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256 Financial Management
Depreciation: Amounts charged to provide for that part of the cost, or book value of
a fixed asset, which is not recoverable when it is finally put out of use.
Dividend: Distribution of a part of a company’s net profit to shareholders as a reward
for investing in the company. Usually expressed as percentage of par value or as cents per
share.
Equity: The general term for ownership in securities value over debit balance.
Growth stock: Stock with good prospects for future expansion, which promises capital
gain. Immediate income prospects may be modest.
Limited liability: The liability of the shareholder in this type of company is limited to
the extent of any unpaid capital on his shares.
Market order: An order to buy or sell a security at the next available price. A buy order
is executed at the lowest price available and a sell order is executed at the highest price
available. All market orders are day orders.
Mutual funds: Type of investment operated by an investment company that raises
money from shareholders and invests it in a portfolio of stocks, bonds, or other securities.
These funds offer investors the advantages of diversification and professional management.
For these services they typically charge a management fee, which must be disclosed in the
prospectus. Each mutual fund has its own investment objectives and strategies.
NASDAQ (National Association of Securities Dealers Automated Quotations): Owned
and operated by the NASD, NASDAQ is the computerized network that provides price
quotations for securities traded over the counter as well as many listed securities.
Open price: The price at which a security starts in a trading day.
Portfolio: Investors holding of securities of various types.
Preference shares: Rank above ordinary shares for claims an assets, earnings and
dividends but rank below creditors and debenture holders. These shares usually have a fixed
dividend rate.
Premium: The amount by which a security is quoted or issued above its value. The
opposite to ‘discount’.
Security: An instrument that represents an ownership interest in a corporation (stock),
a creditor relationship with a corporation or government body (bond), or rights to ownership
through such investment vehicles as options, rights, and warrants.
Stag: A person who applies for a new issue of securities with the intention of selling
immediately at a profit as opposed to one who invests for long-term holding.
Par value: The par value is stated in the memorandum and written on the share script.
The par value of equity shares is generally Rs. 10 (the most popular denomination) or
Rs.100. As per the SEBI guidelines any company coming with new issues from April 2000
onwards the par value of their shares should be of Rs.10 denomination.
Book value: The book value of an equity share is
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