Investment terms One should know.
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Before investing in stocks,every investor should know some basic terms so that he/she can trade efficiently and maximise his/her profits from his/her portfolio.Stock market terminology relates to industry-specific jargons which are used in the stock markets regularly.
The terms are as follows:
i)Turnover:
Turnover is an accounting concept that calculates how quickly a business conducts its operations.Turnover in accounting is how much a business makes in sales during a period.
Formula:Cost of Goods Sold/Average Inventory.
ii)Market Capitalisation:
Market capitalization, commonly called market cap, is the market value of a publicly traded company's outstanding shares. Market capitalization is equal to the share price multiplied by the number of shares outstanding.
Formula:Price of stock ×No.of shares in market.
iii)P/E Ratio:
The ratio is used for valuing companies and to find out whether they are overvalued or undervalued.
Formula:Share Price/Earnings Per Share
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iv)EPS:
Earnings per share (EPS) can be defined as profits or losses per share.
Formula: Company's Profits or Losses/Total issued shares.
v)IPO:
Initial Public Offering refers to the first time a company offers its share for trading on a stock exchange.
Formula: Value of one share=Total paid-in capital/Total shares sold.
vi)Liquidity:
Liquidity means how quickly you can get your hands on your cash. In simpler terms, liquidity is to get your money whenever you need it
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vii) Portfolio:
Portfolio is simply the collection of all the investments an investor has made.
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viii)Trading volume:
The number of shares being traded on a given day is called trading volume.
ix)Dividends:
Dividend is a part of the profit distributed by a corporation among its shareholders by the means of its shares.
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x)Volatility:
It refers to the degree of or the extent in fluctuation in the prices of the stock. Highly volatile stock witness abnormal highs and lows during the trading session, while low volatile stocks experience ups and downs to a lesser degree.
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xi)Bull Market:
When stock prices in a market are generally rising, it is called a bull market.
xii)Bear Market:
The exact opposite of a bull market is a bear market – when the stock prices in the market are generally falling it is called a bear market.
These are some basic terms an investor must know before entering the stock markets.
Disclaimer:We are not certified financial experts but the claims made in the blog are totally true.We will not be responsible for any kind of financial problems based on reading this blog.Investment in securities(stocks)market are subject to market risks, read all the related documents carefully before investing.
This is the third part of our Finance series.We intend to increase financial literacy through this series.
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