acid test

A stern measure of a company's ability to pay its short term debts, in that stock is excluded from asset value. (liquid assets/current liabilities) Also referred to as the Quick Ratio.

assets
Anything owned by the company having a monetary value; eg, 'fixed' assets like buildings, plant and machinery, vehicles (these are not assets if rentedand not owned) and potentially including intangibles like trade marks and brand names, and 'current' assets, such as stock, debtors and cash.

asset turnover
Measure of operational efficiency - shows how much revenue is produced per of assets available to the business. (sales revenue/total assets less current liabilities)

balance sheet
The Balance Sheet is one of the three essential measurement reports for the performance and health of a company along with the Profit and Loss Account and the Cashflow Statement. The Balance Sheet is a 'snapshot' in time of who owns what in the company, and what assets and debts represent the value of the company. (It can only ever nbe a snapshot because the picture is always changing.) The Balance Sheet is where to look for information about short-term and long-term debts, gearing (the ratio of debt to equity), reserves, stock values (materials and finsished goods), capital assets, cash on hand, along with the value of shareholders' funds. The term 'balance sheet' is derived from the simple purpose of detailing where the money came from, and where it is now. The balance sheet equation is fundamentally: (where the money came from) Capital + Liabilities = Assets (where the money is now). Hence the term 'double entry' - for every change on one side of the balance sheet, so there must be a corresponding change on the other side - it must always balance. The Balance Sheet does not show how much profit the company is making (the P&L does this), although pervious years' retained profits will add to the company's reserves, which are shown in the balance sheet.

budget

In a financial planning context the word 'budget' (as a noun) strictly speaking means an amount of money that is planned to spend on a particularly activity or resource, usually over a trading year, although budgets apply to shorter and longer periods. An overall organizational plan therefore contains the budgets within it for all the different departments and costs held by them. The verb 'to budget' means to calculate and set a budget, although in a looser context it also means to be careful with money and find reductions (effectively by setting a lower budgeted level of expenditure). The word budget is also more loosely used by many people to mean the whole plan. In which context a budget means the same as a plan. For example in the UK the Government's annual plan is called 'The Budget'. A 'forecast' in certain contexts means the same as a budget - either a planned individual activity/resource cost, or a whole business/ corporate/organizational plan. A 'forecast' more commonly (and precisely in my view) means a prediction of performance - costs and/or revenues, or other data such as headcount, % performance, etc., especially when the 'forecast' is made during the trading period, and normally after the plan or 'budget' has been approved. In simple terms: budget = plan or a cost element within a plan; forecast = updated budget or plan. The verb forms are also used, meaning the act of calculating the budget or forecast.

capital employed
The value of all resources available to the company, typically comprising share capital, retained profits and reserves, long-term loans and deferred taxation. Viewed from the other side of the balance sheet, capital employed comprises fixed assets, investments and the net investment in working capital (current assets less current liabilities). In other words: the total long-term funds invested in or lent to the business and used by it in carrying out its operations.

cashflow
The movement of cash in and out of a business from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments.

cashflow statement
One of the three essential reporting and measurement systems for any company. The cashflow statement provides a third perspective alongside the Profit and Loss account and Balance Sheet. The Cashflow statement shows the movement and availability of cash through and to

the business over a given period, certainly for a trading year, and often also monthly and cumulatively. The availability of cash in a company that is necessary to meet payments to suppliers, staff and other creditors is essential for any business to survive, and so the reliable forecasting and reporting of cash movement and availability is crucial.

cost of debt ratio (average cost of debt ratio)

Despite the different variations used for this term (cost of debt, cost of debt ratio, average cost of debt ratio, etc) the term normally and simply refers to the interest expense over a given period as a percentage of the average outstanding debt over the same period, ie., cost of interest divided by average outstanding debt.

cost of goods sold (COGS)

The directly attributable costs of products or services sold, (usually materials, labour, and direct production costs). Sales less COGS = gross profit. Effetively the same as cost of sales (COS) see below for fuller explanation.

cost of sales (COS)

Commonly arrived at via the formula: opening stock + stock purchased - closing stock. Cost of sales is the value, at cost, of the goods or services sold during the period in question, usually the financial year, as shown in a Profit and Loss Account (P&L). In all accounts, particularly the P&L (trading account) it's important that costs are attributed reliably to the relevant revenues, or the report is distorted and potentially meaningless. To use simply the total value of stock purchases during the period in question would not produce the correct and relevant figure, as some product sold was already held in stock before the period began, and some product bought during the period remains unsold at the end of it. Some stock held before the period often remains unsold at the end of it too. The formula is the most logical way of calculating the value at cost of all goods sold, irrespective of when the stock was purchased. The value of the stock attributable to the sales in the period (cost of sales) is the total of what we started with in stock (opening stock), and what we purchased (stock purchases), minus what stock we have left over at the end of the period (closing stock).

current assets
Cash and anything that is expected to be converted into cash within twelve months of the balance sheet date.

current ratio
The relationship between current assets and current liabilities, indicating the liquidity of a business, ie its ability to meet its short-term obligations. Also referred to as the Liquidity Ratio.

current liabilities
Money owed by the business that is generally due for payment within 12 months of balance sheet date. Examples: creditors, bank overdraft, taxation.

depreciation
The apportionment of cost of a (usually large) capital item over an agreed period, (based on life expectancy or obsolescence), for example, a piece of equipment costing 10k having a life of five years might be depreciated over five years at a cost of 2k per year. (In which case the P&L would show a depreciation cost of 2k per year; the balance sheet would show an asset value of 8k at the end of year one, reducing by 2k per year; and the cashflow statement would show all 10k being used to pay for it in year one.)

dividend
A dividend is a payment made per share, to a company's shareholders by a company, based on the profits of the year, but not necessarily all of the profits, arrived at by the directors and voted at the company's annual general meeting. A company can choose to pay a dividend from reserves following a loss-making year, and conversely a company can choose to pay no dividend after a profit-making year, depending on what is believed to be in the best interests of the company. Keeping shareholders happy and committed to their investment is always an issue in deciding dividend payments. Along with the increase in value of a stock or share, the annual dividend provides the shareholder with a return on the shareholding investment.

earnings before..

There are several 'Earnings Before..' ratios and acronyms: EBT = Earnings Before Taxes; EBIT = Earnings Before Interest and Taxes; EBIAT = Earnings Before Interest after Taxes; EBITD = Earnings Before Interest, Taxes and Depreciation; and EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization. (Earnings = operating and non-operating profits (eg interest, dividends received from other investments). Depreciation is the non-cash charge to the balance sheet which is made in writing off an asset over a period. Amortisation is the payment of a loan in instalments.

fixed assets
Assets held for use by the business rather than for sale or conversion into cash, eg, fixtures and fittings, equipment, buildings.

fixed cost
A cost which does not vary with changing sales or production volumes, eg, building lease costs, permanent staff wages, rates, depreciation of capital items.

FOB - 'free on board'

The FOB (Free On Board) abbreviation is an import/export term relating to the point at which responsibility for goods passes from seller (exporter) to buyer (importer). It's in this listing because it's commonly misunderstood and also has potentially significant financial implications. FOB meant originally (and depending on the context stills generally means) that the seller is liable for the goods and is responsible for all costs of transport, insurance, etc., until and including the goods being loaded at the (nominated FOB) port. An importing buyer would typically ask for the FOB price, (which is now now often linked to a port name, eg., FOB Hamburg or FOB Vancouver), knowing that this price is 'free' or inclusive of all costs and liabilities of getting the goods from the seller to the port and on board the craft or vessel. Logically FOB also meant and still means that the seller is liable for any loss or damage up to the point that the goods are loaded onto the vessel at the FOB port, and that thereafter the buyer assumes responsibility for the goods and the costs of transport and the liability. From the seller's point of view an FOB price must therefore include/recover his costs of transport from factory or warehouse, insurance and loading, because the seller is unable to charge these costs as extras once the FOB price has been stated. The FOB expression originates particularly from the meaning that the buyer

is free of liability and costs of transport up to the point that the goods are loaded on board the ship. In modern times FOB also applies to freight for export by aircraft from airports. In recent years the term has come to be used in slightly different ways, even to the extent that other interpretations are placed on the acronym, most commonly 'Freight On Board', which is technically incorrect. While technically incorrect also, terms such as 'FOB Destination' have entered into common use, meaning that the insurance liability and costs of transportation and responsibility for the goods are the seller's until the goods are delivered to the buyer's stipulated delivery destination. If in doubt ask exactly what the other person means by FOB because the applications have broadened. While liability and responsibility for goods passes from seller to buyer at the point that goods are agreed to be FOB, the FOB principle does not correlate to payment terms, which is a matter for separate negotiation. FOB is a mechanism for agreeing price and transport responsibility, not for agreeing payment terms. In summary: FOB (Free On Board), used alone, originally meant that the transportation cost and liability for exported goods was with the seller until the goods were loaded onto the ship (at the port of exportation); nowadays FOB (Free On Board or the distorted interpretation 'Freight On Board') has a wider usage - the principle is the same, ie., seller has liability for goods, insurance and costs of transport until the goods are loaded (or delivered), but the point at which goods are 'FOB' is no longer likely to be just the port of export - it can be any place that it suits the buyer to stipulate. So, if you are an exporter, beware of buyers stipulating 'FOB destination' - it means the exporter is liable for the goods and pays transport costs up until delivery to the customer.

forecast
See 'budget' above.

gearing
The ratio of debt to equity, usually the relationship between long-term borrowings and shareholders' funds.

goodwill
Any surplus money paid to acquire a company that exceeds its net tangible assets value.

gross profit

Sales less cost of goods or services sold. Also referred to as gross profit margin, or gross profit, and often abbreviated to simply 'margin'. See also 'net profit'.

initial public offering (ipo)

An Initial Public Offering (IPO being the Stock Exchange and corporate acronym) is the first sale of privately owned equity (stock or shares) in a company via the issue of shares to the public and other investing institutions. In other words an IPO is the first sale of stock by a private company to the public. IPOs typically involve small, young companies raising capital to finance growth. For investors IPO's can risky as it is difficult to predict the value of the stock (shares) when they open for trading. An IPO is effectively 'going public' or 'taking a company public'.

letters of credit
These mechanisms are used by exporters and importers, and usually provided by the importing company's bank to the exporter to safeguard the contractual expectations and particularly financial exposure of the exporter of the goods or services. (Also called 'export letters of credit, and 'import letters of credit'.) When an exporter agrees to supply a customer in another country, the exporter needs to know that the goods will be paid for. The common system, which has been in use for many years, is for the customer's bank to issue a 'letter of credit' at the request of the buyer, to the seller. The letter of credit essentially guarantees that the bank will pay the seller's invoice (using the customer's money of course) provided the goods or services are supplied in accordance with the terms stipulated in the letter, which should obviously reflect the agreement between the seller and buyer. This gives the supplier an assurance that their invoice will be paid, beyond any other assurances or contracts made with the customer. Letters of credit are often complex documents that require careful drafting to protect the interests of buyer and seller. The customer's bank charges a fee to issue a letter of credit, and the customer pays this cost. The seller should also approve the wording of the buyer's letter of credit, and often should seek professional advice and guarantees to this effect from their own financial services provider. In short, a letter of credit is a guarantee from the issuing bank's to the seller that if compliant documents are presented by the seller to the

buyer's bank, then the buyer's bank will pay the seller the amount due. The 'compliance' of the seller's documentation covers not only the goods or services supplied, but also the timescales involved, method for, format of and place at which the documents are presented. It is common for exporters to experience delays in obtaining payment against letters of credit because they have either failed to understand the terms within the letter of credit, failed to meet the terms, or both. It is important therefore for sellers to understand all aspects of letters of credit and to ensure letters of credit are properly drafted, checked, approved and their conditions met. It is also important for sellers to use appropriate professional services to validate the authenticity of any unknown bank issuing a letter of credit.

letters of guarantee
There are many types of letters of guarantee. These types of letters of guarantee are concerned with providing safeguards to buyers that suppliers will meet their obligations or vice-versa, and are issued by the supplier's or customer's bank depending on which party seeks the guarantee. While a letter of credit essentially guarantees payment to the exporter, a letter of guarantee provides safeguard that other aspects of the supplier's or customer's obligations will be met. The supplier's or customer's bank is effectively giving a direct guarantee on behalf of the supplier or customer that the supplier's or customer's obligations will be met, and in the event of the supplier's or customer's failure to meet obligations to the other party then the bank undertakes the responsibility for those obligations. Typical obligations covered by letters of guarantee are concerned with: Tender Guarantees (Bid Bonds) - whereby the bank assures the buyer that the supplier will not refuse a contract if awarded.

Performance Guarantee - This guarantees that the goods or services are delivered in accordance with contract terms and timescales. Advance Payment Guarantee - This guarantees that any advance payment received by the supplier will be used by the supplier in accordance with the terms of contract between seller and buyer.

There are other types of letters of guarantee, including obligations concerning customs and tax, etc, and as with letters of credit, these are complex documents with extremely serious implications. For this reasons suppliers and customers alike must check and obtain necessary validation of any issued letters of guarantee.

liabilities
General term for what the business owes. Liabilities are long-term loans of the type used to finance the business and short-term debts or money owing as a result of trading activities to date . Long term liabilities, along with Share Capital and Reserves make up one side of the balance sheet equation showing where the money came from. The other side of the balance sheet will show Current Liabilities along with various Assets, showing where the money is now.

liquidity ratio
Indicates the company's ability to pay its short term debts, by measuring the relationship between current assets (ie those which can be turned into cash) against the short-term debt value. (current assets/current liabilities) Also referred to as the Current Ratio.

net assets (also called total net assets)

Total assets (fixed and current) less current liabilities and long-term liabilities that have not been capitalised (eg, short-term loans).

net current assets

Current Assets less Current Liabilities.

net present value (npv)

NPV is a significant measurement in business investment decisions. NPV is essentially a measurement of all future cashflow (revenues minus costs, also referred to as net benefits) that will be derived from a particular investment (whether in the form of a project, a new product line, a proposition, or an entire business), minus the cost of the investment. Logically if a proposition has a positive NPV then it is profitable and is worthy of consideration. If negative then it's unprofitable and should not be pursued. While there are many other factors besides a positive NPV which influence investment decisions; NPV provides a consistent method of comparing propositions and investment opportunities from a simple capital/investment/profit perspective. There are different and complex ways to construct NPV formulae, largely due to the interpretation of the 'discount rate' used in the calculations to enable future values to be shown as a present value. Corporations generally develop their own rules for NPV

calculations, including discount rate. NPV is not easy to understand for non-financial people - wikipedia seems to provide a good detailed explanation if you need one.

net profit
Net profit can mean different things so it always needs clarifying. Net strictly means 'after all deductions' (as opposed to just certain deductions used to arrive at a gross profit or margin). Net profit normally refers to profit after deduction of all operating expenses, notably after deduction of fixed costs or fixed overheads. This contrasts with the term 'gross profit' which normally refers to the difference between sales and direct cost of product or service sold (also referred to as gross margin or gross profit margin) and certainly before the deduction of operating costs or overheads. Net profit normally refers to the profit figure before deduction of corporation tax, in which case the term is often extended to 'net profit before tax' or PBT.

opening/closing stock
See explanation under Cost of Sales.

p/e ratio (price per earnings)

The P/E ratio is an important indicator as to how the investing market views the health, performance, prospects and investment risk of a public company listed on a stock exchange (a listed company). The P/E ratio is also a highly complex concept - it's a guide to use alongside other indicators, not an absolute measure to rely on by itself. The P/E ratio is arrived at by dividing the stock or share price by the earnings per share (profit after tax and interest divided by the number of ordinary shares in issue). As earnings per share are a yearly total, the P/E ratio is also an expression of how many years it will take for earnings to cover the stock price investment. P/E ratios are best viewed over time so that they can be seen as a trend. A steadily increasing P/E ratio is seen by the investors as increasingly speculative (high risk) because it takes longer for earnings to cover the stock price. Obviously whenever the stock price changes, so does the P/E ratio. More meaningful P/E analysis is conducted by looking at earnings over a period of several years. P/E ratios should also be compared over time, with other company's P/E ratios in the same market sector, and with the market as a whole. Step by step, to calculate the P/E ratio:

1. 2. 3. 4. 5.

Establish total profit after tax and interest for the past year. Divide this by the number of shares issued. This gives you the earnings per share. Divide the price of the stock or share by the earnings per share. This gives the Price/Earnings or P/E ratio.

profit and loss account (P&L)

One of the three principal business reporting and measuring tools (along with the balance sheet and cashflow statement). The P&L is essentially a trading account for a period, usually a year, but also can be monthly and cumulative. It shows profit performance, which often has little to do with cash, stocks and assets (which must be viewed from a separate perspective using balance sheet and cashflow statement). The P&L typically shows sales revenues, cost of sales/cost of goods sold, generally a gross profit margin (sometimes called 'contribution'), fixed overheads and or operating expenses, and then a profit before tax figure (PBT). A fully detailed P&L can be highly complex, but only because of all the weird and wonderful policies and conventions that the company employs. Basically the P&L shows how well the company has performed in its trading activities.

overhead
An expense that cannot be attributed to any one single part of the company's activities.

quick ratio
Same as the Acid Test. The relationship between current assets readily convertible into cash (usually current assets less stock) and current liabilities. A sterner test of liquidity.

reserves
The accumulated and retained difference between profits and losses year on year since the company's formation.

restricted funds
These are funds used by an organisation that are restricted or earmarked by a donor for a specific purpose, which can be extremely specific or quite broad, eg., endowment or pensions investment;

research (in the case of donations to a charity or research organisation); or a particular project with agreed terms of reference and outputs such as to meet the criteria or terms of the donation or award or grant. The source of restricted funds can be from government, foundations and trusts, grant-awarding bodies, philanthropic organisations, private donations, bequests from wills, etc. The practical implication is that restricted funds are ring-fenced and must not be used for any other than their designated purpose, which may also entail specific reporting and timescales, with which the organisation using the funds must comply. A glaring example of misuse of restricted funds would be when Maxwell spent Mirror Group pension funds on Mirror Group development.

return on capital employed (ROCE)

A fundamental financial performance measure. A percentage figure representing profit before interest against the money that is invested in the business. (profit before interest and tax/capital employed x 100)

return on investment
Another fundamental financial and business performance measure. This term means different things to different people (often depending on perspective and what is actually being judged) so it's important to clarify understanding if interpretation has serious implications. Many business managers and owners use the term in a general sense as a means of assessing the merit of an investment or business decision. 'Return' generally means profit before tax, but clarify this with the person using the term - profit depends on various circumstances, not least the accounting conventions used in the business. In this sense most CEO's and business owners regard ROI as the ultimate measure of any business or any business proposition, after all it's what most business is aimed at producing - maximum return on investment, otherise you might as well put your money in a bank savings account. Strictly speaking Return On Investment is defined as: Profits derived as a proportion of and directly attributable to cost or 'book value' of an asset, liability or activity, net of depreciation. In simple terms this the profit made from an investment. The 'investment' could be the value of a whole business (in which case the value is generally regarded as the company's total assets minus intangible assets, such as goodwill, trademarks, etc and liabilities, such as debt. N.B. A company's book value might be higher or lower than its market value); or the investment could relate to a part of a business, a

new product, a new factory, a new piece of plant, or any activity or asset with a cost attached to it. The main point is that the term seeks to define the profit made from a business investment or business decision. Bear in mind that costs and profits can be ongoing and accumulating for several years, which needs to be taken into account when arriving at the correct figures.

share capital
The balance sheet nominal value paid into the company by shareholders at the time(s) shares were issued.

shareholders' funds
A measure of the shareholders' total interest in the company represented by the total share capital plus reserves.

t/t (telegraphic transfer)

Interntional banking payment method: a telegraphic transfer payment, commonly used/required for import/export trade, between a bank and an overseas party enabling transfer of local or foreign currency by telegraph, cable or telex. Also called a cable transfer. The terminology dates from times when such communications were literally 'wired' before wireless communications technology.

variable cost
A cost which varies with sales or operational volumes, eg materials, fuel, commission payments.

working capital
Current assets less current liabilities, representing the required investment, continually circulating, to finance stock, debtors, and work in progress.

American Depository Receipt (ADR) Analyst

A certificate of trading on a U.S. stock exchange that represents shares of a foreign corpora

A person with expertise in evaluating financial investments. He performs investment research and makes recommendations to ins hold. Most analysts specialize in a single industry or business sector. The problem is that no two analysts are usually in agreement is a "Consensus Rating" below. Do not blindly follow analyst's recommendations; you should learn to make your own judgments company whose shares are recommended by the analyst's reports, you have to sign a waiver that no liability attaches to the analys true.

Annuity Appreciate

A contract sold by life insurance companies that guarantees a specified payment at some future time, u

An increase in any investments value. For example, if shares of stock you own in a company have risen from five to ten, it has " describe your blood pressure after you finds you have just invested in a dud stock.

Approved List

The list that tells you which shares are approved for the purpose of pledging them with the bank against loan. Only these shares wil This list of approved securities is periodically revised.

Arbitrage
Buying in one exchange and selling in another to take advantage of price difference.

Asset Allocation

The process of dividing your funds among different classes on investment such stocks, bonds or real estate. You could further al foreign, etc.

Assets

Any possession that has value in exchange in the sense that it has buyers. In the stock market, money is the medium of all excha stock exchange is always in terms of money.

Auction

A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. It is done when the seller is unable to d question is offered by a member who has ready possession of the script.

Average Daily Share Volume

The number of shares traded per day, averaged over a period of time, usually one year. Helps in determining the level of activity of currently active stocks.

Average Maturity Average P/E Ratio

Average price/earnings ratio of stocks owned by a mutual fund.

The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on f

Backend load Balance Sheet

Sales charge paid when selling a mutual fund - also known as deferred load. (For instance, alimony can be sai

A financial statement listing a company's assets (what it owns) and liabilities (what it owes) as of a specific date, usually the last day between a company's assets and liabilities is termed its net worth or shareholder's equit

Basis Points

One basis point is 0.01 per cent. Usually used to describe changes in bond yields. For instance, a ten basis point increase means th point change is 1 per cent.

Bear
An operator who expects the share price to fall.

Bear Market

A weak and falling market where buyers are absent (Usually because they burnt their fingers when they held on too long to their sh correlates with recession. An opportunity to buy at low prices, in hope (usually) fulfilled if you wait long enough) of an upturn. Lo holding on to stocks for a long period. This is the reverse of the bull market. Hence, the strategy would also be reversed but be cau stock is going to reverse direction than to predict when a rising is likely to fall.

Blue Chip Stock

Shares of well-established and financially strong corporations, with little investment risk and a history of earnings and dividend paym a portfolio and allow for higher gain (and higher risk) speculation in other stocks. Investment in such stocks is more for capital app most blue chips trade at high market prices. Best to allocate a portion of your annual income for the purchase of inves

Bond

A bond is a debt instrument issued by an entity for the purpose of raising capital. A long term promissory note issued by a corporati other entity such as state or municipal governments or the Central Bank of the country. Bonds normally have a set maturity (term them. In simpler word, you are in effect lending money to the entity which issues the bonds for a specified period in return for a fixed point you get back your principal investment.

Bond Rating
A grade evaluating the quality of a bond.

Bonus Shares

Shares allotted to the existing shareholders by capitalizing the reserves into additional capital. When the market expects a company the shares normally goes up. Following a bonus issue, though the number of total shares increase, the proportional ownersh

Book Closure

A company closes its register of members for updating the records to facilitate payment of dividends or issue of tights of bonus sha this process is done and deliveries are not affected in the clearing house.

Book value Bottom line

Total shareholder equity from the balance sheet divided by the number of shares outstand

Call Option
An option where the buyer gets the right to buy the underlying security at a specified future date.

Capital Employed
Total liabilities and equity less non-interest bearing liabilities.

Capital Gains
Difference between the price at which a financial ashes is sold and its original cost (assuming the price has gone up).

Capital Gains Distribution

Payments to mutual fund shareholders of profits from the sale of securities in a fund's portfolio. Capital gains distributions (if any) are usually made annually.

Capital Turnover
Annual total Revenue as a percentage of total assets.

Capitalization
The value of a company as measured by the market price of its common shares, multiplied by the total number of shares that have been issued.

Capitalize
When costs of items such as buildings, equipment and other items with a useful lifetime exceeding one year are categorized as assets to be depreciated over a number of years, rather than being expensed in the year of purchase.

Carry Forward
Settlement where positions are carried forward from one settlement to another settlement.

Cash Flow per Share

Cash flow from operating activities divided by average number of shares.

Cash Settlement
Payment for transactions done in one settlement on the due date.

Change in Stock Price

The change in stock price is recorded in points. The fraction amount depends on the security being traded. The change in stock price is the difference between the opening stock price and the current price the stock is selling at. For example, if stock XYZ opened at 10, and is now selling for 11.50 it would be up +1.50. The +1.50 is the change in stock price.

Circuit Breaker
A mechanism used to restrain the market when it gets overheated. The Exchange may relax the limit after a cooling off period of about half an hour.

Clear Title
A title to an asset proves your legal ownerships of that asset. That asset be mortgaged, sold, rented or otherwise transferred, temporarily or permanently, to another person. This represents an encumbrance on the title. Banks are reluctant to authorize loans against assets which have encumbrances and prefer a clear title.

Clearing House
It is a legal counter party to both legs of every trade. The netted purchase and sale positions of the trading. Members are settled through the clearing house.

Close
The closing price is the last traded price for the stock on a particular day. The previous close is the price a stock closed on the previous day.

Closed-End Fund
Investors of such a fund buy shares from other share holders and sell shares to other investors. Share price is determined by supply and demand for fund shares.

Collateral
It is used to provide a guarantee for a loan. Can be encased by the bank if you default in any way on repayment of interest or principle of your loan or other obligations. It includes negotiable instruments, shares or goods and titles to immovable assets. If you feel that your bank works at a snail's pace, try defaulting on a loan - the bank will encase your collateral so fast you'll never know what hit you till it is too late.

Commission
A fee charged by brokers for their service in facilitating investment has to be handled through brokers registered on that exchange.

Commodities
Articles of commerce or products that can be used for commerce or used as raw materials in producing other goods. In a narrow sense, products traded on an authorized commodity exchange. Types of commodities include agricultural products, metals, petroleum, foreign currencies, financial instruments and indexes to name a few. No, you cannot trade your boss here.

Common Stock
Equity or ownership in a corporation. Stockholders participate in a company's profits or losses through dividends and changes in the stock's market value.

Company Objection
In some cases, the companies send back the certificates received for transfer citing reasons for their inability to do so. The letter sent by the company is known as Company Objection.

Consensus Rating
This method is prevalent in the U.S.A. but not (yet) in India . It is the average of analyst's recommendations for single entity. As many brokers have different ratings systems, their recommendations are standardized so that a consensus can be calculated

The I/B/E/S ratings are calculated using a standard set of recommendations, maintained by I/B/E/S, each with an assigned numeric value: 1. 4. Strong Buy 2. Buy 3. Hold Under perform, and 5. Sell

Each recommendation received from the analysts is mapped to one of the I/B/E/S standard ratings. Assigning a numeric value to the broker text enables I/B/E/S to calculate a consensus recommendation. This consensus recommendation appears as the mean (average) of the assigned values.

Consolidation
A technical analysis term meaning a stock price is in trading range, not moving significantly up or down.

Convertible Bond
A bond that can be exchanged for shares of stock.

Convertible/Equity Related Loan

Loan convertible into equity as per pre-agreed terms.

Corporation
A business organization that, for tax, purposes is a legal entity and has continuity of existence and easy stock transfer procedure. A corporation has limited stock liability. The owners are liable only to the extent of their investment, that is, if an organization Tanks the maximum you can lose is the value of your equity holding. A corporation's owners are the shareholders.

Cost of Sales
Cost of materials and labour required to produce products or services. Gross profit is sales minus cost of sales.

Coupon Rate
The interest rate on a bond.

Cum Bonus
A share is described as cum bonus when the purchaser is entitled for current bonus. A share is described as cum bonus dividend when the purchaser is entitled for current dividend.

Cum Rights
A share is described as cum rights when the purchaser is entitled for current rights

Dalal Street
A street in Mumbai, India, where the Mumbai Stock Exchange building is located. A street paved with hopes and broken dreams.

Day Order
The quantity that remains untraded is not cancelled until the end of the day.

Debt to Equity (long term)

Total long term debt divided by total shareholder equity.

Debt to Equity (Total)

Total (short and long term) debt divided by total shareholder equity.

Debt to Equity Ratio

Long-term debt divided by shareholders' equity, showing the relationship between long-term funds provided by creditors and funds provided by shareholder; a high ratio may indicate high risk, low ratio may indicate low risk.

Default
Failure to pay back a debt.

Deferred Expense
Balance sheet liability reflecting expenses shown on the income statement that haven't actually been paid.

Deferred revenue
When a share is bought or sold for the purpose of receiving or effecting deliveries.

Dematerialisation
It is a process by which an investor gets physical certificates converted into electronic balances maintained in his account with the Depository Participant (DP). In other words, the shares are 'dematerialized'.

Depositories
An organization which holds securities of investors, on request in electronic from through a registered Depository Participant (DP). It can be compared with a bank. It holds securities in an account, transfers securities between accounts on the instruction of the account holder, facilitates transfers of ownership without having to handle securities and facilitates safe-keeping of shares. Minimum net worth stipulation required by SEBI for registering a DP is Rs. 100 crore.

Depository Participant (DP)

A DP is a representative of the depository in the system. The DP maintains the client's securities account balances and keeps him informed about the status of holdings. According to SEBI regulations, financial institutions (FI's), banks, custodians, stockbrokers, etc. can become DPs. It is comparable with a branch of a bank if a Depository is likened to a bank. A DP is offered depository services only after it gets proper registration from SEBI.

Depreciation
A non-cash accounting charge representing the loss in value of hard assents such as buildings and machinery over the accounting period.

Derivatives
A financial contract between two or more parties based on the future value of an underlying asset. Options and similar other instruments are examples. For instance, the value of a call option on reliance (derivative) fluctuates with the price of reliance stock. The value is totally 'derived' from the value of the underlying asset such as securities, commodities, bullion, currency, live stock, etc. it is any hybrid contract of a pre-determined fixed duration such as forward, future, option, etc. linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities.

Dip
A drop in the price of a stock that is temporary making it the ideal time to buy the stock. A precept common to all businesses: buy low sell high. Never forget, 'highs' and 'lows' are relative not absolute. Any increase over your purchase price is a gain, and vice versa. One usually gets into trouble when giving in to the thoroughly human instinct for the gap to increase (in case of gains) or decrease (in case of losses). Book your profits (or cut your losses) as you go; don't allow them to accumulate too long.

Discount
The difference between a bond's face value and when to trade a security.

Diversification
The acquisition of a group of assets in which returns on the assets are not directly related over time. Proper investment diversification is intended to reduce the risk inherent in particular securities. An investor seeking diversification for a securities portfolio would purchase securities of firms that re not similarly affected by the same variables. For example, an investor would not want to combine large investment positions in airlines, trucking and automobile manufacturing because each industry is significantly affected by oil prices and interest rates. Of course, diversification is essentially for investors not traders. A lot of thought goes into deciding on investment avenues because you are not looking so much at the present status of the industry but at its short- or mid-term future. This, in turn, requires that you take into an account innumerable factors that could affect the health of the industry. Of course, you can always take an analyst's help, but you should also learn to recognize factors that may impact a particular industry. This calls for clear thinking and common sense. You can do it!

Dividend
Cash payment made to the shareholders out of the profits of the company. Cash dividends are paid out of corporate earnings and the percentage of earnings paid out varies from corporation to corporation. Generally, the percentage of corporate earnings paid out runs from 40 to 80 per cent, but many times it is less, even zero, where the corporation keeps its entire earnings. A stock dividend gives the shareholders additional shares of stock or a fraction thereof, rather than cash. It is not mandatory for accompany to distribute dividends. At the same time, if a company is stingy on its dividend policy, it is not going to find many investors.

Dividend Per Share

The amount of dividend paid out per share. (Dividend rate x nominal value of share)/100. The price used is usually the market price at the end of the period under review, for instance, the end of a financial year.

Dividend Yield
Total of 12-months' dividend paid (historical or forecast) divided by the latest share price.

Documentation
The papers that are needed to process your loan application.

Dow Jones Industrial Average (DJIA)

A stock index (one of many) commonly used as an indicator of changes in the general level of the stock market prices in United States . In this index, there are 30 industrial stocks thought to be representative of industrial stocks in general. Dow Jones & Company, a financial and investment publisher based in New York , also calculates averages for utility stocks, transportation stocks and bonds. Just a few of the 30 companies in the DJIA are: American Express, AT&T, Bethlehem Steel, Boeing, Chevron, Disney, Coca-Cola, General Motors and IBM. You will not be directly concerned at what happens on the Dow. But remember, the Dow average is global leader and is usually reflected by exchange around the world. The wonders of globalization! You don't have enough problems trying to understand the trend of Mumbai stock prices; you also have to keep in touch with global trends. Is that fat fee you are paying your stock analyst looking more reasonable now?

Drawing Power Valuation

Valuation in stock markets affects your drawing power and hence your loan taking ability as it is reviewed from time to time as per the applicable market value adopted by the bank. It is like an overdraft limit. But in this case it is based on the market values of shares put up as collateral against a loan. The limit fluctuates in line with the market price of the shares.

Due Diligence
The process whereby an in-depth examination of a company's business prospects is conducted. Usually when a merger, sale or acquisition of a company is intended.

Earning Per Share (EPS)

Profit after tax and minority interest divided by average number of shares.

EBIT
Effective before interest and taxes. Also known as operating income.

Effective Interest Rates

The compounded interest rate calculated on the actual inflows and outflows of cash.

Emerging Markets
Developing countries.

EMI

Equated monthly installments to be paid by the borrower in repayment of the loan taken (includes principal and interest). If you think you can save s EMI agreement does not contain a pre-payment penalty. In the bizarre world of loan finance, lenders prefer that you do not repay your loan befo

Equities
Another name for shares.

Equity per Share

Shows how much of a company's equity one share represents. If the market price is greater than the equity per share, the market believes that the by number of shares at the close of the period.

Ex Bonus
A Share is described as ex dividend when the buyer is not entitled for the dividend. The seller remains the beneficiary. The

Ex Rights

A share is described as ex rights when the buyer is not entitled for the Rights. The seller remains the beneficiary. Ex rights shares are cheaper than investment oriented players.

Expiry Date
The date and time after which a writer of an option cannot exercise his rights.

Exposure

When the value of your asset/product pledged with a bank against loan is reduced by market price fluctuation or for other reasons, it increases you the return of the loan. And when a bank feels insecure, what happens in the famous Hollywood movie 'Indecent Exposure' is nowhere the bank co

Exposure Limit Extended Hours Trading

Trades executed before or beyond normal market hours.

The limit allowed to the broker by his exchange or to the customer by broker. It is the total value up to which one is allowed to hold o

Face Value
The nominal value of a security.

Financial Futures First Stage Capital Fiscal Year

Legally binding agreements to buy or sell financial instruments at a future date (for example, bonds stocks, treasury bo

Capital provided to an entrepreneur who has a proven product, to start commercial production and marketing, not covering market expa

Any Consecutive 12-month period of financial accountability for a corporation or government. For example, in many English speaking countries, b stores find it easier to wind up their yearly accounting on January 31 instead of December 31.Fiscal year is often abbreviated FY with a date. For ex year covers the period June 1 to May 31 of the following year. In India , the Fiscal Year of the Government is 1 st April to the 31 st March of the n fiscal cannot be January 1 to December 31 to correspond with the calendar year. This is a British legacy. British Babus didn't want to work throug babus, most of the time, don't want to work at all period.

Flat Rate of Interest

Percentage representation of the amount of annual interest on the total loan amount.

Float Floating Rate of Interest

The number of shares outstanding minus what is owned by insiders and what the company is holding back (tre

The interest rate varies with the change of interest rates over the loan period. Remember, if you opt for a floating bank rate it could be either good with a rise in the bank rate, it is also reduced when the interest rates falls (yes, this has been known to happen in th

Forex
Foreign currency exchange markets.

Free Cash Flow

Operating cash flow minus amounts spent on plant and equipment and minus dividends

Front-End Load
Sales charge paid when purchasing a mutual fund.

Fundamental Analysis

A method of stock analysis based on the management of the company, past and projected financial and profitability. Do you know how to read a people who play the market cannot analyze a balance sheet or cannot draw valid conclusions from it. If you are among them, find a good analys understand a balance sheet and profit and loss account. While there is nothing wrong in depending on an analyst, it will add immensely to your co conclusions.

Futures Contract

An agreement between parties for specified asses for performance on a fixed day in future. A futures contract is a legally binding agreement to buy financial securities at fixed time in the future at a price agreed upon today. The delivery period, quantity and quality of a futures contract is standardiz contract is opened and is negotiated between buyers and sellers. Futures are traded either electronically or via open outcry on a traded either electr Exchange offering the particular contract.

Goodwill
The amount by which a company's shareholder equity exceeds the value of its hard assets.

Green Shoe
An agreement allowing the lead underwriter to buy additional shares of an IPO at the offering price after the IPO begins trading.

Gross Margin
Gross profit divided by sales.

Gross Profit
Profit a company makes on goods and services before considering overhead expenses. Gross profit is sales minus cost of sales.

Growth Stocks
Stocks that pay low dividends, but are expected to grow. Strictly for long term investors who have a vision for the future and are not interested in maximizing short term profits.

Guarantor
A person who promises to pay your debts if you are unable to pay them yourself. If you find a good guarantor, hand on to him. Never let him down. He's like money in a bank.

Hedging
A practice of taking one market position to offset potential losses in another. For example using a futures a contract to reduce the impact of price fluctuations in a cash or physical market. Like when you may like to cover possible loss by also backing the horse for a place. In securities trading, since there is no win or place, you have to look for another investment avenue where the return is less but the risk is also correspondingly less. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market.

High
The highest price that was paid for a security during a certain time period. This can be expressed daily, weekly, and monthly or for a 52-week period. For example, the high for the day can be 20, but the high for the year can be 50. It helps to know the price history of a security over a period of time as an additional support for current buy or sell decision.

Hot Stock
A stock whose price rises quickly the day it goes public. Let's say you buy a new offering at Rs.10. What would you do if, on the first day of listing on the exchange it is quoted at Rs.25? Sell, or wait for a further increase. The same old choice: should I sell now and make a profit or wait for a while in hope that the price will go up further?

Hypothecation
Pledging assets against a loan using properties such as securities as collateral for loan, but not transferring legal ownership to the lender - which does not mean that you will not lose your collateral if you default on repayment. With a little paper work, the lender can sell your collateral to realize his payments.

Income Statement
A record of a company's sales and expenses over a particular year or quarter.

Income Stocks

Stocks that have consistently paid high dividends. Contrary to what you might think after some time on the stock exchange, there really are such stocks. W inflation do you part if you have good base of income stocks, you can afford to speculate in higher risk stocks. But remember you have to keep an eye on th mean ?for ever?.

Index/Indices

An index is managed and publishes either by a stock exchange or a professional financial and investment body. It is representative of the market sentiment. stocks of that exchange. Usually they represent about 80 to 85 percent of the market capitalization and trading. Sectored indices like Industrial, banking, Utili particular sector. The BSE Sensex is based on 30 stocks as is New York 's Dow average. These 30 stocks, in number, are a miniscule percent of the total lis capitalization, they represent anything up to 85 per cent.

Industry Group
Companies in related businesses.

Inflation

Increase in the prices for goods and services. For the common man, this means he pays more for what he uses. For the stock market player, it could be both because there is a shortage in output, a surge in construction activities or higher government taxes? There could be a number of reasons, each of them havin industry. If you are holding cement shares, should you hold on to them, buy more or sell? Try and figure it out. If you can't le

Inflation Rate

An important economic indicator. The rate at which prices are rising. So, when the inflation rate is 2 percent, it means it is rising at the rate of 2 percent per anything you buy will now cost you 2 percent more than it did last time.

Insider Information

Any knowledge about a company, its products, or securities not generally available to the public gained from a source inside the company. For instance if yo large public limited organization and lets fall during a family get-together that his company is planning to buy company XYZ and you immediately place a buy o legally in most countries for anyone to make a securities trade based on what they believe to be inside trading result in large fines or imprisonment or both. In but the system is so widespread and disparate and the judicial system, which it's numerous levels of appeals, so time consuming and cumbersome that most system is being tightened up so think twice before you place that buy order for XYZ shares.

Institutional Ownership
Shares of a company owned by pension funds, mutual fund, banks, financial institutions, etc.

Intangibles
Soft assets such as patents, trademarks, etc.

Interest Interest Coverage Intraday

Stock trading tracked in periods shorter than one day. For instance the trades during the first two hours or last two hours

Money charged by a lender to a borrower for the use of his or her money. Payment made at periodic investments on a

A measure of a company's ability to pay interest on its debt (operating income divided by interest expense

Intrinsic Value

Lead Underwriter
Brokerage house in charge of IPO.

Leverage
Any means of increasing value and return by borrowing funds or committing less of one's own money. For corporations, it refers to the ratio of debt (in the form of bonds and preferred stock outstanding) to equity (in the form of common stock outstanding) In the company's capital structure. The more long-term debt there is, the greater the financial leverage. Shareholders benefit from this financial leverage to the extent that the return on the borrowed money exceeds the interest costs of borrowing it. The market value of the company rises and so do its shares. Because of this effect, financial leverage is popularly called ?trading on the equity'. For individuals, leverage can involve debt, as when an investor borrows money from his broker ?on margin' and so is able to buy more stock than he otherwise could. If the stock goes up, he repays the broker the loan amount and keeps the profit himself. By borrowing money he has achieved a higher return on his investment than if he had paid for all the stock himself. Rights, warrants, futures and option contracts also provide leverage, not through debt but by offering the prospect of a high return for little or no investment. The downside: most individuals pledge existing stocks with their bankers or brokers for the loan, which is a percentage of the market value of the stocks pledged. Say you have pledged stocks worth Rs.100 on the market against which you are given a loan of Rs.50 (50 per cent). Now suppose the market value of the pledged stocks goes down to Rs.75. The lender is immediately going to ask you to pledge more stocks (or pay cash) to bring the level up to 200 per cent of the loan. Multiply this instance by thousands and you can imagine the margin pressure that is exerted on the market. This is when the market falls and we have what is known as a ?bear' market.

Leveraged Buy Out

Take over of a public corporation using borrowed funds.

Liability
A financial obligation or debt.

Limit Order
A market order that specifies the highest or lowest price at which the customer is willing to trade securities. An order to a broker to buy a certain stock (future, etc.) only if the price rises to a specified level. This decision-making is necessary to cut losses due to lower prices or sudden reverses in rising share prices.

Liquidity
A measure of the number of shares, or money value of shares traded daily. Mutual funds and other institutional buyers prefer high liquidity stocks so they can easily move in and out of positions. Depth of market to absorb buy and sell activity of even large orders at prices appropriate to supply and demand. The market must also adapt quickly to new information and incorporate that information into the stock's price. Liquidity is one of the most important characteristics.

Load
A sales commission paid when you buy (front-end) or sell (back-end) a mutual fund.

Load Funds
Mutual funds that carry a sales commission.

Long Position
A bull position in a security. To buy or hold a long position is the state of actually owning a stock, security, contact, or commodity. It is the opposite of a short position.

Long-term Gain
A gain on the sale of a capital asset where the holding period was twelve months or more and profit was subject to the long-term capital gains tax. The legal definition of short term and long term capital gains varies from country. So is taxation based on those classifications? This is one of the reasons investors buy and sell stocks around the world. A U.S. investor (FII), today, can make more money on an investment on the BSE than the U.S. bourse. The day-even minute - the FII sees a better opportunity elsewhere in the world. That's where the money will go.

Long-term Investments
Balance sheet item reflecting investments in other companies, etc.

Lot
A fixed minimum number in which shares are bought and sold. Trading lots can comprise 5, 10, 50 or 100 shares depending on the face value of shares. Such number makes round lots, anything less makes odd lots.

Low (price)
The lowest price a security or commodity has reached in a certain period of time such as a daily low or annual low. This can be expressed daily, weekly, monthly, or for a 52 week period. For example, the low for the day can be 10, but the low for the year can be 5, Helps you understand whether today's price is an aberration or a logical extensive of a trend.

Margin

An upfront payment made by the customer to take a position in the market. His exposure limit is fixed based on the margin money brought in by him. The di amount sanctioned. The margin for physical shares is 50 percent (that is you can borrow only up to 50 percent of the values of your pledged shares. If one shares worth Rs.200. The margin for demat shares is35 percent. Margins are at the sole discretion of the bank and may even

Mark to Market
A notional profit or loss of a long or short position as compared to the current market price.

Market Capitalization
Total market value of the company on the stock exchange. Total number of shares multiplied by the official price quoted on

Market Liquidity

Use to track money flow into and out of the markets. Positive cash flow can serve as an indicator that fund managers have cash to put into the markets at th flow may indicate that fund managers may need to liquidate some holdings to meet redemption requirements. Additionally, IPO's reduce market liquid

Market lots Market Open/Close Price

It is the last sale price of a particular stock on the previous day.

The minimum trading lot on a stock exchange.On compulsorily dematerialized shares for all classes of investors, the market

Market Order Market Price

It is the price a particular stock is currently selling for during the operating hours of the stock market.

An order where no price specification is mentioned at the time of placement and market prices apply. Authorization for a broker to buy or sell securities at t

Market Sentiment
A measure of the bullish or bearish attitude of the crowd.

Minimum Number of Companies Accepted

The minimum number of companies, whose shares have to be offered as security for obtaining loans. For example, in case of IDBI Bank the shares to be offe It is in your interest to pledge the shares of an number of companies when you take a loan; if the value of some shares drop in the market they may be offset also profitability of a number of companies.

Momentum Analysis Money Supply Money -market Funds

Mutual funds that invest in short -term securities.

Usually involves looking for stocks in a strong uptrend (high relative strength), strong earnings growth, and increasing earnings forecasts. In today's

The amount of money in circulation. The Reserve Bank of India attempts to control the growth of the economy by regulating the increas

Moving Average

NASDAQ Composite Index

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock Market.The Index is mar security affects the Index in proportion to its market by total shares outstanding, is calculated throughout the trading day, and is related

Net Asset Value (NAV)

Net Asset Value (NAV) is the market value of the securities held by the scheme of a Mutual Fund.NAV varies on a day-to-day basis since the market value o divided by the total number of units of the scheme on a specific date is the NAV.To simplify, if you hold a unit in a mutual fund, the NAV

Net Asset Value per Share

Equity excluding minority interests, divided by number of shares.

Net Profit Ratio

Profit from operations as a percentage of revenue.

No-load Funds
Mutual funds that do not carry a sales commission.

Non-operating Expense
Expenses not due to the basic business of company.

Non-operating Income
Income not derived from basic business of company

Normalized Earnings NSCCL NSE

National Stock Exchange

Profits a company can be expected to achieve taking out cyclical effects and unusual events such as one-time write-offs caused by late product re

National Securities Clearing Corporation Limited. The Clearing Corporation of the National Stock Exchang

Odd Lots
Stocks sold in quantities of less than a specified minimum number. Generally, it costs less to trade in round

Offer
The price at which a share is available in the market.

Offer Price
The price at which a company offers its shares to the public through issue of a prospectus.

Open Order
A limit order that does not expire at the end of the trading day.

Opening Price

Opening price is normally determined by the price at which a stock finished selling on the previous day. Most exchange has limits of how high or low the sto circuit, and is based on a percentage of the last traded of the previous day. For example, is the stock exchange has a upper or lower limit of 10, and if XYZ st maximum or minimum opening price the following day will be 22.00 and 18.00. This reduces the scope of overnight off-market

Operating Cash Flow

Surplus cash generated from a company's basic operations without regard to income tax entries such as depreciation and amortization. Changes in levels of i also affect cash flow. Also see Free Cash Flow.

Operating Earnings

Earnings without considering certain expenses such as inventory write downs, severance pay, depreciation and amortization charges, or just about anythin earnings look better. Also known as core earnings, ongoing earnings, earnings excluding special items or operatin

Operating Income
Sales minus all expenses except income taxes and other items not relaxed to basic business.

Operating Margin
Operating income divided by sales.

Order Cancellation
A facility available in the trading system where one is allowed to cancel the order placed earlier.

Order Modification
A facility available in the trading system where one is allowed to modify an earlier order.

Overbought Oversold

Refers to a stock that has risen sharply in price or to the market as a whole after a period of vigorous buying which, it is sometimes s

The reverse of over-bought. A single security or a market which, it is believed has declined to an unreasonable level. Usually, this is where everybody starts s starts a probe. Also applies sometimes to overbought situations.

P/E (Price/Earnings Ratio)

Shows a share's market price in proportion to its earnings. Calculated by dividing the share price by the reported or forecast ann the P?E ratio is 10, the price is equivalent to ten years earnings. The figure illustrates expectations of future company growth. In c same field. For a portfolio, the ratio is the weighted average P/E, the greater the expectations for a com

Par Value Pay In Pay Out

The designated day on which the Clearing House effects payment and deliveries to

The face value or the price of a share, debenture, or bond that is written on the certificate. It is

The designated day on which the members pay securities and fund to the clearin

Payout Ratio
Percentage of earnings paid out in dividends.

Penny Stocks

This term is typical to the USA stock markets. Low-priced issues, often highly speculative, selling at less than $1 a share. Frequen stocks have developed into investment-caliber issues. In India they are called low-Capped stocks and BSE has a separate index find the index for these stocks outpacing the Sensex. These stocks offer larger returns b

Pledge
To deposit securities with a lender as security for money borrowed.

Poison Pill

Steps taken by a corporation to thwart a hostile takeover attempt. For instance, a company could issue rights to purchase shares preferred shares giving holders the right to redeem their shares at a discount after

Portfolio Post-Offering Shares

The number of shares that will be outstanding after an IPO.

A collection of stocks, mutual funds or other securities that is owned by an inv

Power of Attorney Preferred Stock

Legal document which gives someone the right to act on your behalf in legal m

Debt instruments. Preferred shareholders are paid a head of common stock holders in the event the corporation is liquidated. Co stock according to predetermined conditions. Mostly these types of stocks pay a fixed dividend regardless of corporate earnings dividends. However, it carries no voting rights, and should earnings rise significantly the preferred holder is stuck with the same fix income stream of preferred stock makes it similar in may ways to bonds. It is like a fixed deposit in a bank. You are stuck with a fi the other hand, If interest rates fall, you can congratulate yourself on a wise de

Premium

For bonds and preferred stock, the premium is the amount by which the price exceeds the face, or par value. For options marke other words, you have to pay a little extra upfront if you want to be shielded from the fluctuat

Price Band

It sets up the upper and lower limits for share's movement on any given day. It is based on the previous days trading closing price set limits. A measure to check price volatility.

Price Rigging

A process where persons collude to artificially increase or decrease the price of a security. It is very difficult to judge initially whet activity or price rigging.

Price Earnings Growth (PEG) Ratio

Commonly used for growth stocks, the PEG ratio takes into consideration growth by dividing the P/E ratio by current annual gro estimates.

Private Placement

The sale of securities to a small group of investors that is exempt from the elaborate requirements of a public issue. Private place lending institutions from whom the issuing company takes or intends to take, a loan. The private placement results in the len

Profit Margin
Bottom line (after tax) earnings divided by sales.

Programmed Trading

Investment strategy that uses computers programmed to buy or sell large numbers of securities to take advantage of price disc stocks represented in those averages (see Arbitrage).Not fully established in India . This probably the nearest you can get to a co buy and sell to the alternative with the highest price - which, after all, is the objective o

Prospectus Proxy Statement

A document circulated to potential investors prior to an IPO describing a company's b

Material given to stockholders when the corporation solicits shareholder votes. In effect, the company seeks temporary delega contains details on the corporation's executive compensations plans.

Publicly Held Corporation

A corporation that allows anyone in the public to purchase its stock.

Put Option Pyramiding

An option where the buyer gets the right to sell the underlying security at a specified future da

So called because it is akin to building a pyramid. It involves pledging shares with a banker or broker to raise a loan to buy mor These shares are pledged again to secure a further loan to buy additional shares of the same company in a self-feeding cycle whi price to rise further and increase the operator's profit. In a bear market this cause

Quick Ratio
Cash and cash equivalents plus accounts receivables divided by current liabilities.

Quote
Prices at which a share can be bought or sold. The highest bid to buy and the lowest offer to sell any stock at a given time.

Record Date
The date on which the beneficial owner of the corporate benefits is determined.

Redemption Fee
Fee charged when you sell a mutual fund, if you have not held the fund for the prescribed minimum time.

Rematerialisation
Process of converting the shares from electronic form to physical form.

Research and Development (R&D)

Costs of developing new products and services.

Resistance Return on Assets Return on Equity Return on investments Revenue

A company's sales.

Historical price level at which rising prices have stopped rising and either moved sideways or reversed direction; usually seen as a

After tax income divided by total assets. Profit from operations plus financial income as a percentage of average capital e

After tax income (latest 12 months) divided by shareholders equity (from balance sheet).Profit after tax and minority interests as a percentage of aver

After tax income (latest 12 months) divided by total of shareholders equity plus long term debt, plus other long term lia

Rights Issue Risk

The potential to lose money (principal and any earnings) or not to make on an investment.

Issue of new shares to the existing shareholders at a price which is normally lower than the current market price of the old shares. it is issued in a fixed ra

Road Show Rollover Round Lots

Stocks sold in specified share quantities.

Presentations made by underwriters and IPO company officials to institutional buyers to create interest in the offer

A point where a stock price has fallen to support, or risen to resistance, and then reverses the up or down trend convin

S&P 500 (Standard & Poor's 500 Stock Index)

An index of 500 stocks widely traded on the New York Exchange. This index is used as a measure of performance of the overall market. Considered by many to be a much more accurate picture of the market in general.

Sales
Services and products sold by a company. Sales and revenue mean the same thing.

Sales Charge
A transaction fee or commission paid for an investment instrument. Commonly referred to as the "load" in a mutual fund.

Sales per Share

Annual sales divided by the number of shares outstanding.

Scrip
A holding in securities.

SEBI
The Securities Exchange Board of India, the regulatory body and watchdog controlling the functioning of Stock Exchange in India .

Second Stage Capital

Capital provided to expand marketing and meet growing working capital needs of an enterprise that has commenced production but does not have positive cash flows sufficient to take care of its growing needs.

Secondary Market
When stocks or bonds are traded or resold, they are said to be sold on a secondary market. The majority of all securities transaction takes place on a secondary market. They are normally conducted through the relevant exchange on which they are listed.

Sector
Sector is another word for industry. Sector (or industry) fund groupings usually focus on a single industry, such as healthcare, technology, or utilities.

Sector Funds
Mutual funds specializing in particular industry sector such as computers, or healthcare.

Secular Trend
A very long-term trend.

Securities
Documents proving debt or ownership that may be bought or sold.

Security Swapping
One has to pledge one's shares when availing of "loan against shares". Later on the person may withdraw some shares and pledge new ones to replace the shares he has withdrawn. This is popularly called security swapping. (Unlike wife swapping, it is a permitted practice.)

Seed Capital
A small amount of capital provided to an entrepreneur, usually for product development; beta stage development, pilot projects, etc, not covering launch expenses, commercial production or marketing; typically provided by angel (venture) investors.

Selling Short
The reverse of the usual stock market technique, short selling is based on the anticipation that a particular security price will go down. The practice of short selling involves borrowing shares of a security from your broker and immediately selling them at the current price. Then as the price of that security declines, you buy back an equal number of shares on the open market and use them to cover the shares you borrowed from your broker, and make a profit. For instance, if you sell short 100 shares of XYZ Corporation at 50.00 a share and the price of the stock drops to 35.00, your profit is 15.00 a share, or 1500.00. Short sellers lose when the price of the stock ascends rather than descends. Theoretically, there is more risk involved with short selling because a stock price could continue to rise forever and the short seller's loss could be infinite. A stock purchased at 10.00 a share can, however, only fall to zero and that is the maximum loss that would be incurred. Not for the common investor, unless you are very sure of yourself. Carefully check all tips on short sales before deciding to act on them.

Settlement
The process of paying for stocks you purchase, or receiving credit from your broker for the stocks you sell. Most stock transactions must be settled within three business days.

Shares
A unit representing a measure of ownership in a corporation.

Shareholder
A person who buys stock in a corporation, and therefore becomes a part owner of the corporation. This does not mean you should walk into a Reliance office and ask for a glass of water. You will get the water as a matter of courtesy, but it will be accompanied by some odd looks.

Shareholders Equity
The difference between the totals of assets and liabilities shown on a company's balance sheet.Book value is the shareholders equity divided by the number of outstanding shares.

Short Covering
Buying stock to return stock previously borrowed to make delivery on a short sale.

Short Position
Stock options, or future contracts sold and not covered as of particular date. Short position also means the total amount of stock an individual has sold short and has not covered, as of a particular date. Most stock exchange have a rigid rules regarding short selling. The player should ascertain these rules from a registered broker of the exchange.

Short Sale
To sell a stock you do not currently own. To go short you "borrow" stock from the broker/dealer, then sell the stock, with the intent to buy the stock back at a lower price than you had initially sold it for. A short sale can only take place on an "up tick"" or 'zero-plus tick'.

Short-term Gain
The profit realized from the sale of securities or other capital assets held twelve months or less.

Short-term Debt
Borrowing that must be repaid within one year.

Short-term Investments
Stocks and other liquid securities.

Solvency Ratio
Equity excluding minority interests as at year-end as a percentage of liabilities and equity at year-end.

Speculators
Investors who seek large capital gains through relatively risky investments.

Split
An increase in the number of shares outstanding. This increase in the number of shares result in the proportionate decrease of share price. For example, a company declares a "3 for 1 " stock split, the price of the stock is currently 60 a share, a shareholder with 100 shares before the split would have 300 shares after the split with a value of 20 a share. The shareholders equity does not change. A reverse split is where the total number of shares is decreased and the stock price increases proportionally. As in a split the total stock holders equity remains the same.

Spot Trading
Trading in commodities that will be delivered immediately. (Also called cash trading)

Spread
The spread is the difference between the bid price and the offer price.

Standard Deviation
A measure of a mutual fund or stock's historical volatility.

Stock Certificate
The actual document that is evidence of stock ownership, usually watermarked and patterned to make it hard to forge.

Stock Option
Contract allowing holder to buy or sell given number of shares of a particular stock at a given price by a certain date.

Stock Split
An increase in the number of outstanding shares in a corporation. This is usually n\brought about by the division of existing shares. For examples, a two-for-one split means that shareholders will receive two new shares for each old share, making a total of three. Alternately, a reverse stock split brings about the decrease in the number of shares in a corporation.

Stop Loss Order

An order placed with a "trigger price". It is placed to minimize the losses and the order cab be either for a purchase or a sale.

Stop Order
An order to buy or sell a security conditioned on a specific price. This order is very often referred to as a "stop loss" order, because it prevents the security from falling below a certain price.

Stops
Can be either a buy or a sell stop. A buy is placed above current prices and a sell is placed above current prices and a sell is placed below current prices.These order types instruct the broker to execute at market once a specific price level is reached and traded at.

Sub-accounts
A sub-account includes institutions (established or incorporated outside India ) and those funds, or portfolios (established outside India ) whether incorporated or not and corporate and individuals on whose behalf investments are proposed to be made in India by a Foreign

Institutional Investor. NRIs and overseas Corporate Bodies (OCB) are not eligible for registration as sub-accounts. There are two categories of sub-accounts : (1) broad-based/proprietary sub-accounts which are allowed to individually invest up to 10% of the total issued capital, and (2) Foreign corporate and foreign individuals who are not allowed to exceed 5 percent of the issued capital.

Support
Historical price level at which falling prices have stopped falling and either moved sideways or reversed direction; usually seen as a price chart pattern.

Tangible Book Value

Book value minus goodwill and intangible assets.

Technical Analysis
An analysis of a stock or future based strictly on numbers. The method includes analysis of price patterns. Don't try to understand it unless you are a maths gold medalist.

Third Stage Capital

Capital provided to an enterprise that has an established commercial production and basic marketing set-up, typically for market expansion, acquisitions, product development etc.

Tick
The tick is the direction in which the price of stock moved on its last sale. An up-tick means the last trade was at a higher price than the one before than the price was at a higher price than one before it and a down -tick means the last sale price was lower than the one before it. A zero-plus tick means the transaction was at the same price as the one before, but still higher than the nearest preceding price. The tick becomes especially important when large market movements trigger the implementation of certain circuit breakers meant to stabilize the market.

Ticker
A ticker is a trading screen information display showing the current price, volume, etc of a particular stock, option, future, etc.

Ticker Symbol
A ticker symbol represents a particular security (company, option etc.) on the exchange it is trading on and is used to retrieve information about that security from that exchange. For example, the symbol ?f? on the New York Stock Exchange (U.S.A) will bring you information about Ford Motor Company. ?ONGC? will show you the information of the Oil and Natural Gas Commission on the National Stock Exchange of India. Ticker symbols can be used to retrieve information from a financial publication such as your daily paper's business section. Today, ticker symbols can be submitted to an electronic ticker quote retrieval system to find information about a particular security instantly.

Top
A technical analysis term meaning the stock price is going down from here.

Total liabilities
All monies owed regardless of how classified on the balance sheet. The best measure of a firm's total debt.

Trader
An employee of a broker/dealer or other financial institution who specializes in handling purchases and sales of securities for the firm or its clients.

Trailing Twelve Months (TTM)

The last four reported quarters.

Transaction Costs
The costs of trading securities, including the broker's commission and taxes. Commission varies with the size of the trade.

Treasury Bills
Shorts-term debt issued by the central government, sold at a discount and redeemed at full face value.

Treasury Notes
Debt securities issued by the central government that mature over a specified number of years.

Turnover Rate
Turnover is the relationship between the float and the average monthly volume of a stock. The higher the turnover rate, the more volatile the stock and the greater potential for wider swings in price (both ways).

Turnover Ratio
How often a mutual fund changes its portfolio holdings. 100 per cent turnover means a fund, on average, changes all the stocks in its portfolio once a year.

Undervalued
A stock trading below its fair value.

Underwriter
An investment banking firm committed to successful distribution of a public issue, failing which the firm would take the securities being offered (that is, buy) into its own books. Some countries also provide for underwriting on best effort basis.

Value Traded
This is the total monetary value of all trading in a security for the market day. It is calculated by multiplying the volume traded by the average sale price.

Venture Capital
Professional moneys co-invested with the entrepreneur usually to fund an early stage, more risky venture. Offsetting the high risk the investor takes is the promise of high return on the investment. A venture capitalist not only brings in moneys as ?equity capital' (that is, without security/charge on assets) but also brings onto the table extremely Valuable domain knowledge, business contacts, brand-equity, strategic advice, etc. He is a fixed interval investor, whom the entrepreneurs approach without the risk of ?takeover'. If you have a good idea that can be commercialised and you can convince the venture capitalist of the workability of your idea and of your own ability in seeing it through, the venture capitalist will nurse you through. His return is high but, then, he's taking all the risks on an untried idea.

Venture Capitalist
An investor involved in financing a company's operations before going public, in exchange for an ownership percentage.

Volatility
A measure of the fluctuation in the market price of the underlying security. Mathematically, volatility is the annualist standard deviation of returns.

Volume
The total number of shares, bonds, or other units of a security traded in a certain time period

Wall Street
A street in the city of Manhattan , New York where several major brokerage firms and stock exchanges are located. Dalal Street is the Indian counterpart in Mumbai.

Warrant
A warrant is a financial instrument issued by a bank or other financial institutions, which is traded on a Stock Exchange's equity market. Warrants may be issued over securities such as shares in a company, a currency, an index or a commodity.

Working Capital
Current assets minus current liabilities.

Yield
In stocks and bonds, the amount of money returned to investors on their investments. Also known as rate of return. Interest and dividends paid to mutual fund shareholders as a percentage of share price (Net Asset Value). Also the effective interest rate on a bond. For instance, if a bond pays 1.00 interests annually, and is selling for 10.00, the yield is (1.00/10.00) 10 per cent.

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Acceleration - A standard clause in a mortgage instrument permitting the lender to demand full payment of principal from the borrower upon default of the obligation Account History - The payment history of an account over a specified period of time, including the number of times the account was past due or over limit. Bank Guarantee - Bank Guarantee could be a finance guarantee or a performance guarantee. Under finance guarantee, the bank guarantees the beneficiaries (The person named in the guarantee to receive the guaranteed sum under stated circumstances), certain amount on behalf of its customers who has commercial relationship with the beneficiary. Under performance guarantee, the bank guarantees performance of a contract or goods/ services supplied under a contract by its customers. However, even in the later case, if its customers fail to deliver, it settles the claim of the beneficiary in money terms only; the bank does not fulfil the contract, obligation of its customer. Bank Statement - A periodic record of a customer's account that is issued at regular intervals, showing all transactions recorded for the period in question. Bill - Usually mistaken for commercial invoice. Actually bill in the banking parlance means a bill of exchange drawn by a seller on the buyer whenever he sells goods or services on ?payment later? basis. Such a transaction is also referred to as a credit transaction. The bill is routed through the bank for collection of amount from the buyer. Commercial invoice is a part of the document submitted to the bank by the seller. A bill of exchange is an order made to the buyer by the seller that in exchange for the goods or services sold by him on credit, the buyer is required to pay on a specific date a certain amount with or without interest to him or to any other directed party.

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Cash Credit - A credit facility under which a customer draws up to the preset limit, subject to availability of sufficient security with the bank. The difference between an overdraft and cash credit account is that while the former is extended more to individuals, and less for business, the latter is extended only to business bodies. The cash credit facility is unique to India, as in most of the countries it is called overdraft. Further the cash credit facility is more or less on a permanent basis so long as the business is going on. Internationally at the end of specific period the overdraft facility is withdrawn and the customer is required to pay back the amount lent by the bank. The purpose of cash credit is for working capital. The operations are similar to overdraft.

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Cash Reserve Ratio - Called in short CRR. Suppose a bank has total deposits of Rs.100 Bn and is required to maintain a CRR of say 5%. This means that the bank should maintain in current accounts with the central bank or any other approved bank balances, not less than Rs. 5 Bn. This much amount is impounded and kept in the free form. And the bank cannot lend this money. This acts as a buffer to the bank. In India, RBI decides from time to time and at present it is 5% of the deposits, held by the bank. Credit Report - It is called by different names. At times it is referred to as credit information report. At other times it is also called customer?s confidential report. Bankers report also means the same. With the growth of commerce within a country and abroad, most of the times, trade is done with the organizations about which you are in the dark. The banker provides good platform for knowing something about the business enterprise with which you are likely to deal. There are accepted abbreviations internationally for denoting the soundness or the lack of it of a business enterprise. These abbreviations are commonly used in such reports. You can seek confidential informations about your prospective customers about whom you do not have sufficient knowledge. The banker provides this information for a fee which includes the fees that they have to remit to international credit agencies. Daily Product Basis - This is the basis on which interest is usually determined on credit facilities, like loan, overdraft, cash credit etc. for this; the basis is 365 days in a year. Some banks do take 360 days in a year also. There is no hard and fast rule in this behalf. e.g A bank has given a customer an overdraft facility to the extent of Rs.10,000/- for 45 days at 6% p.a. on a daily product basis the interest is determined as under.

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Step No 1. 10000*45 days= known as product= 450000 Step No 2. Determination of annual average as rate of Interest is on annual basis i.e. 450000/365=Rs. 1233/-. This means that on a 365 days per year basis, drawing Rs. 10000/- for 45 days is equivalent to drawing Rs. 1233/- through out the year, i.e. on annual basis. Step No 3. Calculation of interest at 6% p.a is equal to 1233*0.06= Rs. 73.98.

This means that by adopting daily product basis we are converting the amount drawn for a period less than a year to its annual equivalent so that the rate of Interest, which is universally on annual basis can be applied to determine the quantum of interest.

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Discount - Less than face value. If the value of the bill is Rs. 100/and in case the bank gives the finance against the same, the amount of finance will be less than Rs. 100/-, say Rs. 98/-. Rs 98 is the discounted value of the bill for Rs. 100/-, while the difference of Rs. 2/- is known as ? discount?. Discount is the interest recovered upfront, especially in the case of those bills for which payment will be forthcoming after a specific or extended period. Letter of Credit - Seller ?A? enters into contract with Buyer ?B?. One of the terms of supply is that buyer will establish a letter of credit in favour of the seller through his bank. The buyer approaches his bank, which, on certain conditions, agrees to extend this facility. Under this facility, the buyer?s bank gives commitment of payment to the seller through his bank. The commitment is dependent upon the seller fulfilling specific conditions as per the L/C. The conditions are: The seller should furnish proof of dispatch of goods or services and submit all the documents required under the L/C. Then, the buyer?s bank will pay the amount of bill drawn by the seller on the buyer under this agreement. International letter of credit are by and large, ?irrevocable? (cannot be cancelled by the buyer without the consent from the seller).

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Loan - A lump-sum amount given to the customers, either in one installment or in two or three installments, and repayment over a period of time in monthly or quarterly, or half yearly or annual (very rarely) installments. Interest may be recovered separately from the customer who is called borrower or combined with the installment. In case it is combined with the installment it is called equated installment. If interest is recovered separately it is usually on a quarterly basis. Loans against property and for the purpose of owning flats/ apartments/ houses are known as mortgage loans. Margin Money Margin money is like a security deposit retained by the bank till the loan is fully settled. The banks sanction the credit limit after retaining a margin on the value of the security offered. The percentage of margin requirements varies as per RBI guidelines. Monthly Product Basis - In India, in the savings account, the product is taken on a monthly basis; the rule is interest is paid on the minimum balance in the account between the 10th and the last day of every month. This means that any credit to the account after the tenth of the month is ignored for the particular month, while debit is taken into account. Accordingly let us say for example. The following minimum credit balances

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in

the

savings

account

earning 1000

3.5 800 150 250 300 300

pa

interest

in

India

January, 2005 February, 2005 March, 2005 April, 2005 May, 2005 June, 2005

Suppose the Interest is payable every half-year and accordingly this customer will be entitled to 1.75 % for the half year ending June 2005. In order to determine the correct half yearly interest, you need to find out the annual equivalent of the deposit that the customer has kept in his savings account. Then divide the sum of the monthly products by 12. The annual equivalent amount is RS 233.33 and the interest at 3.5% p.a. for the half year on this work out to be Rs 8.17. This is the way the interest is found out on a monthly product basis.

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Overdraft - An extension of current account in which the customer is allowed to withdraw more than the credit balance lying in the account. This may be a temporary accommodation to tide over temporary cash crunch or on a regular basis. If permitted on a regular basis, withdrawals are allowed up to a ceiling (called ?a limit?), subject to availability of sufficient security with the bank. In case the overdraft is given to the business enterprises and it is for day-to-day operations, it is known as ?working capital?. Remittance ? A facility, by which its customers at one place makes funds available to the bank and the bank in exchange, makes the funds available to the customer or any other specified party at the required place, within the same country or abroad. Remittance can be in the form of Demand Draft (DD), mail Transfer (MT), Telegraphic Transfer (TT), Electronic mail transfer (EMT) through computer networking (or satellite channel), International Money Order (IMO) etc. Repayment Holiday - Whenever a loan is taken especially for acquiring fixed assets, the repayment does not start immediately. It starts after the fixed assets starts giving a return especially in the case of business enterprises. This is not so in the case of personal loans. The period during which there is no repayment is known as repayment holiday period. This is also known as moratorium period. The period is longer in the case of industrial loans and minimum or absent in case of personal loans. It should be noted that during this period, Interest is charged and there is no period on non-levy of interest. Although there may be a period of non-recovery of Interest. That is interest although levied, not recovered for a specific period. Again if this is the case interest on interest is recovered. RTGS refers to the settlement system where, settlement of payments on an individual order basis are done on continuous basis, without netting debits with credits across the books of a central bank. RTGS system is also defined as a gross settlement system, in which both processing and final settlement of funds transfer instructions take place continuously (i.e. on real time basis). Thus we can say that RTGS system

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reduces settlement risk because inter-bank settlements are done throughout the day, rather than just at the end of the day. One of the main attraction of the RTGS systems is that payee banks and their customers receive funds with certainty, or so-called finality, during the day, enabling them to use the funds immediately without exposing themselves to risk. RTGS is a system where both the processing and final settlement take place on real time basis. RTGS is regarded as the centerpiece of an integrated payments system. Settlement risk refers to the risk when a settlement (in a transfer system) does not take place as expected. This can happen due to various reasons, e.g. one party may default on its clearing obligations to one or more counter parties. Thus, settlement risk consists of two components namely credit and liquidity risks. Credit risk arises when a counter party fails to meet an obligation for full value on due date and thereafter

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Statutory Reserve Ratio ? Called in short SLR. In the above example, suppose the bank is supposed to maintain SLR of 25%, this means that over and above CRR the bank is expected to keep aside an amount of Rs. 25 Bn. This will be kept in easy-to?encash securities like, treasury bills of the government and any other approved securities. In India at present it is 25%. This again acts as buffer to the bank and prevents the bank from lending the entire amounts of deposits kept with it by various customers. Stock & Receivables Audit is one of the most important aspects of the overall exercise of audit of any organization. In stock and receivable audit, auditor ensures himself about the quantity, quality, composition and actual value of the stock and the debtors. Syndication ? Making arrangement for loans for borrowers. Should not be confused for granting of loans. The bank may or may not participate in the loan process, but would assume responsibility for getting ?in principle? sanction from all participating banks and financial institutions. Syndication fees are part of non-interest income as no funds are involved in the activity. For example. An Indian company wants a foreign currency loan of 100 mn Rs. Making arrangement for this is known as syndication. Even if the arranging bank participates in the loan, by granting a portion of it, syndication is different from it. It gets paid separately for this activity.

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