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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.

What next?