Glossary

The lowest price a seller is currently willing to accept.

Related: bid, spread, order-book

Something of value that a person or company owns — cash, inventory, property, investments.

Related: liability, balance-sheet

A snapshot on a single date of what a company owns (assets) and what it owes (liabilities) plus owners' equity.

Related: asset, liability, equity

The highest price a buyer is currently willing to pay for a share.

Related: ask, spread, order-book

Free additional shares issued to existing shareholders, funded from reserves rather than cash.

Related: stock-split, retained-earnings

Shareholders' equity divided by the number of shares — an accounting, not a market, value.

Related: pb-ratio, equity

A registered intermediary that places orders on an exchange on your behalf.

Related: trading-account, stock-exchange

The Bombay Stock Exchange, Asia's oldest stock exchange. Its flagship index is the Sensex.

Related: nse, index, stock-exchange

A company buying back its own shares, which reduces the number of shares outstanding.

Related: dilution, share

Compound Annual Growth Rate — the smoothed annual rate between a starting and ending value. A description of the past.

Example: ₹100 crore to ₹200 crore over 5 years ≈ 14.87%

Related: revenue, net-profit

A statement covering a period that shows actual cash movements, split into operating, investing and financing activities.

Related: operating-cash-flow, free-cash-flow, income-statement

Central Depository Services (India) Limited — India's other depository, holding securities electronically.

Related: nsdl, demat-account

A price band within which a share is allowed to move in a session. Exchanges apply these to temper extreme moves.

Related: volatility, stock-exchange

How much borrowed money the company uses for each rupee of owners' money.

Example: ₹500 crore debt ÷ ₹1,000 crore equity = 0.5

Related: roe, interest-coverage

An account that holds your securities electronically, much as a bank account holds your money.

Related: trading-account, nsdl, cdsl

An accounting charge that spreads the cost of a long-lived asset over its useful life. It reduces profit but does not use cash.

Related: ebitda, cash-flow-statement

The reduction in existing owners' percentage when a company issues new shares.

Related: share, eps

A share of profit paid to shareholders, usually as cash per share, decided by the board.

Related: dividend-yield, payout-ratio, retained-earnings

The annual dividend as a percentage of the share price. A very high yield can reflect a fallen price.

Related: dividend, payout-ratio

Earnings Before Interest and Tax — EBITDA less depreciation and amortisation. Used to judge the business itself, before how it is financed.

Related: ebitda, operating-margin, roce

Earnings Before Interest, Tax, Depreciation and Amortisation. A view of operating performance before financing and accounting effects.

Related: ebit, ev-ebitda, income-statement

The cost of buying the whole business and taking on its debt, net of its cash. Useful when comparing companies financed differently.

Related: ev-ebitda, market-cap

The profit attributable to each share, and the building block of the P/E ratio.

Example: ₹100 crore profit ÷ 10 crore shares = ₹10 EPS

Related: pe-ratio, net-profit, dilution

Two related meanings: ownership in a company, and the owners' stake shown on the balance sheet.

Related: balance-sheet, roe, share

Enterprise value measured against EBITDA. Financing-neutral, but it ignores capital expenditure and working-capital changes.

Related: enterprise-value, ebitda

Operating cash flow left after capital expenditure. The cash available to repay debt, pay dividends or reinvest.

Related: operating-cash-flow, cash-flow-statement

Gross profit as a percentage of revenue — the basic economics of what is sold.

Related: gross-profit, operating-margin

Revenue minus the direct cost of the goods or services sold.

Related: gross-margin, income-statement

A statement covering a period that starts with revenue and subtracts costs step by step to reach net profit.

Related: revenue, net-profit, cash-flow-statement

A basket of securities used to track a market or segment. The Nifty 50 and Sensex summarise large Indian companies.

Related: nse, bse

How many times operating profit covers the interest bill. A rough gauge of debt comfort.

Related: debt-to-equity, ebit

Stock held for sale or use. Cash spent on inventory has left the business before the sale is made.

Related: working-capital

The first time a company offers its shares to the public, raising money in the primary market.

Related: primary-market, secondary-market, rights-issue

Something owed to someone else — loans, payables and other obligations.

Related: asset, balance-sheet

An instruction to buy or sell only at a specified price or better. Prioritises price over certainty of execution.

Related: market-order

How easily something can be bought or sold without moving its price much. Large, heavily traded shares are usually more liquid.

Related: volume, spread

The market's price tag for the whole company.

Example: ₹500 × 10 crore shares = ₹5,000 crore

Related: share, enterprise-value

An instruction to buy or sell immediately at the best available price. Prioritises execution over price.

Related: limit-order

The bottom line: profit after every expense, including interest and tax.

Related: profit, net-margin, eps

Net profit as a percentage of revenue — what is left at the very bottom.

Related: net-profit, operating-margin

National Securities Depository Limited — one of India's two depositories, holding securities in electronic form.

Related: cdsl, demat-account

The National Stock Exchange of India, one of India's two main stock exchanges, based in Mumbai. Its flagship index is the Nifty 50.

Related: bse, index, stock-exchange

Cash generated by the normal running of the business — selling goods and paying suppliers and staff.

Related: cash-flow-statement, free-cash-flow

Operating profit (EBIT) as a percentage of revenue.

Related: ebit, net-margin

The live list of resting buy and sell orders at various prices.

Related: bid, ask, market-order, limit-order

Market price compared with the accounting net worth per share. More informative for asset-heavy businesses such as banks.

Related: book-value-per-share, equity

How many rupees the market pays per rupee of annual earnings. Useful only in context — the company's history, its sector, growth, and risk.

Example: ₹500 ÷ ₹20 = 25

Related: eps, enterprise-value, ev-ebitda

Money the company owes to its suppliers. It effectively funds part of the business.

Related: working-capital, liability

The share of earnings paid out as dividends rather than retained in the business.

Related: dividend, retained-earnings

Where securities are created and sold by the issuer. Money raised here goes to the company.

Related: ipo, secondary-market

What remains of revenue after costs. Measured at several levels: gross, EBITDA, operating (EBIT) and net.

Related: net-profit, ebitda, ebit, gross-profit

Money customers owe the company for goods or services already delivered and recorded as revenue.

Related: working-capital, revenue

Profits kept in the business rather than paid out as dividends. It accumulates within shareholders' equity.

Related: dividend, equity, balance-sheet

The total money a company brings in from selling goods or services, before any costs are subtracted.

Related: profit, net-profit, income-statement

An offer of new shares to existing shareholders, usually at a discount, in proportion to their holding.

Related: ipo, dilution

Operating profit measured against all long-term capital, so companies with different debt levels can be compared.

Related: roe, ebit

Profit generated for each ₹100 of shareholders' money. High ROE can come from real strength — or from heavy borrowing.

Related: roce, debt-to-equity

The Securities and Exchange Board of India — the statutory regulator that oversees India's securities markets and protects investors.

Related: stock-market, stock-exchange

Where already-issued securities trade between investors. Money changes hands between investors, not with the company.

Related: primary-market, stock-exchange

One unit of ownership in a company. Owning shares makes you a part-owner with a claim on the company's profits.

Example: Owning 5,000 of a company's 1,00,000 shares is 5% ownership.

Related: equity, stock, dilution

The gap between the best bid and the best ask — a simple measure of trading cost and liquidity.

Related: bid, ask, liquidity

A general term for shares of a company. In everyday use, 'stock' and 'share' mean the same thing.

Related: share

An organised marketplace that brings buyers and sellers together, matches their orders and publishes prices.

Related: nse, bse, stock-market

The overall system where shares of companies are bought and sold — comprising exchanges, brokers, depositories and investors.

Related: stock-exchange, nse, bse

Dividing each existing share into more shares. The number of shares rises and the price falls proportionally; total value is conceptually unchanged.

Example: 1:2 split turns 10 shares at ₹1,000 into 20 shares at ₹500

Related: bonus-shares, share

An account used to place buy and sell orders through a broker. It is separate from the demat account that holds the securities.

Related: demat-account, broker

How much a price swings around over time. High volatility means bigger up-and-down moves, which is a source of uncertainty.

Related: liquidity

The number of shares traded over a period. High volume usually means an active market.

Related: liquidity

Short-term money tied up in running the business: receivables and inventory, less what suppliers are owed.

Related: receivables, inventory, payables