the investor. It can be on the basis of the value of the shares or a pre fixed amount between the investor and the brokerage/broking firm.
Bulls : Bulls are the optimistic bundle of investors who are expecting positive movement in the markets. Bulls are buyers who expect a particular share or sector to go up.
Bull Market : A bull market is a market that is filled with participants having a positiveopinion about the market and expect the market to keep goin up. The prices tend to keep rising in a bull market which is often backed by a significant volume of buyers.
Bullion : Bullion is a technical term for gold and silver that is traded in the form of a bar or a biscuit.
Buy Back : Buy Back is a situation in which a public company purchases its outstanding shares and depletes the number of shares in the open market. Buy backs are primarily done in order to increase the value of shares by reducing their supply in the open market.
Call Option : Call option is basically an agreement that provides the investor with an option to buy a particular commodity, stock, bond or any other type of investment at a future date at a particular price within a time period. Call option gives the investor and option to buy, but it is not mandatory for an investor to buy that particular investment.
Capital Expenditure : Capital expenditure is the expenditure done by a company on purchasing or maintaining fixed assets like machinery, factory, furniture etc.
Capital Gain: Capital gain is basically an increase in the value of the capital purchased by the investor . The capital here can be an investment or a fixed asset like real asset.
Capital Loss : Capital Loss is a decrease in the value of a particular capital purchased by the investor. The capital can be an investment or also a fixed asset like a land. Capital loss occurs when the purchasing price is higher then the current price of the asset.
Capital Growth : Capital growth is the increase in the value of a particular asset or a portfolio of assets overtime. It can be measured by subtracting initial investment by the current value of the assets.
Cash Market : Cash market is the market of commodities and securities in which the transactions and payments happen instantly on the spot unlike the options or the forwards market.
Central Bank : Central Bank is an institution that overviews a countries interest rates, currency as well as the money supply. The central bank also is the governing body for all the commercial banks that function in a country, it is often referred to as the ‘bank’s bank’. The RBI (Reserve Bank of India) is the central bank of India.
Churning : Churning is when a broker encourages a client to trade excessively in order to increase his commissions like brokerage.
Clearing Day : Any business day on which the clearing corporation is open to perform trade clearing and settlement.
Close End Funds : These are the types of mutual funds that are unlike open ended schemes do not offer an anytime entry and exit. Closed end funds can be traded like stocks on the live market. They raise a fixed amount of capital through an IPO like process.
Collateral : Collateral is an asset like a property or shares that the borrower keeps with the creditor as a security for the money borrowed.
Commodities : Commodities are the general goods that are used in various forms such as raw materials, assets etc.
Commodities Market : Commodity Market is a market place for the buying and selling of the various general commodities like gold, silver etc. Commodities market is both virtual and physical. Virtual is where the futures of these commodities are traded and physical would be the vegetable market near your house.
Commodity Exchange : Commodity exchange is the body that regulates the operations taking place in the commodity markets of an economy. The actual trading of the commodities take place through the commodity exchanges of the particular countries. MCX is the leading commodity exchange in India.
Compounding : Compounding is a process of an increase in the value of an investment because of earning interest on both principal and accumulated interest. Primarily earning interest on the principle amount plus the previous interests. For Example: If you invest $100 and receive 20% interest per annum after one year you will have $120, if you again let all the capital gain interest at 20% after 2 years you will gain the 20% interest not on $100 but on the $120 which will be $144. If this rate of interest continues for 10 years the $100 would convert into $620
Compound Interest : Compound interest is the addition of interest to the principal amount basically, interest on interest. The formula of Compound Interest is:
Contingent Liability : Contingent Liabilities are the liabilities that the business might face in the future. These are the potential liabilities that are mostly dependent on particular uncertain event. For example a product warranty is often referred as a contingent liability.
Contract : A spoken or written agreement concerning employment, sales, or tenancy, that is intended to be enforceable by law.
Convertible Bong : A convertible bond is a type of bond that can be converted into equity shares of the bond issuing company during the lifetime of the bond.
Corporate Income Tax : Corporate Income Tax also known as company tax is the direct tax that is imposed on the earnings or the capital of corporate companies by the government. The corporate tax rate in India stands at approximately 30%.
Coupon Interest Rate Bond : This is the type of a bond that gives fixed payouts at particular time intervals rather than an interest at the time of completion of the bond or sale.
Currency Futures: Just like commodities and equites the currency market also has the option of futures where traders and speculators can bet on particular currencies future valuation based on their study and speculation.
Current Assets : Current Assets are the assets the that can be converted into cash very easily and last for less than a year, they are likely to be converted into cash or other form of capital within a year.
Current Ratio : Current ratio is a liquidity assessing ratio that tells analysts and investors how capable a company is to pay back its short term liabilities. The formula to calculate Current Ratio is : Current Assets/Current Liabilities.
Day High & Day Low : The highest price the stock has reached during that day is the day high and the lowest price the stock has dropped to during the day is known as the days low.
Day Trader : A day trader is a type of speculator who aims to make money by making intraday trades. These trades are completed before the trading day gets over. The positions are not held overnight.
Debt: Debt is simple a sum of money that is owed to another entity. A loan taken by an individual or a company is a debt that has to be paid back.
Debtor : A debtor is an entity that owes money to another entity. For example if you borrow $1000 from a bank, you are the debtor while the bank is the creditor.
Debt to Equity Ratio (D/E): The D/E ratio is a financial ratio that aims to compare the amount of debt raised by a company with the number of equity shareholders it has. It provides to be a great measure of the financial leverage of the company.
Default Risk : Default risk is the risk faced by all the creditors, it simply means the risk of the debtor not being able to payback the money taken from the creditor.
Defensive Stock : A defensive stock is a very stable and safe stock that is not significantly affected by the market movements in a drastic way. Defensive stocks tend to provide investors with a stable dividend and growth.
Delisting :Delisting is when a company is removed from the stock exchanges that it trades on. Delisting can happen intentionally when the company wants to be traded privately instead of being a publicly traded company.
Delivery : When an investor or a speculator buys a share and holds them overnight and takes those shares into his demat account, it means that the investor/speculator has taken the delivery of the shares.
Depreciation : Depreciation is the fall in the value of assets as time goes by usually caused by wear and tear.
Derivatives : Derivatives are securities that derive their price from other on or more underlying assets. Futures and options contracts are derivative instruments that derive their value from the particular script they depend on.
Devaluation : Devaluation is a tool which is a part of the monetary policy in which the regulators tend to lower the price of the domestic currency in order to make its exports more attractive in the foreign markets leading to an increase in its exports.
Discount Broker : A discount broker is a type of broker that charges a very low brokerage to its customers but it does not provide its customer with services like a dedicated relationship manager or investment advise.
Discounted Cash Flow (DCF) : Discounted cash flow is a method that can be used to estimate the valuation of a particular company, asset or a project by using the future free cash flow estimates and adjusting them with discounts.
Diversification : Diversification basically means not putting all your eggs into one basket. In financial market terms it means not investing all your capital into one stock or one sector but investing you capital into multiple stocks and sectors in order to reduce the amount of risk that your portfolio carries.
Dividend : Dividend is the distribution of the profits made by a company to its shareholders. It is primarily distributed in form of cash but can also be in form of additional stocks of the company.
Dividend Yield : Dividend yield is the dividend shown as the percentage of the current share price of the company.
Dumping: Dumping refers to a country exporting a particular good or commodity substantially lower then the price it is available at the importing country at significantly high quantities driving the domestic producers demand to lower levels.
Earnings Per Share (EPS) : Earnings per share more commonly known as EPS is a financial indicator that shows us the earnings of a company divided by the number of outstanding shares. This is one of the most important indicator of a companies profitability, the higher the EPS the better it is.
Earnings before Interest and Tax (EBIT): Earnings before interest and tax or EBIT as the name suggests is an indicator of a companies profitability that shows us the revenues minus the expenses but not the taxes and interest that the company is obligated to pay.
Earnings before Interest Tax Depreciation & Amortization (EBITDA) : EBITDA is the earnings of a company before the subtraction of outflows like interest costs, taxes, depreciation and amortization. EBIDTA = Net Profit + Interest + Taxes + Depreciation + Amortization. (Amortization is primarily an accounting term that is a process that allocates costs of intangible assets over a particular period of time, other than intangible assets it can also refer to the repayment of loans over time.)
Equated Monthly Installments (EMI) : EMI is a payment process that allows the outflow of money to occur in similar amounts every month rather than repaying the loan back all at once.
Employee Stock Ownership Plan (ESOPs) : ESOPs are employee benefit schemes that allow employees to buy the shares of a company at a lower price level for a specific period of time. ESOPs are meant to motivate employees by giving them a sense of ownership of the company that they work for.
Endowment : Endowment is basically the donation of money or property to a non profit organization, in order to help the NGO fulfill its objectives.
Entry Load : Entry load is a financial obligation that has to be fulfilled by the investor before investing in a particular scheme or mutual fund. Many mutual funds charge investors with an entry load which is basically a charge they have to pay when investing in a scheme. Not all mutual funds charge an entry load.
Equity : Equity is a stock or any other form of security that denotes ownership. The ownership can be of a company or of a project etc.
Equity Linked Saving Schemes (ELS) : Basically ELS are tax saving mutual funds that allows investors to avoid some amount of their tax obligation by investing in this 3 year locking period mutual fund. The maximum tax deduction limit through ELSS is 1.5 lac rupees.
Exchange Traded Fund: Exchange Traded Fund or ETF are primarily Index Funds that are listed and traded on exchanges in a similar way like stocks. ETF’s enable investors to invest on stock markets around the world and broadly through the exchange rather than particular stocks.
Exit Load : Similar to entry load, the exit load is a charge levied by the mutual funds on investor. But exit load is charged when an investor pulls out funds from a mutual fund. Basically it is charged at the time an investor exits a scheme.
Exposure : Exposure refers to being open to harm or damage. In investing terms, exposure means the uncertainty or risk an investor is open to while looking at a particular investment option, be it a stock or a sector.
Extrinsic Value : Extrinsic value is the part of the worth that has been assigned to an asset or a company by external sources. For example: The price of a gold ring according to its weight, purity, making etc is $100 but that gold ring has been into an individuals family for 4 generations so the worth of that gold ring would be much higher to that individual, this increase in worth due to the history of the gold ring is the extrinsic value.
Face Value : Face value is the nominal value of the security set by the issuer.
Financial Instruments : Financial instruments are financial assets that can be traded from one entity to another. Financial instruments include cash, stocks, bonds etc.
Fiscal Policy : Fiscal policy is mainly the use of government expenditure and revenue schemes that are used to influence the economy of a country. Fiscal policy includes things like the taxation etc.
Fixed Income Instruments : Fixed income instruments are the financial instruments that require either the borrower or the issuer of the instrument to make fixed payments of a particular amount on a particular scheduler set prior to the exchange of the instrument. Some of the commonly known fixed income instruments are T-Bills and CD’s.
Fixed Deposit (FD) : An FD is a financial instrument provided by the banks and other financial institutions to its customer, that provided them with a higher interest rate then a regular bank account until a given date of maturity.
Forex Market : Forex market is the market that trades in the foreign exchange securities. Forex market enables traders, speculators and other participants to buy, sell & exchange foreign currencies.
Fund Manager : Fund Manager is a qualified financial professional that leads and manages a particular fund. All the investment decisions like the allocation of assets etc. are to be taken by the fund manager, he/she is basically the CEO of the fund.
Fundamental Analysis : Fundamental analysis is a process of evaluating a company by examining and understanding its economic, financial and other quantitative and qualitative factors. Fundamental analysis is primarily done by investor and analysts looking to invest in a company for a longer period of time while technical analysis is for the short run.
Futures : In the financial markets, futures is a type of a derivative market contract in which there is a legal agreement to buy or sell a particular security at a particular price at a particular time in the future.
GAAP (Generally Accepted Accounting Principles) : Set of commonly followed accounting rules and standards for financial reporting and accounting.
Goodwill : Goodwill is a nontangible asset that adds to the value of a company. Goodwill can be a patent owned by the company or a very good brand name among other types.
GDP (Gross Domestic Product) : GDP is the total amount of goods and services that are produced in an economy in a given period of time, GDP shows the valuation of the production in an economy. It is primarily calculated to measure the economic performance of a country.
Gross Profit : Gross profit refers to the earning left after reducing the cost of goods sold from the total revenue. Gross profit = Sales Revenue – COGS (Cost of Goods Sold)
Hedging : Hedging simply means reducing the risk. By hedging investments an investor can reduce the potential loss that can occur. Example of Hedging – Not investing all the capital into the equity markets, allocating some capital or funds to much more safer bets like bonds or real estate.
Hedge Fund : A hedge fund is a pool of funds gathered from institutional investors which further invests into a variety of securities and financial instruements.
Holdings : The securities that are currently present in an investment portfolio.
Holding Company : A holding Company is a company that owns outstanding shares of another company.
Income Tax : Income tax is the type of tax that is directly imposed on the income of an individual or corporation. It is a form of direct taxation.
Indirect Tax : Indirect tax is the tax that is not levied on the income but which is payed indirectly by all entities. Indirect tax is levied on goods and services rather than income.
Inflation : Inflation is the increase in price of goods and services, causing the value of the currency to fall down.
Initial Margin : Initial margin is the amount of cash or funds an investor must have in the trading account in order to purchase particular securities on margins (borrowed funds).
Initial Public Offering (IPO) : Initial Public Offering or an IPO is when the shares of a company or a security is launched into the financial markets for the first time. IPO’s are a part of the primary market.
Insider Trading : Insider trading is a phenomenon when a market participant has confidential knowledge regarding a companies practices and acts upon it to gain financial gains. Insider trading is considered to be an illegal activity.
Institutional Investors : An institutional investor is an investor who has a large amount of capital to be invested, hence is treated in a more preferential way then other retail investors carrying a lower amount of capital..
Insurance : Insurance is an agreement that a company undertakes that includes, the company will compensate the insurance holding entity for any specified loss that has been insured in exchange of the insurance holder paying specified installments in order to maintain the insurance. It can be health insurance in which the company pays for the hospital bills incase the insurance holder falls sick.
Internal Rate of Return (IRR) : The IRR is a method to calculate the profits one can get from an investment. The IRR does not include any outside forces such as inflation etc. and focuses only on the internal factors.
Intrinsic Value: Intrinsic value is the value of a company that is calculate based on its fundamentals, the current prevailing market valuation has no affect in the calculations of the intrinsic value. Intrinsic value included both tangible and non tangible factors.
Intraday Trading : Intraday trading is when a trader or a speculator buys and sells shares within the same trading day and does not hold the stock or security overnight. Intraday trading is mainly done on the basis of technical analysis.
Investment : Investment is basically allocating capital towards an asset that is likely to generate income or appreciate in value in the future.
Investment Advisor: An investment Advisor is an individual or a firm that provided investment advice regarding different securities to different participants in the financial markets. In exchange of this advise the investment advisor is likely to charge a fee.
Investment Bank : Investment Banks are companies that provide financial services that require a large number of finances, to other entities like underwriting in order to raise capital, making merger deals, handling takeovers etc.
Issue Price : It is the price at which a fresh issue of shares is offered to the public.
Joint Account : Joint Account is a type of bank account that is held by more than one individuals and all the holding members carry the authority to deposit and/or withdraw funds from the bank account.
Junk Bond : Junk bond is a bond that carries a high rate of interest and carries high risk as well. They are usually issued by companies with a lower credit rating and hence they have to pay a higher interest rate on their bonds as compared to the safer companies.
Large Cap : Large cap is a term given to companies with a high market capitalization (more then Rs 10,000 crore). These are the highly recognizable and big net worth companies that are generally considered to be safer bets as compared to the smaller ones.
Leverage : In simple words leverage is the use of borrowed funds to increase the investment or trading capital. Leverage is brovided by most financial institutions to investors, traders and other participants in exchange of interest.
Liquid Assets : Liquid Assets are the assets that can be turned into cash easily in a shorter period of time. Gold is a liquid assets whereas property is a non liquid asset as it might take time to convert in into cash.
Liquid Fund : Liquid funds are debt market mutual funds that invest money into short term money market instruments like treasury bills etc. Liquid Funds last less then one year.
Liquidation: Liquidation is a situation when a company shuts down and sells its assets and distributes them to creditors and shareholders. Liquidation generally takes place when a company goes bankrupt and has to sell its assets in order to pay its creditors.
Loan : Loan is when an individual or a company provides funds to another individual or company in exchange of earning an interest on the principle amount given.
Lock in Period : It is a pre determined period of time during which the holders of particular security are allowed to sell their holdings.
Long Position/Long : A long position or a long is an options contract in which the buyer of the contract expects the value of the security to rise in the coming days.
Long term Investor: A long term investor is a market participant who invests in a share/company for more then one year and the investment is done primarily based on fundamental factors rather then technical ones.
Lump Sum : Lump sum is a type of investment strategy in which the investor invests into a scheme or security in a single payment at a given time, rather then spreading it over various payment like in SIP’s.
Mark to Market : Showing the value of the assets or the security according to the current live price.
Market Capitalization : Market Capitalization more commonly known as market cap is the value of the company trading in the stock market. Market capitalization is calculated by multiplying the share price by the number of shares. Market cap can be divided into large, mid, small and micro depending on their capitalization respectively.
Market Order : Market order is a buy or a sell order that is executed immediately at the price at which the security is trading in the market during that time.
Market Sentiment: Market Sentiment refers to the feeling of the participants regarding the current operations and future of the market. The price movement and the inflow of capital shows the market sentiment, if the prices move upwards the market sentiment is positive and bullish.
Maturity: Maturity is when a particular fixed income instrument expires or is completed.
Multi Commodity Exchange (MCX) : MCX is the most profoundly known commodity exchange in India. Just like BSE or NSE where the buy and sell of stocks takes place at MCX the buying and selling of commodities takes place. It is the commodity exchange of India headquartered in Mumbai.
Mid Cap : Mid Caps are the medium size companies that have a market capitalization between 2-10 billion rupees, mid caps are the not very big but recognizable companies that are risker to invest in when compared to the large caps but are definitely more safer to invest in then the small caps.
Ministry Of Finance (MOF) : The Ministry of Finance is the ministry within the Government of India that operates as the Indian Treasury Department and overviews and insures the financial stability of an economy.
Money Market: Money market is the financial market where short term liquid financial securities are traded . Financial instruments like T-Bills etc. are traded and the time range is in between overnight to a year.
Money Market Funds : Money Market Funds are the schemes that only invest in the short term securities that are traded in the money market.
Mortgage : A mortgage is a loan that is secured by the borrower by pledging an asset with the lender in case the borrower is unable to payback the loan.
Mutual Funds : Mutual Funds are pool of money that are managed by specialized professionals who invest the collected money into diversified security depending on the type of mutual fund category it belongs to. Mutual Funds charge an entry or an exit load or both in some instances as the incentive to provide investors with their services.
Net Asset Value (NAV) : Net Asset Value or NAV is basically the value of the mutual fund divided into units, that is taken as the current price of the mutual fund. An investor wanting to invest in a mutual funds would have to buy particular unites according to the NAV.
Net Assets : Net Assets is the total assets of a company minus the total liabilities that it has. Net Assets are often associated as the owners or shareholder equity.
Nominee : A nominee is a person who receives the assets or monetary benefits when the holder of a security like an insurance passes away. The nominee is either mentioned by the security holder at the time of opening an account through which the security is traded or is decided by the law.
Offer Price : Offer price is the price at which an institution or individual is ready to sell off a particular security.
Opportunity Cost : Opportunity Cost is the next best alternative of a particular decision. When making an investment decision an investor should always consider the opportunity cost as it shows the loss of revenue if the other investment option was chosen by the investor.
Options : Options is a derivative instrument that gives one entity an option to buy or sell a particular security at a particular price in the future at a specified date. The entity with the option is called the the option holder and the option provider is known as the option writer. The option holder is not obligated to buy or sell the security, but does poses the option to if he is gaining monetary benefits.
Overallotment / Green shoe : Overallotment or greenshoe is an option available to the underwriters that enables them to issue the sale of additional shares when the IPO of a company is released if the application of shares exceeds the current issue quantity.
Oversubscription : Oversubscription is a situation when the amount of applications received for an IPO exceed the number of shares are are being issues by the company.
Price to Earnings Ratio (P/E) : The P/E ratio is one of the most famous valuation ratio that compares the current share price of the company with its per share earnings.
Paid up Capital : Paid up capital is the amount of funds the company has raised from the shareholders by selling the companies shares to them. The money generated through the Initial Public Offering (IPO), is the paid up capital.
Policy Holder : Policy holder is the individual in whose name the insurance policy is held.
Portfolio: Portfolio in the financial world is the collection or range of investments held by an individual or a corporation.
Portfolio Manager: Portfolio Manager is a trained and experienced professional who overviews an individuals or a companies investments into different sectors.
Portfolio Management Services (PMS) : PMS is a service used by high net worth individuals who give their funds to professional or financial service firms that invest their money into the financial market on behalf of the investor, in exchange the PMS provider takes a cut from the money invested. The minimum amount to invest in a PMS is Rs 25 lacs hence not every investor can invest in it.
Preferential Shares : Preferential Shares are the shares that are provided to shareholder before the issue of normal share, preferential shares gain some additional benefits like getting to be the first in line for payment If the company goes into bankruptcy.
Premium : Premium is the additional amount that an investor has to pay for a share above its face value.
Price to Sales Ratio (P/S) : P/S Ratio is a very good valuation measuring ratio that shows us the firms stock price compared to its revenue generated by sales. In order to calculate P/S ratio you have to divide the market capitalization of the company by the latest revenue stats. It can also be calculated by dividing the price per share with the revenue per share.
Price to Book Ratio (P/B) : P/B ratio is another valuation ratio that compares the price of a share of a company to the book value of the company. P/B is calculated by dividing the current stock price with the latest book value per share stats. A high P/B ratio means that the share is overvalued and a low P/B ratio suggests that the share is undervalued.
Primary Dealer : Primary Dealers often known as PD’s are government recognized individuals and corporations that are legally authorized to deal in government securities, mainly government bonds.
Profit : Profit is the surplus left after removing all the costs from the revenue generated by an entity.
Prospectus : Prospectus is a legal document that has to be submitted by the corporations launching an IPO in the coming future. A prospectus includes information like the underwriter of the issue, the lot size, the amount of shares being offered for sale and much more.
Put / Put Option : Put option in the financial market is when the owner is given the right to sell the security at a specific price within a specific time range. The owner of the contract tends to be bearish on the market and is expecting the price levels to fall down.
Rally : A rally in the financial market is when there is a continuous increase or decrease in the level of prices of stocks, indices etc. for a significant period of time in a certain direction.
Realized / Unrealized Profit : Realized profit is when a position is converted into cash and the shares have been sold at a particular surplus, whereas unrealized profit means when the price of the shares held is at a surplus then the buying price but the shares have not been sold yet they are being held by the investor.
Repo Rate : Repo rate is the interest rate at which the Central Bank (RBI) lends money to the commercial banks (HDFC) of the economy in case the commercial banks face a cash crunch.
Reverse Repo Rate: Reverse Repo Rate is the exact opposite of the repo rate it is the rate at which the central bank (RBI) borrows money from the commercial bank in order to limit money supply or in case of cash shortfalls.
Retained Earnings: Retained earnings are the earnings that are held by the company and not distributed as dividends. Retained earnings can be used for expansion of business, capital requirements and many more expenses.
Return on Capital Employed (ROCE) : ROCE is one of the most prominently used profitability ratio that compares the profits earned by the company with the capital that was put into the company. ROCE : EBIT / Capital Employed
Return on Equity (ROE) : ROE is a profitability ratio that measures the amount of profit a company is making with the amount of capital infused by the shareholders.
Reverse Repo Rate : Reverse repo rate is the rate at which the commercial bank of a nation borrows money from the commercial banks of the country. This can be in order to limit liquidity in the market or cure cash crunches.
Risk Reward Ratio : Risk reward ratio is a measure to calculate the amount of risk an investor has to take in order to make a specific amount of gains. It helps investors and corporations make better and more informed decisions.
Risk Management : Risk Management is the process of forecasting the risks of particular investments and aiming to minimize their exposure on the portfolio of the investor.
Rollover : Rollover’s are of many type but the most common types of rollover in the stock market is when the investor and/or trader switches his/her position from short term &/or on margin to on cash &/or on delivery. For example: If a trader has purchased 100 shares of company A at $10 for intraday and the price of company A falls to $9, but the trader still thinks that in a day or two company A will touch $12, he would roll over the intraday positions that he bought on margin to a delivery position bought by cash.
Sales Growth : As the name itself suggests sales growth is an increase in the quantity of good sold by the company over a period of time.
Savings Bank Account : Savings bank account is the most common type of account held by individuals not companies, that provides a low rate of interest on the amount held in the account. Most individuals tend to have savings bank account whereas companies and partnerships etc. have current accounts.
Sector Funds : Sector Funds are the type of mutual funds that only invest in particular sectors in the stock market and do not allocate any funds to scripts other then the particular sector. For Example: UTI Banking Sector fund, this fund only invests in banking shares and nothing else. These types of funds are for the investors who are bullish and have knowledge on particular sectors rather then the whole market.
Securities : In financial terms securities are exchangeable and tradable assets in different form that can be converted into cash. All financial instruments are securities.
Short Selling : Short selling or shorting a certain security basically means when a trader sells a security that he currently does not hold in his demat account. The trader sells the security at a higher price predicting the price of the particular security to fall, then he buys the security at a lower price to fulfill the short and makes a profit out of the difference between the sell and the buy price.
Settlement : Settlement in the stock market is when the transaction of exchange between the buyer and the seller gets completed. The buyer pays the seller for the shares and the seller gives the shares in exchange of the cash. ROCE : EBIT / Capital Employed
Shareholder : Shareholder is an individual or a corporation that owns the shares of a particular company listed in the stock exchange.
Shares Outstanding : Outstanding shares are all the shares held by the shareholders of the company, it includes everyone from the individuals, to mutual funds to institutional investor etc.
Short Term Capital Gains Tax (STGC) : STCG Tax is the tax imposed on the gains made on the earnings from trading activities that last less then a year. The current STCG Tax rate is 15%.
Short Term Debt : Short term debt is the debt that has to be payed back in less then one year. It can be an overdraft borrowed by an individual or a company. Short term debts are a part of the current liabilities of a company or an individual.
Short Term Investments : Short Term Investments are the investments made for a time span of less then one year. Some of the most prominent short term investments are the money market instruments.
Systematic Investment Plan (SIP) : An SIP is basically a method to invest money into mutual funds in monthly, quarterly or yearly installments rather then lump sum (all at once). SIP’s help investors invest some portion of their income at regular intervals rather then having to invest a major amount of funds at a single period of time which may cause a cash crunch.
Statuary Liquidity Ratio (SLR) : Statuary Liquidity Ratio is a particular percentage of liquid assets like cash, gold or government securities a commercial bank has to hold before providing lending services to its customers. The SLR is set by the Reserve Bank of India and the current SLR is 21.50%.
Speculator : Speculators are market participants that are involved in high risk high return trading activities, that hold or make trader for shorter period of time. Speculators base their buy and sell decisions of hunches and particular aspects that have high chances of going south.
Split of Shares : A split of shares is when the number of outstanding shares of a company increase and the face value of one share decreases. Splits happen in order to decrease in price of one share in order to increase the investor participation in the script. Splits increase the number of shares with the investor but the aggregate value of shares remain the same. For Example: Currently ABC has a Face Value of 10 with a current price of Rs 1000, now the management of ABC has decided to Split the shares by 10:1 ratio. Now the Face Value of ABC’s single share would be 1 and the price of one share would be Rs 100 rather than Rs 1000.
Stock Market : The stock market is a place where the shares of publicly listed companies are bought and sold. The stock market consists of two parts the primary market where the IPO’s of companies are launched and secondary market where the buying and selling of the shares of these currently listed companies takes place.
Stop Loss : Stop Loss is when a buyer places a price limit below the buying price, where the positions held by the buyer are automatically sold. Stop Loss is a great tool to minimize and hedge risks and allows traders to stay away from major losses even if they aren't active on the terminal.
Strike Price : Strike price is a particular price at which a trader dealing in options buys calls or sell puts of a particular share.
Support Levels : Support levels are the price levels of a share below which the share price does not go very easily. The support levels are a good tool for the traders because once the price of a share breaks the support it is likely is go down with a greater pressure.
Swaps : Swaps is one of the derivative contract that basically means the exchange of financial instruments between two entities.
Treasury Bills (T-bills) : T-bills are short term money market instruments that are sold at a discount on their face value and mature at the face value so instead of the interest the investor makes money out of the difference between the buying price and the face value. T-bills have different maturities ranging from four, thirteen, twenty-six and fifty-two weeks.
TAX : Tax is a mandatory charge that has to be paid by individuals and corporations on their earnings and gains. TAX can be direct (imposed on income) and indirect (imposed on the purchase of goods and services).
Tax Evasion : Tax evasion is when an individuals or corporation show incorrect earnings or financials in order to pay a less amount of tax.
Tax Haven : Tax Havens are places or countries where the tax rates are significantly lower and hence are preferred by businesses for higher profit margins.
Technical Analysis : Technical analysis is the study of patterns, charts and trends that help trader determine the price movements of shares for the short term.
Trader : Trader is a participant of the market who does the buying and selling of financial instruments on behalf of others or for himself. Trader is also a term used for individuals who hold funds for a lesser period of time and buy and sell positions on a frequent basis.
Trend : Trend is basically the direction to which the price of share is heading, trend can be upward and downward. It is a tool that helps traders and speculators predict price movements.
Turnover : Turnover is basically the total amount of sales that are generated by a firm by selling its goods or services expressed in a numerical form.
Undervalued : An undervalued asset like a share is the one selling at a price below its actual intrinsic value based on its fundamentals. A share or an asset should be preferably bought by an investor when it is undervalued and this phenomenon is known as value investing.
Valuation : Valuation is primarily understanding and evaluating a businesses actual worth through different techniques such as fundamental analysis etc.
Venture Capital (VC) : Venture capital is a type of financial market in which high net worth investors, invest in start up businesses with the primary motive of value appreciation. It is considered to be the highest risk and highest return financial market.
Volatility : Volatility in the stock markets is how much the price of a share or a sector or even a market deviates. Traders and speculators tend to favor more volatile stocks in order to make higher gains out of the more significant price deviations.
Working Capital : Working capital is the capital or money that is required for the daily expenses of a business. Working capital indicates the cash flow and liquidity of a business. Working Capital: Current Assets - Current Liabilities
Yield : Yield is simply the earnings generated from an investment.
Zero Coupon Bond : This is a type of a bond that is issues at a discount on its face value and pays no interest but matures at a face value above the purchase price.