Stock Market Knowledge Terms

Thought would try to define some of the commonly used terms in equity arena and I am sure this would be handy for new comers as well as to those who are looking at some definitions.

Acid Test Ratio :
Ratio of company’s current Asset to current liabilities. It reflects the financial strength of the company and is also known as quick ratio.

Annual Report :
Financial results of the company.

Asking Price :
Price at which someone is willing to sell his securities.

Bear Market :
Continuous phase of declining share prices.

Bid :
Highest price at which someone is willing to buy the securities. When Asking price and Bid price match there is a deal.

Blue-Ship :
Stock of well known companies with stable business.

Bonds :
Bond holder is the creditor of the company and normally bonds are issues with a minimum of 3 years time frame with specific interest rate.

Bonus Shares :
Bonus shares are shares given to share holder at no extra cost.

Book Value :
It is the value at which you carry the asset into the balance sheet. The book value is calculated by dividing the equity reserve of the company by the number of shares issues for the same.

Brokerage :
Brokerage is the commission charged by the broker for a transaction which can be upto 2.5% as per SEBI.

Bull Market :
Continuous phase of rising share prices.

Buyback :
Repurchase of its own company or bonds from the holders.

Carry forward :
The process of postponement of purchase from one settlement to other by paying a charge.

Circuit :
The limit imposed by exchanges to control the fluctuation of share prices.

Closing price :
Last traded price of a stock.

Close Ended Funds :
Close ended funds are funds where investors can subscribe only during the New Fund Offer (NFO) period only.

Demat trading :
Demat trading is trading of shares in electronic or dematerialized form.

Dividend :
Dividend is the amount of money that any company gives to the share holders for each share held.

Equity / Stock / Share :
Representation of ownership of a company.

ETF :
Exchange Traded Fund: A mutual fund that is traded on a stock exchange and holds a basket of securities like mutual funds. They can be traded like a stock in trading hours of the day. Price movement is like stock varying on a trading basis and not like Mutual Fund which is once everyday.

Face Value :
The nominal value of share. This is the actual price of the share. Many west countries allow the face value to be consistent and of Re. 1 but in India we have Face value in range of Re. 1 to Rs 10.

Forward Trading :
The Scrip is traded today would be settled at future date which can even be settled or carried forward.

IPO :
Initial public offer which refers to the first offering of equity shares to the general public. Top 5 Indian IPO’s

Nifty :
What is Nifty

Open Ended Funds :
Investors can purchase and sell units even after the New Fund Offer (NFO) period.

Open Interest :
Open interest are open contracts which refers to the total number of contracts, that have not been settled or squared off. For each buyer there must be a seller. So when either of the buyer or seller opens the contract and till he does not square off the contract, it is open and sum total of all such open contracts is called open interest.

P/E Ratio :
Price of the stock divided by the net earning of the company.

Resistance :
Resistance, is the point at which sellers (bears) take control of prices and prevent them from rising higher.

SEBI :
Securities and exchange board of India.

Sensex :
What is Sensex

Settlement and Settlement Date :
The date at which transaction between users is settled by deliver of shares.

Share Premium :
Premium paid over the face value for acquiring the share in the company.

Support :
Support is a level at which bulls (i.e., buyers) take control over the prices and prevent them from falling lower.

Undervalued Shares :
Shares which are traded lower than the book value.

Volume :
The number of shares or contracts traded in a security or an entire market during a given period of time.

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