Some Economic and Financial Terms

Accrued interest: The interest due on a bond since the last interest payment was made. The buyer of the bond pays the market price plus accrued interest.

Acquisition: The acquiring of control of one corporation by another. In ‘unfriendly’ take over attempts, the potential buying company may offer a price well above-current market values, new securities and other inducements to stockholders. The management of the subject company might ask for a better price or try to join up with a third company.

Ad-valorem Tax : Ad-valorem tax is a kind of indirect tax in which goods are taxed by their values. In the case of ad-valorem tax, the tax amount is calculated as the proportion of the price of the goods. Value Added Tax (VAT) is an ad-valorem tax. In other words when the tax is determined on the basis of value of a commodity, it is known as Ad-valorem tax.

Amalgamation: It means ‘merger’. As and when necessity arises two or more companies are merged into a large organisation. The old firms completely lose their identity when the merger takes place.

American Depository Receipt (ADR): A security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets.

Annual report: The formal financial statement issued yearly by a firm, composing or corporation. The annual report shows assets, liabilities, revenues, expenses and earnings-how the company stood at the close of the business year, how it fared profit-wise during the year, as well as other information of interest to shareowners.

Appreciation : Appreciation means an increase in the value of something e.g. stock of raw materials or manufactured goods. It also includes an increase in the traded value of currency. It is an increase in the value of assets over a particular time period. Example : land, building, paintings etc. Appreciation is just opposite to depreciation. When the prices rise due to inflation, appreciation may occur.

Arbitrage : A technique employed to take advantage of differences in price. If, for example, ABC stock can be bought in New York for $10 a share and sold in London at $10.50, an arbitrageur may simultaneously purchase ABC stock here and sell the same amount in London, making a profit of $.50 a share, less expenses.

Arbitration: Where there is an industrial dispute, the Arbitration comes to the force. The judgement is given by the Arbitrator. Both the parties have to accept and honour the Arbitration. Arbitration is the settlement of labour disputes that takes place between employer and the employees.

Assets: Everything a corporation or an organisation owns or that is due to it: cash, investments, money due it, materials and inventories, which are called current assets; buildings and machinery, which are known as fixed assets; and patents and goodwill, called intangible assets.

Auction: When a commodity is sold by auction, the bids are made by the buyers. Who so ever makes the highest bid, gets the commodity which is being sold. The buyers make the bid taking into consideration the quality and quantity of the commodity.

Auction market: The system of trading securities through brokers or agents on an exchange such as the Bombay Stock Exchange. Buyers compete with other buyers while sellers compete with other sellers for the most advantageous price.

Auditor’s report: Often called the accountant’s opinion, it is the statement of the accounting firm’s work and its opinion of the corporation’s financial statements, especially if they conform to the normal and generally accepted practices of accountancy.

Autarchy: It means self-sufficiency and self-reliance of an economy. Autarchy is an indicator of self-sufficiency. It means that the country itself can satisfy the needs of its population without making imports from other countries.

Balance Sheet: Balance sheet (also known as Earnings Report) is a statement showing the assets and liabilities or profit and loss of a business at certain date. Balance sheet helps in estimating the real financial situation of a firm.

Bank: Bank is a financial institution. It accepts funds on current account and savings accounts. It also lends money. The bank pays the cheques drawn by customers against current or savings bank account. The bank is a trader that deals in money and credit.

Bank Draft: Banker’s draft (Demand Draft) is a negotiable claim drawn upon a bank. Drafts are as good as cash. The drafts cannot be returned unpaid. Bank Draft is safer than a cheque.

Bankruptcy: It is a situation in which a person is unable to discharge his debt obligations.

Basket of Currency: In this system the exchange value of a country’s currency is fixed in terms of some major international currencies. Indian rupee is valued against US Dollar, British Pound, Japanese Yen, French Franc and German Deutsche Mark. India opted for this system in 1975.

Bear and Bull: These terms are used in stock exchange. ‘Bear’ is an individual who sells shares in a hope that the stock’s price would fall. ‘Bull’ is an individual who buys shares in a hope that the stock’s price would rise.

Bearer bond: A bond that does not have the owner’s name registered on the books of the issuer. Interest and principal, when due are payable to the holder.

Bid and Asked: Often referred to as a quotation or quote. The bid is the highest price anyone wants to pay for a security at a given time, the asked is the lowest price anyone will take at the same time.

Bill of Exchange: It is an unconditional order in writing addressed by one person to another requiring the addressee to pay on demand or at a fixed future time a certain sum of money to the order of the specified person or to the bearer.

Black Money : It is unaccounted money which is concealed from tax authorities. All illegal economic activities are dealt with this black money. Howala market has deep roots with this black money. Black money creates parallel economy. It puts an adverse pressure on equitable distribution of wealth and income in the economy.

Blue Chip : It is the most reliable industrial shares on a stock exchange. It is concerned with such equity shares whose purchase is extremely safe. It is a safe investment. It does not involve any risk.

Boom: The point at which price and employment are the maximum. The trade is also at its highest point and beyond this no upward movement is possible.

Bounty : It is a subsidy paid by the government to exporters. It reduces the price of exportable goods and hence act as incentive to enhance exports.

Bridge loan: A loan made by a bank for a short period to make up for a temporary shortage of cash. On the part of borrower, mostly the companies, for example, a business organisation wants to install a new company with new equipments etc. While its present installed company or equipments etc. are not yet disposed off. Bridge loan covers this period between the buying the new and disposing of the old one.

Broad Banding: It means providing more flexibility to manufacturers to produce wider variety of products with same raw material mix so as to ensure optimum capacity.

Broker: An agent who handles the public’s orders to buy and sell securities, commodities or other property. A commission is charged for this service.

Buffer stocks: These are the stocks (generally of primary goods) accumulated by a government agency when supply is plentiful. These stocks are released in case of shortage of supply. In India Food Corporation of India (FCI) accumulates foodgrains as buffer stocks.

Bullion: It is gold or silver having a specific degree of purity. Generally it is in the form of gold or silver bars.

Bull Market: It is a market where the speculators buy shares or commodities in anticipation of rising prices. This market enables the speculators to resale such shares and make a profit. The opposite is Bear Market.

Buoyancy: In the inflationary period, the increase in tax revenue is known as buoyancy. When the government fails to check inflation, it raises income tax and the corporate tax. Such a tax is called Buoyancy. It concerns with the revenue from taxation in the period of inflation.

Buyer’s market: When the market is favourable to buyer’s market. This situation occurs when there is a change from boom to recession i.e. demand is less than supply.

Call Money : It is a loan that is made for a very short period of a few days only or for a week. It carries a low rate of interest. In case of stock exchange market, the duration of the call money may be for a fortnight.

Capital: The stock of goods which are used in production and which themselves have been produced. It is one of the major factors of production, the other being land, labour and entrepreneurship .

Capitalism: The economic system based on free enterprise and private profit. Capitalism is an economic system in which all means of production are owned by private individuals. Self-profit motive is the guiding feature for all the economic activities under capitalism. Under pure capitalist system economic conditions are regulated solely by free market forces. This system is based on ‘Laissez-faire system’ i.e, no state intervention. Sovereignty of consumer prevails in this system.

Capital stock: All shares representing ownership of a business, including preferred and common.

Capitalization: Total amount of the various securities issued by organisation or a company. Capitalization may include bonds, debentures, preferred and common stock, and surplus.

Cash flow Reported net income of a corporation plus amounts charged off for depreciation, depletion, amortization, and extraordinary charges to reserves, which are book-keeping deductions and not paid out in actual rupees and paise or dollars and cents.

Ceiling Prices:This is the maximum limit fixed generally by government or its agency. Beyond it the prices can not rise.

Certificate: The actual piece of paper that is evidence of ownership of stock in a company or an organisation. Watermarked paper is finely engraved with delicate etchings to discourage forgery.

Certificate of Deposit (CD): A money market instrument characterized by its set date of maturity and interest rate. There are two basic types of CDs: traditional and negotiable. Traditional bank CDs typically incur an early-withdrawal penalty, while negotiable CDs have secondary market liquidity with investors receiving more or less than the original amount depending on market conditions.

Cheap Money: It indicates a situation when bank rate and other rates of interest are low.

Cheque : Cheque is an order in writing issued by the drawer to a bank. If the customer has sufficient amount in his account, the cheque is paid by the bank. Cheques are used in place of cash money.

Clearing House: Clearing house is an institution which helps to settle the mutual indebtedness that occurs among the members of its organisation.

Closed Economy : Closed economy refers to the economy having no foreign trade (i.e. export and import). Such economies depend exclusively on their own internal domestic resources and have no dependence on outside world.

Collateral : Securities or other property pledged by a borrower to secure repayment of a loan.

Commercial paper : Debt instruments issued by companies to meet short -term financing needs.

Commission: The broker’s basic fee for purchasing or selling securities or property as an agent.

Commission broker: An agent who executes the public’s orders for the purchase or sale of securities or commodities.

Conglomerate: A company or an organisation that has diversified its operations usually by acquiring enterprises in widely varied industries.

Consolidated balance sheet: A balance sheet showing the financial condition of a corporation and its subsidiaries.

Convertible: A bond, debenture or preferred share that may be exchanged by the owner for common stock or another security, usually of the same company, in accordance with the terms of the issue.

Core Industries : Core Industries include strategic, basic and critical industries which remain generally under state control, e.g. defence, iron and steel, fertilizers etc.

Core Sector Economy needs basic infrastructure for accelerating development. Development of infrastructure industries like cement, iron and steel, petroleum, heavy machinery etc can only ensure the development of the economy as a whole. Such industries are core sector industries.

Cost Price Index (CPI): It is used for measuring cost of living and it covers large number of commodities than Wholesale Price Index (WPI) which is used for measuring rate of inflamation.

Coupon bond : Bond with interest coupons attached. The coupons are clipped as they come due and presented by the holder for payment of interest.

Credit Control: It implies the measures employed by central bank of a country to control the volume of credit in the banks.

Credit Rating: It is the assessed credit worthiness of prospective customer.

Credit Rationing: Credit rationing takes place when the banks discriminates between the borrowers. Credit rationing empowers the bank to lend to someone and refuse to lend others. In this way credit rationing restricts lending on the part of bank.

Credit Squeeze : Monetary authorities restrict credit as and when required. This credit restriction is called credit squeeze. In other words when the credit control is very tight and restrict, this situation is known as credit squeeze.

Cumulative preferred: A stock having a provision that if one or more dividends are omitted, the omitted dividends must be paid before dividends may be paid on the company’s common stock.

Current assets: Those assets of a company that are reasonably expected to be realized in cash, sold or consumed during one year. These include cash, Government bonds, receivables and money due usually within one year, as well as inventories.

Current liabilities : Money owed and payable by a company, usually within one year.

Cyclical Unemployment: It is that phase of unemployment which appears due to the occurance of the downward phase of the trade cycle. Such an employment is reduced or eliminated when the business cycle turns up again.

Dealer: An individual or firm in the securities business who buys and sells stocks and bonds as a principal rather than as an agent. The dealer’s profit or loss is the difference between the price paid and the price received for the same security. The dealer’s confirmation must disclose to the customer that the principal has been acted upon. The same individual or firm may function, at different times, either as a broker or dealer.

Debentures : It is a document which enlists the terms or conditions of a loan. The debentures are used by corporate sector (companies). The debenture holders are to be paid a fixed annual rate of interest and they have the first claim on the assets of a company as creditors.

Debit balance: In a customer’s margin account, that portion of the purchase price of stock, bonds or commodities that is covered by credit extended by the broker to the margin customer.

Decentralisation : Decentralisation means the establishment of various units of the same industry at different places. Large scale organisation or industry can not be run at one particular place or territory. In order to increase the efficiency of the industry, various units at different places are located.

Deed: It is a written contract signed under legal seal.

Deflation: Deflation is a fall in the general price level over a particular period of time. It is opposite to inflation.

Depreciation: It is the reduction in the value of a fixed asset due to wear and tear.

Depression: It is just opposite to ‘boom’. It implies a state of economy when lack of demand result in heavy unemployment and stagnation in economy.

Director: Person elected by shareholders to serve on the board of directors. The directors appoint the president, vice presidents and all other operating officers. Directors decide among other matters, if and when dividends shall be paid.

Discretionary account: An account in which the customer gives the broker or someone else discretion to buy and sell securities or commodities, including selection, timing, amount and price to be paid or received.

Diversification: Spreading investments among different types of securities and various companies in different fields.

Dividend : It is earnings on stocks paid to shareholders.

Dumping: It means selling goods in international market at a price which is lower than that in domestic or home market.

Elasticity of demand : The responsiveness of demand of a commodity to the change in its price is known as elasticity of demand.

Embargo : It means prohibition of entry of goods from certain countries into a particular country.

Engel’s law : Ernest Engel, the 19th century German statistician, analysed the budget data of working families and established a relationship between the families income and expenditure. According to the Law ‘When a family’s income increases the percentage of its income spent on food decreases’.

Equity : The ownership interest of common and preferred stockholders in a company. Also refers to excess of value of securities over the debit balance in a margin account.

Exchange Rate : The rate at which central banks will exchange one country’s currency for another.

Extra: The short form of ‘extra dividend’. A dividend in the form of stock or cash in addition to the regular or usual dividend the company has been paying.

Face value: The value of a bond that appears on the face of the bond, unless the value is otherwise specified by the issuing company. Face value is ordinarily the amount the issuing company promises to pay at maturity. Face value is not an indication of market value. Sometimes referred to as par value.

Factor cost: It is the sum total of amount paid to four main factors of production i.e. Land (rent), Labour (compensation of employees), Capital (interest), entrepreneurship (profit). It is exclusive of taxes or subsidies.

Fixed charges : A company’s fixed expenses, such as bond interest, which it has agreed to pay whether or not earned, and which are deducted from income before earnings on equity capital are computed.

Floating of a Currency: When the exchange value of a currency in terms of other currencies is not fixed officially, that currency is said to be floating.

Floor: The huge trading area- about the size of a football field – where stocks, bonds and options are bought and sold on the Stock Exchange.

Floor broker: A member of the stock exchange who executes orders on the floor of the Exchange to buy or sell any listed securities.

Foreign Exchange Reserves:Foreign Exchange Reserves of a country includes foreign currency assets and interest bearing bonds held by it. In India it also includes SDR and value of gold.

Free and open market: A market in which supply and demand are freely expressed in terms of price. Contrasts with a controlled market in which supply, demand and price may all be regulated.

Free Trade: Also known as laissez-faire’. It implies absence of any protective tariffs or trade barriers by any economy with respect to export and import.

Give-up: A term with many different meanings. For one, a member of the exchange on the floor may act for a second member by executing an order for him or her with a third member. The first member tells the third member that he or she is acting on behalf of the second member and ‘gives up’ the second member’s name rather than his or her own.

Gresham’s law: “If not limited in quantity; bad money drives good money out of circulation.” This statement was given by economist Sir Thomas Gresham, the economic advisor of Queen Elizabeth.

Gross Domestic Product (GDP): It is the aggregate of total flow of goods and services produced by an economy in a year.

Gross National Product (GNP) : Gross Domestic Product plus net factor income from abroad is equal to Gross National Product.

Growth stock: Stock of a company with a record of growth in earnings at a relatively rapid rate.

Holding company : A corporation that owns the securities of another, in most cases with voting control.

Hot Money: It is a volatile money which comes easily but can also go out easily, e.g. portfolio investment.

Hypothecation: The pledging of securities as collateral-for example, to secure the debit balance in a margin account. bol

Index: A statistical yardstick expressed in terms of percentages of a base year or years. For instance, the BSE Composite Index of all BSE common stocks is based on 1965 as 50. An index is not an average. 20 based on 15

Inflation: It is a sustained increase in general price level over a particular period of time. It reduces the purchasing power of money.

Institutional investor: An organization whose primary purpose is to invest its own assets or those held in trust by it for others. Includes pension funds, investment companies, insurance companies, universities and banks.

Interest: Payments borrowers paylenders for the use of their money. A corporation pays interest on its bonds to its bondholders. beprobore w baw bsess

Interim Budget: It is an addition to the general budget and is presented as a part of it through the financial year.

International Monetary Fund (IMF): It is a multinational institution set up in 1945. It started working as an independent organisation in 1947. It seeks to maintain cooperative and orderly currency arrangements between member countries with the aim of promoting increased international trade and BOP equilibrium.

Interrogation device : A computer terminal that provides market information-last sale price, quotes, volume, etc.-on a screen or paper tape.

Investment : The use of money for the purpose of making more money, to gain income, increase capital or both.

Investment banker : Also known as an underwriter. The middleman between the corporation issuing new securities and the public. The usual practice is for one or more investment bankers to buy outright from a corporation a new issue of stocks or bonds. The group forms a syndicate

to sell the securities to individuals and institutions. Investment bankers also distribute very large blocks of stocks or bonds – perhaps held by an estate.

Invisibles: A term used to describe those items, such as financial series, included in the current Balance of Payments accounts, as distinct from physically visible Imports and Exports of goods. Invisibles include government grants to overseas countries and subscriptions to international organizations, net payment for shipping services, travel, royalties, commissions for banking and other services, transfers to or from overseas residents, Interest, Profits and Dividends received by or from overseas residents.

I.O.U. : It means ‘I owe you’. It is non-negotiable promissory note indicating the debt owed by one party ‘to another.

IRA: Individual Retirement Account is a pension plan with tax advantages. IRAs permit investment through intermediaries like mutual funds, insurance companies and banks or directly in stocks and bonds through stockbrokers.

Joint Stock Company: It is a form of company in which a number of people contribute funds to finance a firm in return for ‘shares’ in the company.

Keogh plan : Tax-advantaged personal retirement program that can be established by a self-employed individual.

Legal Tender: It is the currency (coins and bank notes) which have to be accepted in payment.

Leverage: The effect on a company when the company has bonds, preferred stock, or both outstanding. Example: If the earnings of a company with 10,00,000 common shares increases from $ 1000000 to $ 1500000, earnings per share would go up go up from $1 to $ 1.50, or an increase of 50%. But if earnings of a company that had to pay $ 500000 in bond interest increased that much, earnings per common share would jump from $.50 to $1 a share, or 100%.

Liabilities: All the claims against a corporation. Liabilities include accounts, wages and salaries payable; dividends declared payable; accrued taxes payable; and fixed or long-term liabilities, such as mortgage bonds, debentures and bank loans.

Limit, limited order or limited price order: An order to buy or sell a stated amount of a security at a specified price, or at a better price, if obtainable after the order is represented in the trading crowd.

Liquidation: The process of converting securities or other property into cash. The dissolution of a company, with cash remaining after sale of its assets and payment of all 6 indebtedness being distributed to the shareholders.

Liquidity: The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable price changes. Liquidity is one of the most important characteristics of a good market.

Listed stock: The stock of a company that is traded on a securities exchange.

Locked in: Investors are said to be locked in when they have profit on a security they own but do not sell because their profit would immediately become subject to the capital gains tax.

Manipulation: An illegal operation. Buying or selling a security for the purpose of creating false or misleading appearance of active trading or for the purpose of raising or depressing the price to induce purchase or sale by others.

Margin: The amount paid by the customer when using a broker’s credit to buy or sell a security. Under Federal Reserve regulations, the initial margin requirement since 1945 has ranged from the current rate of 50% of the purchase price up to 100%.

Market price: The last reported price at which the stock or bond sold, or the current quote.

Market value: The market value of an equity share is the price at which it is traded in the market. This price can be easily established for a company that is listed on the stock market and actively traded. (For a company that is listed on the stock market but traded very infrequently, it is difficult to obtain a reliable market quotation. For a company that is not listed on the stock market, one can merely conjecture as to what its market price would be if it were traded.)

Maturity: The date on which a loan or bond comes due and is to be paid off.

Merchant Banking : In Merchant Banking banks act as ‘underwriter’ and do business on behalf of corporate sector. Such banking helps in larger participation of people in capital market e.g. ICICI.

MODVAT : The modified system of value added taxation is based on the idea of tax final products and not inputs that go into production.

Money Market: It is a market engaged in short-term lending and borrowing of money linking together the financial institutions, companies and the government.

Monopoly: It is a type of market structure having one seller and many buyers. There is a lack of substitute products and entry of new firms into market is not possible.

Mortgage bond: A bond secured by a mortgage on a property. The value of the property may or may not equal the value of the bonds issued against it.

MoU: The concept of Memorandum of Understanding (MoU) was introduced in 1988. The main objective of MoU is to reduce the quantity of control and increase the quality of accountability. The emphasis is on achieving the negotiated and agreed objectives rather than interfering in the day-today affairs.

Mutual Fund : It is a form of collective investment that is useful in spreading risks and optimising returns.

Nasdaq An automated information network that provides brokers and dealers with price quotations on securities traded over-the-counter. Nasdaq is an acronym for National Association of Securities Dealers Automated Quotations.

National Income: It is equal to the total money value of goods and services produced over the given time period less capital consumption.

Negotiable: Refers to a security, the title to which is transferable by delivery.

Net asset value: Usually used in connection with investment companies to mean net asset value per share. An investment company computes its assets daily, or even twice daily, by totaling the market value of all securities owned. All liabilities are deducted and the balance is divided by the number of shares outstanding. The resulting figure is the net asset value per share.

Net Domestic Product (NDP): The money value of a nation’s annual output of goods and service, less capital consumption (depreciation) experienced in producing that output.

Net National Product (NNP): Net National Product is equal to Net Domestic Product plus Net factor income from abroad.

Octroi: It is an internal tariff system among different region of a country.

Off-board: This term may refer to transactions overthe-counter in unlisted securities or to transactions of listed shares that are not executed on a national securities exchange.

Offer: The price at which a person is ready to sell. Opposed to bid, the price at which one is ready to buy.

Oversold : The reverse of overbought. A single security or a market which, it is believed, has declined to an unreasonable level.

Over-the-counter: A market for securities made up of securities dealers who may or may not be members of a securities exchange. The over-the-counter market is conducted over the telephone and deals mainly with stocks of companies without sufficient shares, stockholders or earnings to warrant listing on an exchange. Over-thecounter dealers may act either as principals or as brokers for customers. The over-the-counter market is the principal market for bonds of all types.

Penny stocks Low-priced issues, often highly speculative, selling at less than $1 a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment-caliber issues.

Per Capita Income; It implies income per person. It is obtained by dividing national income of country by its population.

Plastic Money : It refers to use of instruments like ‘credit cards’ instead of cash in business transactions. It is called so because credit cards are made of plastic. Plastic Money also carries information about its holder in coded form which makes it theft proof. No one, but the holder is able to use the card.

Point: In the case of shares of stock, a point means $ 1. If ABC shares rise 3 points, each share has risen $ 3. In the case of bonds a point means $ 10, since a bond is quoted as a percentage of $ 1000. A bond that rises 3 points gains 3% in $1000, or $30 in value. An advance from 87 to 90 would mean an advance in dollar value from $ 870 to $900. In the case of market averages, the word point means merely that and no more.

Portfolio : Holdings of securities by an individual or institution. A portfolio may contain bonds, preferred stocks, common stocks and other securities.

Poverty Line: The poverty line has been fixed by the planning commission on the basis of an average daily intake of 2400 calories per person in rural areas and 2100 calories per capita in urban areas. In monetary terms the poverty line is commented to be 32 per month in rural and ₹ 47 in urban areas in terms of 2011-12 prices.

Premium: The amount by which a bond or preferred stock may sell above its par value. May refer, also, to redemption price of a bond or preferred stock if it is higher than face value.

Primary distribution: Also called primary or initial public offering. The original sale of a company’s securities.

Prime rate: The lowest interest rate charged by commercial banks to their most credit-worthy customers; other interest rates, such as personal, automobile, commercial and financing loans are often pegged to the prime.

Principal: The person for whom a broker executes an order, or dealers buying or selling for their own accounts. The term ‘principal’ may also refer to a person’s capital or to the face amount of a bond.

Profit-taking Selling stock that has appreciated in value since purchase, in order to realize the profit. The term is often used to explain a downturn in the market following a period of rising prices.

Prospectus : The official selling circular that must be given to purchasers of new securities registered with the Securities and Exchange Commission. It highlights the much longer Registration Statement file with the Commission.

Proxy: Written authorization given by a shareholder to someone else to represent him or her and vote his or her shares at a shareholders meeting.

Proxy statement : Information given to stockholders in conjunction with the solicitation of proxies.

Recession: Recession cycle characterised by a modest downturn in the level of economic activity means fall up of demand.

Reflation : It is an increase in the level of National Income and Output. Reflation is often deliberately brought about by the authorities in order to secure full employment and to increase the rate of economic growth.

Quote: The highest bid to buy and the lowest offer to sell a security in a given market at a given time. If you ask your financial advisor for a ‘quote’ on a stock, he or she may come back with something like ’45 1/4 to 45 1/2′. This means that $ 45.25 is the highest price any buyer wanted to pay at the time the quote was given on the floor of the exchange and that $ 45.50 was the lowest price that any seller would take at the same time.

Redemption price: The price at which a bond may be redeemed before maturity, at the option of the issuing company. Redemption value also applies to the price the company must pay to call in certain types of preferred stock.

Refinancing: Same as refunding. New securities are sold by a company and the money is used to retire existing securities. The object may be to save interest costs, extend the maturity of the loan, or both.

Registered bond: A bond that is registered on the books of the issuing company in the name of the owner. It can be transferred only when endorsed by the registered owner.

Registrar: Registrar or transfer agents are the trusts or institutions that register and maintain detailed records of the transactions of investors for the convenience of mutual fund houses. .

Regulation T: The federal regulation governing the amount of credit that may be advanced by brokers and dealers to customers for the purchase of securities.

Regulation U: The federal regulation governing the amount of credit that may be advanced by banks to customers for the purchase of listed stocks.

Rights: When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right.

Scheduled bank : It is a bank included in the second schedule of RBI. It has to keep a minimum cash reserve in RBI.

Self Reliance : Self Reliance, in short, can mean attainment of economic independence which, in turn implies capability to sustain a higher rate of growth of economy essentially with the help of the domestic resources.

Seller’s Market : It is market situation which exists for a short time period. During this period there is an excess demand for good and services at current prices which forces price up to the advantage of the seller.

Sell side : The portion of the securities business in which orders are transacted. The sell side includes retail brokers, institutional brokers and traders, and research departments. If an institutional portfolio manager changes jobs and becomes a registered representative, he or she has moved from the buy side to the sell side.

Sensex : The Stock Exchange Sensitive Index (popularly referred to as the SENSEX) reflects the weighted arithmetic average of the price relative of a group of share included in the index of sensitive shares. For example, Bombay Stock Exchange Sensitive Index is a group of 30 sensitive shares.

Serial bond : An issue that matures in part at periodic stated intervals.

Settlement : Conclusion of a securities transaction. When a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale is called settlement.

Shares: These are the equal portions of the capital of a limited company. Shares in a company do not carry fixed rate of interest. The holders of the ordinary shares carry the residual risk of the business; they rank after debenture holders and preference shareholders for the payment of dividends and they are liable for losses, although this liability is limited to the value of the shares and to the limit of guarantee given by them. Preference shares are such shares of a company on which interest is paid before any others, and owners have prior right to repayment of capital if company is wound up.

Share Capital : Money raised by issuing of shares is called Share Capital.

Sinking fund:Money regularly set aside by a company to redeem its bonds, debentures or preferred stock from time to time as specified in the indenture or charter.

Speculation: The employment of funds by a speculator. Safety of principal is a secondary factor.

Speculator : One who is willing to assume a relatively large risk in the hope of gain.

Spin off: The separation of a subsidiary or division of a corporation from its parent company by issuing shares in a new corporate entity. Shareowners in the parent company receive shares in the new company in proportion to their original holding and the total value remains approximately the same.

Stop order: An order to buy at a price above or sell at a price below the current market. Stop buy orders are generally used to limit loss or protect unrealized profits on a short sale. Stop sell orders are generally used to protect unrealized profits or limit loss on a holding. A stop order becomes a market order when the stock sells at or beyond the specified price and thus, may not necessarily be executed at that price.

Swapping: Selling one security and buying a similar one almost at the same time to take a loss, usually for tax purposes.

Syndicate: A group of investment bankers who together underwrite and distribute a new issue of securities or a large block of an outstanding issue.

Third market : Trading of stock exchange-listed securities in the over-the-counter market by non-exchange member brokers.

Ticker: Atelegraphic system that continuously provides the last sale prices and volume of securities transactions on exchanges. Information is either printed or displayed on a moving tape after each trade.

Trader : Individuals who buy and sell for their own accounts for short-term profit. Also, an employee of a broker/dealer or financial institution who specializes in handling purchases and sales of securities for the firm and/ or its clients.

Transfer : This term may refer to two different operations. For one, the delivery of a stock certificate from the seller’s broker to the buyer’s broker and legal change of ownership, normally accomplished within a few days. For another, to record the change of ownership on the books of the corporation by the transfer agent. When the purchaser’s name is recorded, dividends, notices of meetings, proxies, financial reports and all pertinent literature sent by the issuer to its securities holders are mailed directly to the new owner.

Transfer agent: A transfer agent keeps a record of the name of each registered shareowner, his or her address, the number of shares owned, and sees that certificates presented for transfer are properly canceled and new certificates issued in the name of the new owner.

Treasury stock : Stock issued by a company but later reacquired. It may be held in the company’s treasury indefinitely, reissued to the public or retired. Treasury stock receives no dividends and has no vote while held by the company.

Turnover rate: The volume of shares traded in a year as a percentage of total shares listed on an exchange, outstanding for an individual issue or held in an institutional portfolio.

Unlisted stock: A security not listed on a stock exchange.

Variable annuity : A life insurance policy where the annuity premium (a set amount of dollars) is immediately turned into units of a portfolio of stocks. Upon retirement, the policyholder is paid according to accumulated units, the dollar value of which varies according to the performance of the stock portfolio. Its objective is to preserve, through stock investment, the purchasing value of the annuity which otherwise is subject to erosion through inflation.

VAT: It seeks to tax the value added at every stage of manufacturing and sale with a provision of refunding the amount of VAT already paid at earlier stages to avoid double taxation.

Volume: The number of shares or contracts traded in a security or an entire market during a given period. Volume is usually considered on a daily basis and a daily average is computed for longer periods.

Yield : Also known as return. The dividends or interest paid by a company expressed as a percentage of the current price.

Yield to maturity: The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.

Zero coupon bond: Also known as treasury bills. A bond that pays no interest but is priced, at issue, at a discount from its redemption price.

Follow on Facebook page – Click Here

Google News join in – Click Here

Read More Asia News – Click Here

Read More Sports News – Click Here

Read More Crypto News – Click Here