FINANCIAL WORDBOOK

Annual Report

An annual report is a yearly report that every company prepares to provide company specific information for the shareholders of their company. The annual report consist lots of information about a company, from cash flow to management strategy. Several people read the annual report to look at the company’s solvency and judge their financial position.

Arbitrage

Arbitrage means purchasing something from one place and selling it to another place where the price of the item is higher than buying place.

For example: If stock is trading at Rs. 200 in Cash Market and Rs. 203 in futures market, the trader must buy shares at Rs. 200 from cash market and sell them for Rs. 203 in the futures market, getting the difference amount between both the markets price.

Averaging Down

Averaging down means the investor buys more stock when the price of a particular stock goes down. This decreases the average purchase price of your specific stock. Several investors use this strategy if they feel that consensus about a specific company is wrong, so they expect the stock price to jump back and earn profit.

Bear Market

It is a market where investors talk about the stock market performing in a downward trend, or it is a certain period where the prices of multiple stocks are falling.

Bull Market

It is a market where investors talk about the stock market performing in an upward trend, or it is a certain period where the prices of multiple stocks are increasing.

Broker

A broker is a person who buys and sells investment on your behalf and, in exchange, takes a certain amount of money called commission or fee.

Dividend

A dividend means when the company earns profit, a particular portion of their earnings is distributed to shareholders or the people who own the company stock on a quarterly or annual basis. Not every company pays dividends, and if you’re after penny stocks, you’ll likely not get any dividends.

SENSEX

Sensex is a figure that indicates all the relative share prices that are listed on the Bombay Stock Exchange (BSE).

NIFTY

The Nifty 50 Index is the major index of National Stock Exchange (NSE) of India. It is the primary and broad based stock market index used to provide a picture of the equity market in India. The Nifty 50 consists of 50 Indian company stocks in different sectors.

Quote

The stock’s latest trading prices contain information that is given in a quote.

Bid Price

A bid price is the amount that you desire to pay for a particular share.

Ask Price

Ask price is a specific price at which you are looking to sell a share.

Order

Order means the purpose of buying and selling shares in a given range of price.

For example, you have placed an order to buy 200 shares of company A, at a maximum price of Rs 50 per share.

Trading Volume

Trading volume means the number of shares that are traded on a particular day.

Market Capitalisation

It simply means the value of a company according to the stock market. That is the current value of all the shares of a company put together.

Intra-Day Trading

Intraday trading means buying and selling your desired stocks on the same day so that before trading hours get over, all your trading positions will be closed within the same day.

Market Order

A market order is an order to buy and sell shares at the market price. Several investors don’t go with this order because the trade price in the market order remains volatile.

Day Order

A day order is an order that remains good till the end of the trading day. If the order does not perform by the time the market closes, the order will be cancelled.

Limit Order

A limit order is to buy shares below a fixed price and sell shares above a fixed price. It is advisable to use a limit order to trade shares.

Portfolio

The portfolio is a collection of all the investments that an investor has made right from purchasing a share for the first time to other investments assets like bonds, debentures, etc.

Liquidity

Liquidity means how stocks can be sold off quickly. Shares consisting of high trade volumes quickly and are called highly liquid stocks.

IPO

IPO means a private company is turning into a public company by issuing its shares to the public for the first time. In the case of an IPO, the investor can buy the shares directly from the company.

FPO

It is follow-on public offering used to sell more stocks and raise more money from the public.

Going Long

Expecting the price of a stock will increase so that you can buy at a low price and sell at a high price.

Going Short

Expecting the price of a stock will fall so that you can sell at a high price and buy at a low price.