Saturday , 18 November 2017


Financial Terminology Deciphered

“I have no idea what you are talking about!” If that is your expression when you [listen to the commentators and] look at figures and terms scrolling on CNBC or any other business or finance news channel, this article is specifically designed to suit your needs. Words: 753

The comments above & below are edited ([ ]) and abridged (…) excerpts from the original article by financialculture.com

Open
The opening time to trade in American stock markets is 9.30 am EST and closing is 4.00 pm EST. The market is operative from Monday to Friday, closed on bank holidays and weekends. The price of any given stock at 9.30 am EST is known as an opening price or generally termed as ‘Open’. Trading is also done in ‘pre-market’ hours i.e. from 8.00 am to 9.30 am EST and ‘after hours’ i.e. from 4.00 pm to 6.30 pm EST. The ‘open’ price is generally affected by these two trading sessions.

Prior Day’s Close
– the price of any given stock at 4.00 pm EST i.e. closing period. However, it’s not necessary that the price of a stock mentioned as ‘prior day’s close’ would be same as next day’s ‘open’ because the ‘after hours’ and pre-market’ sessions is operative in between.

High
– the highest price of any given stock in that particular given trading day.

Low
– the lowest price of any given stock in that particular given trading day.

Volume
– the quantity of shares of a specific given stock traded in any given day. It is an important piece of information noted by traders and investors because if the number mentioned in volume is quite high, it becomes easy to buy and sell shares and the prices are bound to fluctuate. However, if the number of volume is low, it becomes quite difficult to get or sell a stock at the price comfortable to you.

Average Volume
– the average of the quantity of shares traded of a specific stock during a long period, generally 365 days (or a year). Comparing this number with the ‘Volume’ of a stock at any specific day gives you vital information about the company. If the number is much higher than the ‘average volume’ then some significant information is or about to be revealed.

Market Cap or Market Capitalization
– the number of outstanding shares multiplied by the stock price. There are 3 categories under which the listed companies are divided: large cap, mid cap, and small cap. A company is considered as a large cap when the above calculation gets an amount between $10 and $200 billion. It is mid cap when between $2 and $10 billion, and small cap when it is between $2 billion and $500 million.

52 Week High
– the highest price reached by a specific stock anytime in the past 52 weeks.

52 Week Low
– the lowest price reached by a specific stock anytime in past 52 weeks.

Earning Per Share or EPS
– the company’s annual profit divided by the quantity of outstanding shares.

P/E or Price Earnings Ratio
– the prevailing stock price of a specific stock divided by the annual earnings of a share in the last 12 months. Price to Earning ratio can be used to compare the worth of like stocks, depending on the growth level.

FP/E or Forward Price to Earning Ratio
– the future P/E, specifically subsequent financial year, of any specific stock.

Beta
– a tool used to measure how volatile a stock is compared to the ups and downs of the market. Generally the figure of beta for any stock varies between 0 and 2 (excluding 2). If the volatility of the stock is in sync with the market, beta is 1. If volatility is more, beta is more than 1. If volatility is less than the market fluctuations, beta is less than 1. For instance, if the beta of stock ‘Z’ is 1.2 then the volatility of the stock is 20% more than the volatility of the market.

Dividend
– the part of the company’s profit that is distributed among the shareholders.

Yield
– the percentage of the annual amount a shareholder receives over the price he paid to buy the stock (stock price).

Shares and Shareholders
– [the piece of ownership of a company owned by a ‘shareholder’.]

% Institutionally Owned
– the portion of quantity of shares owned by various financial institutions (mutual funds, insurance companies, pension funds, etc.).

[Now you know.] Read this article a couple of times and then watch CNBC tomorrow to test yourself on how much you remember.

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