American Depositary Receipt(ADR) and Global Depositary Receipt(GDR)

It is the rule, which gives priority to creditor to get their payment back before the payment is made to shareholders of the company in the case of liquidation or reorganization of the company.

Acid-test ratio

It is the ratio of current assets minus inventories divided by total current liabilities. It is also called Quick Ratio. It measures the ability to meet current debts with most – liquid current assets.

ADR

ADR is an abbreviation of American Depositary Receipt. It is a negotiable instrument issued by U.S stock exchange, which paves the way to Americans to invest in foreign companies. There are various Indian companies that have issued ADRs in US market.

Alpha

It is the coefficient measuring the risk-adjusted performance, considering the risks that are specific to the security, rather than the overall market. A large alpha indicates that the stock has performed better what would be predicted given its volatility.

Basket

Basket symbolizes a group of stocks formed to do simultaneous buying and selling of all stocks in the Basket usually to perform index arbitrage or a hedging program.

Bearer share

Bearer share is a negotiable share, which is the asset of the person who possesses it at any given time. It is on the name of the bearer & not in the name of a particular person. The issuing company does not maintain any record of ownership of such share.

Below par

Below par means having current price below the face value.

Best ask

Best ask means the lowest price of the order a seller is ready to accept at a given time for a given security.

Best bid

Best bid means the highest price of the order a buyer is ready to pay at a given time for a given security.

Beta

Beta is a quantitative measure of a stock's volatility relative to the market. If Beta of any stock is more than 1 then it is more volatile in respect of the market and is supposed to be riskier than the market portfolio. If the Beta of any stock is less than 1, then it is less volatile in respect of the market and is supposed to be less riskier than the market portfolio.

Bid

Bid is the Price at which broker or a dealer is willing to buy stock.

Bid size

Bid size is the number of share a broker or a dealer is willing to purchase in the stock.

Blue Chip Stocks

Large, credit-worthy company well known for the quality and wide acceptance of its products or services and its ability to make money and often pay dividends.

Buy Back

Companies, which have surplus of cash to invest, can offer to buy back shares from shareholders, thereby investing back into the company.

Buyer

The investor who wants to purchase security and has placed the order to that effect.

Call price

The price at which an issuer may redeem a bond or a preferred stock is called Call price. It is also know as Redemption Price.

Capital Asset Pricing Model

A Model that describes the relationship between risk & required return. In this model a security required rate of return is the risk free rate plus a premium based on the systematic risk of the security.

Cash cycle

The length of time from the actual outlay of cash for purchase until the collection of receivables resulting from the sale of goods or services.

Cash dividend

Cash distribution of earning to stockholders usually on a quarterly basis.

Capital Gain (loss)

The amount by which the proceeds from the sale of a capital asset exceeds (is less than) the asset’s original cost.

Compound Interest

Interest paid on any pervious interest earned, as well as on the principal borrowed.

Capital market

The market where for relatively long term, debt or equity securities are traded.

Commercial Paper

Short term, unsecured promissory notes, generally issued by large corporations.

Capital stock

The total number of shares authorized as per the Memorandum of Association of the company for the issuance, including both common stock and preferred stock.

Capital structure

The proportion of a firm’s permanent long term financing represented by debt, preferred stock, common equity stock & retained earning.

Capital turnover

Capital turnover calculates the rate of return of equity. It is calculated by dividing total sales by stockholder equity. Higher the ratio, more efficiently the management can utilize its capital.

Capitalization stock

The sum of a company’s capital, long-term debt, and retained earnings.

Custodian

Bank or other financial institution that keeps custody of stock certificates and other assets of a mutual fund, individual, or corporate client.

Debenture

A long term, unsecured debt instrument.

Depreciation

The value of assets keeps on decreasing with the passage of time and usage. That decrease in value is termed as depreciation. Every business is required to write off the depreciation over time for tax purposes.

Date of issue

The date on which a bond, insurance policy or stock offering is issued.

Deferred share

A share of stock that receives no rights to a company's remaining assets in the event of bankruptcy until all common and preferred shareholders have been paid.

Delisting

A share is said to be delisted when a share is removed from any exchange mainly due to non-fulfillment of exchange norms.

Day Order

A day order is an order, which is valid for the same session on which it is entered. If the order is not matched during the session, the order gets cancelled automatically at the end of the trading session

Depository

It is an institution, which keeps the shares in, demat (Electronic) form on behalf of the investors, where investor is the beneficial owner of the stocks held.

Earnings

Earning is the difference between revenue & cost of sales. We can interpret various types of earning from the balance sheet data for analysis.

Earnings per Share

EPS refers to the earnings available for the equity holders divided by the number of equity shares outstanding.

EBIDTA

Earnings Before Interest, Taxes, Depreciation and Amortization.

Economies of scale

The benefits arise due to increase in production size in which the average unit cost falls as volume increases.

Employee Stock Ownership Plan

ESOP is a trust established by a company for the allocation of shares to employees. It is a tax efficient way to provide this motivational benefit to the employees.

Exchange rate

The number of units of one currency that may be purchased with one unit of another currency is termed as the exchange rate between the two currencies.

Ex – dividend date

The first date on which a stock purchase is no longer entitled to receive recently declared benefit, dividend in this case.

Face value

It is the value of an asset that is written on the face of the instrument. In case of stocks, it is the original cost of the stock shown on the certificate & in case of bonds, it is the amount paid to the holder at maturity.

Fair market value

The price at which an asset can be sold in market.

Financial Lease

A long-term lease that is not cancelable.

Financial management

Concern the acquisition, financing & management of assets with some overall goal in mind.

Financial markets

A system consisting of institution & procedures for bridging the gap between buyers & sellers of financial instruments.

Financial instrument

An instrument having monetary value and can be traded or transferable or recording a monetary transaction.

Financing flows

It means Cash flows generated through debt and equity financing.

First preferred stock

That preffered stock which gets preference in the payment of the dividend or for the assets before the payment is made to other preffered stockholder & equity stockholder.

Future value

The value at some future time of a present amount of money, or a series of payment, evaluated at a given interest rate.

GDR

GDR is the abbreviation of Global Depositary Receipt .A bank certificate issued in more than one country for shares in a foreign company.

Going Private

Making a public company private through the repurchase of stock by current management &/ or outside private investor.

Goodwill

There are certain intangible assets in the form of present reputation of the company/firm generated through the continuous and efficient supply of quality product and services. This is known as the goodwill of the company. Goodwill must be amortized. In case of merger or acquisition, the extra consideration paid by the acquiring firm to the acquired firm is recorded in the books as goodwill.

Gross working capital

This is capital required to run the day to day expenses of the company. This is the money invested in the various current assets like inventory, bills payable, pre paid expenses etc. In all it refers to the firm’s investment in current assets.

Going public

Offering public to invest in the company & for this the share need to be listed & this procedure is called performing an initial public offering.

Governments Securities

Any securities issued by the government or its agencies.

Good Till Cancelled

This order remains in the system until the user cancels it. It will therefore be able to valid for various trading sessions if it does not get matched. However, the Exchange may set an upper limit to the number of working days for which an order can stay in the trading system. At the end of this period, the orders are cancelled automatically from the system.

Good Till Day

This order allows the user to specify the number of days up to which the order should stay in the trading system. At the end of this period, the order gets cancelled automatically from the system if it is not traded or is not cancelled by the investor.

Gross Exposure

The net cumulative outstanding in various stocks at a time that has not been squared off is called Gross exposure.

Hedge

It is tool used to reduce the risk of future price movements.

Holding Company

A parent company holding maximum number of share of the company. This number should be at least 51%.

Hurdle rate

The minimum required rate of return on an investment in a discounted rate at which a project is acceptable.

Income stock

A stock with a history of paying consistently high dividends.

Inflation

This refers to the situation in which there is rise in the general level of prices of goods & services.

Income statement

A summary of a firm’s revenue & expenses over a specified period, generally one year, ending with net income or loss for the period.

Intraday Turnover

Total value of buy & Sell trades executed on an exchange in a single session is called as Intraday Turnover.

IPO

Also called initial public offer. A company’s first offering of equity stock to the general public.

Interest

Money paid or earned for the use of money.

Intrinsic value

The price a security ought to have based on all factors bearing on valuation.

Interest coverage ratio:

Earning before interest & taxes divided by interest charges. It indicates a firm’s ability to cover interest charges.

Immediate or Cancel

Order allows an investor to buy or sell a security as soon as the order is released into the system, failing which the order is cancelled from the system.

Joint Venture

A business venture jointly owned & controlled by two or more independent firms. Each venture partner continues to exist as a separate firm & the joint venture represent a new business enterprise.

Joint Stock Company

A company, which has some features of a corporation and some features of a partnership.

Know your Client

Compulsory Form, known as the know your client agreement form to be filled by an investor who wishes to trade through a trading member of a recognized stock exchange.

Leverage

Leverage is property rising or falling at a proportionally greater amount than comparable investments. For example, an option is said to have high leverage relative to the underlying stock because a price change in the stock may result in a relatively large increase or decrease in the value of the option. In general, in finance, leverage is the use of debt financing. Leverage, within a corporation, is the use of borrowed money to increase the return on investment. For leverage to be positive, the rate of return on the investment must be higher than the cost of the money borrowed.

Leverage Ratio

Leverage Ratio measures the relative contribution of stockholders and creditors, and of the firm's ability to pay financing charges. Value of firm's debt to the total value of the firm.

Limited Liability Company:

A business form that provides its owners with corporate style limited personal liability & the tax treatment of a partnership

Liquidation

The sale of the assets of a firm, either voluntarily or in bankruptcy.

Liquidity

Liquidity of an asset - The ability of an asset to be converted into cash without a significant price concession.

Liquidity of a firm – This refers to the ability of the firm to pay off its debt as and when it becomes due.

Liquidity ratio

Ratio that measure a firm’s ability to meet short-term obligation.

Listing

Admission of a security for trading on an organization exchange. A security so admitted is referred to as a listed security.

Majority rule voting

A method of electing corporate directors, where each common share held carries one vote.

Market value

The market price at which an asset trades.

Management buyout (MBO)

A leveraged buyout in which prebuyout management ends up with a substantial equity position.

Management's Discussion & Analysis

A section in the Annual report in which the company describes about the performance of the prior period and the outlook for present & future.

Merger

The combination of two or more companies in which only one firm survives as a legal entity.

Market capitalization

The