Terminology explains all the terms used in the financial world in a simple language such as Investments, Insurance, Concept, Ideas and new words
The Multi Commodities Exchange of India (MCXI) is a government-owned commodity exchange in India. It is under the control of the Indian government’s Ministry of Finance. The NSE and BSE are stock exchanges for trading stocks, whereas the MCX is a commodities derivatives market. Metals such as aluminium, copper, and zinc are among the commodities …
The term “price elasticity” describes the relationship between demand and the cost of a product or service. One may say that the demand for a certain good or service is price inelastic if the degree to which the demand changes in response to changes in the price does not change significantly. Example: milk, fuel, rice. …
The proprietors of an unlimited corporation may be held entirely accountable for the company’s debt. On the other hand, with a limited business, the owners’ strict liability is restricted to a certain extent. For instance, if firm X is an unlimited corporation and it declares bankruptcy with a debt of Rs 10 cr, the owners …
The stocks of many different companies have a tendency to react in the same way in the markets. It’s possible that this is due to the fact that they work in the same field, however this isn’t always the case. Pairs trades are trading techniques that take use of this trait to generate profits. A …
In the case of an operating lease, the lessor retains ownership of the items rented out to the lessee (owner of the goods). In exchange for regular payments, the owner of the products gives to a third party the privilege of making use of the items. However, since there is no transfer of title throughout …
Alpha of the stock After correcting for market-related volatility and random variations, alpha is the excess return on an investment. For mutual funds, stocks, and bonds, alpha is one of the five key risk management indicators. In a way, it informs investors whether an asset has regularly outperformed or underperformed its beta. The beta of …
Preference shares, also known as preferred stocks, are stock issued by a company that pays dividends to its shareholders. Preference shares are typically issued to raise cash for a corporation, which is referred to as preference share capital. Preferred shareholders are part-owners of a company, but they do not have voting rights, unlike common shares. …
The gap between the face value of money and the cost of producing it is known as seigniorage. When the money a government generates is worth more than it costs to produce, it is considered positive revenue. Seigniorage is a way for governments to earn revenue without having to collect taxes. Coins are more expensive to …
The marginal cost of funds-based lending rate, often known as the MCLR, is the minimum interest rate below which financial institutions are not permitted to lend at, with the exception of certain special circumstances. The base rate mechanism was superseded by MCLR, which the RBI implemented in 2016. Ajay BohraAjay Bohra is an entrepreneur and a …
With an overdraft option, you are able to withdraw more money from your bank account than you currently have available. In exchange for loans, banks will often charge a certain rate of interest. Your ability to borrow money is subject to a limit that has been established in advance, and this limit is different for …
Share premium is the phrase used when shares are issued at a price higher than their face value. Companies record the total of all the share premium that they receive under a ‘share premium account’ in their financial statements. For illustration’s sake, if a share of stock has a face value of Rs. 100, and …
The Reserve Bank of India maintains an electronic funds transfer system known as National Electronic Funds Transfer. NEFT allows bank clients in India to send electronic messages to transfer funds between any two NEFT-enabled bank accounts on a one-to-one basis. Throughout the day, NEFT payments are separated into batches. It was determined earlier in 2019, 48 …
A dividend reinvestment plan enables investors to use the money they receive as dividends toward the purchase of further shares of the company. This plan is offered by a number of different mutual funds. When investors invest money of these types of mutual funds, they are entitled to dividend payments, which are then automatically reinvested …
The agreement known as barter consisted of swapping one product for another of equal or greater value. As an example, we could swap one kilogramme of Apple for two kilogrammes of Potatoes. There was no exchange of monetary value. This system had a few of flaws, the first of which was that there was no standard …
Prepayment refers to the act of paying debts prior to the day on which they are due. For illustration’s sake, let’s say Deepak had a loan with a due date of 2024, but he paid it off in 2022. This would be an example of prepayment. One advantage is the reduction in amount of interest …
The term “regional stock exchange” refers to any stock market that mainly serves the needs of businesses located within a certain area. Regional stock exchanges played a significant role in India’s trade activities from 1950 to 2000. This was due to the limitations of physical trading and usage of the outcry system (shouting to make …
Russell 3000 is a market capitalization-weighted equity index. It measures the performance of the 3,000 biggest publicly traded companies in the United States, which account for about 98 percent of all US incorporated stocks. Large Cap stocks in this index tend to drive the index’s performance, which is a restriction in reflecting the US stock …
Similar to currency notes, the face value is the original cost of a stock and symbolises the denomination of shares. A stock’s face value might fluctuate over time. If a business decides to split its shares, for example, the face value of the shares will likewise be split. The original price of the share listed …
A Recurring Deposit, often known as an RD, is a kind of investment and savings that banks provide their customers with. Customers have the ability to make recurring deposits of money on a monthly basis for a certain amount of time (varying between 6 months to 10 years). Returns on RDs have typically ranged somewhere …
MCLR is the minimum lending rate at which a bank is not authorised to lend. Prior to MCLR, there existed the Base Rate Policy, which had some transparency issues and direct change of interest rate to Repo Rate (The rate at which RBI lends to commercial banks). The MCLR is a bank’s internal reference rate used to …
What is the Marginal Cost of Funds based Lending Rate (MCLR)? Read More »
An audit is when an auditor examines or inspects several books of accounts. Following that, a physical inspection of inventory is performed to ensure that all departments are using a defined method for documenting transactions. It is carried out to determine the accuracy of the organization’s financial accounts. An audit can be conducted both internally …
The intrinsic value of an asset is determined by financial analysts via complex financial models. It informs you of the asset’s true value. The intrinsic worth of an asset is frequently contrasted to its market value. It can assist in determining if an asset is overpriced or undervalued. There is no one-size-fits-all approach to calculating …
In basic terms, advance tax is the payment of income tax prior to the conclusion of the fiscal year. The term “advance tax” refers to paying your taxes as soon as you get your income. Instead of paying the tax all at once, you can pay it in instalments. This is advantageous to the government …
A bubble is defined as a period of time during which the market value or price of assets rapidly increases. The price of the provided assets is considered to be overvalued during a bubble. A ‘bubble burst’ or a ‘crash’ occurs when the value of these assets begins to quickly decline. Bubbles are said to …
High-Frequency Trading is a type of trading in which sophisticated computer algorithms are used to execute a high number of transaction orders in fractions of a second. To evaluate various markets and execute orders based on market circumstances, a sophisticated algorithm is built. HFT companies have a higher order-to-trade ratio and a higher turnover rate …
Credit Default Swaps are a type of derivative contract that allows one investor to swap or transfer his credit risk to another. If a lender is concerned that a borrower may default on a loan, for example, he might offset or transfer the risk. To hedge against default, the lender purchases a credit default swap …
Liquid funds are a type of debt mutual fund that invests primarily in financial instruments such as Treasury bills, commercial securities, fixed deposits, and other debt securities. Liquid funds are one of the least risky mutual funds, with returns that are frequently likened to those of savings accounts. Investing in and withdrawing from liquid funds …
Capex A company’s capital expenditures are cash used to purchase, upgrade, and maintain tangible assets such as land, plants, buildings, technology, and equipment. Capex is frequently utilised by businesses to fund new projects or expenditures. Capex broadens the scope of operations or provides a financial benefit to the company. ltwletsthinkwise.com
Side pocketing is a strategy used to protect investors in instruments that have risky asset exposure. In a debt portfolio, it is an accounting approach for separating illiquid (riskier) investments from liquid and high-quality investments. When a bond owned in the fund receives a rating drop, the fund houses move the illiquid asset to a …
A special economic zone (SEZ) is a designated area inside the country with simplified tax and regulatory requirements. A SEZ located within the country, on the other hand, is deemed foreign territory. SEZ transactions are treated as exports and imports, just like any other foreign business. Any products or services delivered within the SEZ or …
A Special Purpose Vehicle, also known as a Special Purpose Entity, is a subsidiary set up by the parent firm to protect itself from financial risk. This subsidiary is a legal entity in its own right, with its own financial statements. Bankruptcy Remote Entity is another name for SPV. The SPV will not have any …
Bullion is gold or silver in the form of bars, ingots, and coins that is officially recognised as 99.5 percent to 99.9 percent pure. Governments and central banks usually keep bullion as a reserve asset. Bullion is also known as “parted bullion,” whereas “unparted bullion” refers to bullion that comprises more than one type of metal. …
When word is broken down, a Hedge Fund is made up of two words: hedge, which means “to protect money,” and fund, which means “to invest.” ‘A pool of money’ refers to a pool to protect your money. This definition, on the other hand, only applied in the early days of its existence. Hedge Funds’ …
Insolvency refers to a situation in which a person or business is unable to pay its debts. Cash flow insolvency and balance sheet insolvency are the 2 types of insolvency. Cash flow insolvency When a person or corporation has enough assets to pay off a debt but not enough liquid cash to pay it off …
Exchange-Traded Funds An exchange-traded fund (ETF) is a form of securities that monitors an index, sector, commodity, or other asset and may be bought and sold on a stock market in the same way that a normal stock may. An ETF may be set up to track anything from a single commodity’s price to a …
The trade of one currency for another is known as foreign exchange (forex or FX). One can, for example, exchange the US dollar for the Indian rupee. The foreign exchange market, often known as the forex market, is where foreign exchange transactions can be made. The FX market is the largest and highly liquid financial market …
A deductible is the sum you must pay out of pocket before the insurance provider begins to pay. For example, if your deductible is Rs 25,000 and you claim Rs 50,000, your insurance policy will cover the additional Rs 25,000. The insurer may refuse to cover any expenses if the claim sum is less than …
The process of determining the fair value of a company’s assets and liabilities is known as mark-to-market. Assets and liabilities have a tendency to fluctuate in value over time. As a result, mark-to-market is a tool for determining the actual financial position of a company’s balance sheet based on current market conditions. ltwletsthinkwise.com
The bottom line is the company’s ‘net profit,’ which appears at the bottom of its income statement. It is measured after all costs and related expenditures have been deducted from the revenue. The bottom line of a company will improve if it generates more sales while still cutting costs and expenditures. ltwletsthinkwise.com
In share trading, volume refers to the total number of shares traded between buyers and sellers in a given day. When a company’s shares are actively traded, the amounts are usually larger than when the shares are traded relatively rarely. All types of securities, including shares, bonds, future and option contracts, commodities, and more, can …
An rise in the value of an asset over time is referred to as appreciation. It is said to have appreciated if the asset’s market value has increased over time from the price you paid for it. Any investable asset, including real estate, bonds, stocks, currencies, and currencies, may appreciate. ltwletsthinkwise.com
Business-to-business is abbreviated as B2B. B2B companies offer their goods and services to other companies. IndiaMART and Alibaba are examples of B2B companies. Business-to-consumer is the abbreviation for business-to-consumer. Businesses that market directly to customers are known as B2C. Amazon and Flipkart are examples of B2C companies. ltwletsthinkwise.com
ESG is a set of criteria for determining whether an organisation is environmentally and socially oriented, as well as having principles of good governance within the company. Many people assume that ESG investments have a better chance of surviving in the long run because of their responsible practices. There is no clear cut example of …
Non-banking financial intermediaries engage in banking practises (mostly lending) that are referred to as “shadow banking.” These types of banking operations are carried out outside of the conventional banking sector. Intermediaries are not subject to the same regulations as conventional banks. Shadow lenders include non-banking financial companies (NBFCs). ltwletsthinkwise.com
A qualified institutional Placement (QIP) is a method for publicly traded firms to collect funds by selling shares to qualified institutional buyers (QIBs). Public financial institutions, commercial banks, mutual funds, insurance providers, and other QIBs are a few examples. ltwletsthinkwise.com
The total income earned by a corporation, also known as revenue, is referred to as the topline. The topline includes revenue from sales, operations, and all other sources of revenue. It differs from net profit (bottom line), which is determined after all costs, depreciation, taxes, and other expenditures have been deducted from revenue. ltwletsthinkwise.com
Microfinance Institutions MFIs are financial institutions that provide loans to people who has limited access to banking services. Customers who use microfinance include low-income people and self-help organisations, to name a few. Annapurna Microfinance, Bandhan Financial Services, and other MFIs are examples. ltwletsthinkwise.com
Lenders (most commonly, banks) set a credit limit as the upper limit or maximum amount a borrower can borrow. This is done to discourage borrowers from overborrowing and to help lenders reduce their risk. Credit limits on credit cards are often set depending on a person’s salary and credit score. ltwletsthinkwise.com
The mutual fund firm only has the right to purchase and sell shares on your behalf when you invest in one. It is not the owner of the properties it acquires. All of the investors who put money into the mutual fund are the owners of those funds. As a result, these properties are handled …
You must have collateral when taking out a loan. If you fail to repay your loan, the collateral will become the bank’s property. The bank would also attempt to auction the property in order to recoup the money you owe. When you take out a mortgage loan, the house you’re buying serves as insurance. In …
Digital gold is a form of gold that can be purchased over the web. Without buying real gold, you can purchase and sell gold at the current market price. Since you are essentially possessing gold online rather than purchasing jewels from a store, there are no charges associated with digital gold such as making charges. …
CSR allows corporations to participate in social issues that affect the wider society in which they operate. This can take many forms, including grants, charitable work, environmental work, volunteering, and so on. Companies with a turnover of more than a certain amount are expected to invest 2% of their earnings on CSR operations in India. …
The term “sector” refers to a certain business or segment of the economy. There may be many sectors, but the basic categories are generally accepted by most citizens. The banking sector, auto sector, infrastructure sector, pharmaceutical sector, and so on are some of the most widely discussed fields. There can be some sectors that overlap …
Mutual fund rolling returns are returns measured over consecutive time periods within a given time frame. For example, a mutual fund’s one-month rolling returns can be calculated on a regular basis for the previous year. The first rolling return will run from March 1, 2020 to March 31, 2020, the second from March 2, 2020 …
The historic returns produced over a period of time are known as trailing returns. It aids in determining a mutual fund’s performance over a given time span. Trailing returns can be measured for any time period, like one year, three years, year-to-date returns, and even a few months. As compared to absolute returns, it provides …
Additional Tier-1 bonds, or AT-1 bonds, are bonds issued by banks to supplement their core capital base in order to satisfy Basel-III requirements. They are unsecured bonds for a perpetual tenure. These bonds do not have a maturity date and they have indefinite tenure. AT 1 bonds make up a part of a bank’s Tier …
Anchor investors are institutional investors who are first invited to invest in an IPO. They usually have more knowledge about a business and will therefore make more educated decisions about a stock’s attractiveness. They even serve to make a stock look more appealing to retail investors. In order to invest in a stock, anchor investors …
The term “burn rate” is most often associated with startups, but it is also applicable in a variety of other contexts. It is a term that refers to the sum of money that has been invested. The sum of money you spend on a daily basis is referred to as your personal burn rate. It’s …
Liability in finance refers to money owed. Assume you take out a loan. Then you must repay the money plus interest within a reasonable period of time. Home loans, car loans, credit card bills, and other EMIs will also be included on the list of liabilities. Your liabilities also include unpaid bills. ltwletsthinkwise.com
A company’s balance sheet is a financial statement that provides a snapshot of the company ’s financial position. A balance sheet shows what properties a corporation holds and what debts it owes at any given time. Liabilities are listed on the right side of the balance sheet, and assets are listed on the left. Assets …
A budget is a broad term that refers to a plan of income and expenses. Every year, for example, the government announces the country’s budget. A budget can even be for something, such as your own budget, a company’s budget, or even a budget for a specific event, such as a budget for a vacation …
In basic words, after-market orders (AMO) are stock orders that are placed after the market has closed. Orders for stock exchanges must be placed when the markets are open (9:30 am to 3:30 pm). AMO orders allow people to place orders outside of trading hours. If you place an after-market order, the action you want (buy …
A riskometer is a graphical representation of the risk level of a mutual fund scheme. A mutual fund scheme’s risk level can be calculated in six phases, according to the latest riskometer introduced by Sebi in 2021: low, low to moderate, moderate, moderately high, high, and very high. Mutual fund companies determine the risk level …
Block deals are transactions between two parties that include a minimum of 5 lakh shares or a minimum amount of Rs 5 crores. The two parties agree to purchase or sell shares at a mutually agreed-upon offer. The transaction takes place during a special trade session from 9.15 a.m. to 9.50 a.m. Every trade has …
A daily margin statement is sent to investors at the end of each trading day. It informs the investor about the free margins they have available to take new positions without facing any penalties. For every exchange, there is a separate margin statement. If you trade on different exchanges using the same platform, the platform …
Unrealized Gains refers to profit that you can make but have yet not made. Let’s presume you purchased a stock that has since appreciated in value. However, you have yet to sell it. The rise in the share price is your unrealized benefit in this situation. It’s an unrealized profit that might disappear if the stock …
Bonds are essentially loan proof. Instead of going to a bank, the bond issuer earns funds by selling bonds to customers. The issuer pays interest at regular intervals (usually annually or semiannually) and repays the principal on the maturity date, bringing the loan to an end. Corporates, municipalities, and governments typically sell bonds to collect …
Treasury bonds are bonds (loans) issued by the United States government with a maturity of more than 20 years. Bondholders are paid interest in their bonds on a regular basis for the period of their ownership. Treasury bonds play a significant role in the world economy’s growth. The US government is regarded as the world’s …
‘Within the same day’ is what intraday entails. Intraday dealing occurs where a trader buys and sells a stock on the same trading day. The Indian stock exchanges are open from 9.15 a.m. to 3.30 p.m. As a result, all intraday trade occurs during this time span. Stocks are exchanged for gains rather than as …
There are several different schemes under the same mutual fund. The dividend scheme is one such scheme. In a mutual fund’s dividend scheme, the fund pays a dividend at regular intervals. The amount and frequency of the payment of the dividend is not fixed though mutual funds try to make sure they stick to investor’s …
Credit rating is a method of determining the creditworthiness of a company’s or government’s bonds. Creditworthiness demonstrates a capacity to repay debts. In return for capital, companies or governments issue bonds/debt papers to the general public. The bond holder (the corporation or the government) must refund the money to the public/investors who bought the bonds as …
In India, the fiscal year begins on April 1 and ends on March 31 of the following year. The financial year in many other countries begins on January 1st, the same day as the calendar year. It’s sometimes abbreviated as ‘FY’. For instance, ‘FY21′. In this case, it refers to the fiscal year that began …
The Bombay Stock Exchange is located on Dalal Street in Mumbai (BSE). The BSE is India’s biggest stock exchange. In the Marathi language, the word ‘dalal’ means ‘broker.’ It is the centre of India’s major financial operations. The equivalent of Dalal Street in New York is Wall Street. ltwletsthinkwise.com
Companies hold an Annual General Meeting after the fiscal year ends. AGMs are a way for a company’s owners and executives to collaborate and make decisions about crucial issues like annual reports, board member appointments, and so on. The Companies Act of 2013 mandates the holding of an annual general meeting and specifies the procedures …
Penny stocks are those that sell for a very small amount of money. Their market capitalization is very low. Because of the low volume of trading on the exchanges, penny stocks are mainly illiquid. Though there is no official definition, in India, penny stocks are defined as stocks that are priced below Rs 20. ltwletsthinkwise.com
A credit score is a number that represents a person’s creditworthiness. A person’s creditworthiness indicates whether or not he or she will be able to repay his or her debts. It’s a three-digit numeric summary of a person’s credit history that reflects their credit profile. Defaulting on credit card bills and loan payments lowers your …
Two successive quarters of negative growth are considered a recession. There are four quarters in a year (April-June, July-September, October-December, and January-March). When the economy experiences two consecutive quarters of negative GDP growth, the economy is said to be in a recession. India went through a recession, with negative GDP growth in the two quarters …
ROI is a term that has a wide range of applications and can be applied to a variety of scenarios. In a nutshell, it applies to the return on your investment. It’s important to note that this investment doesn’t just apply to money. It may also be a time, or effort investment. Businesses frequently use ROI …
Investors purchase and sell stocks and other shares from one another on secondary markets. This is what we commonly refer to as the stock market. The other kind of market that exists is called the primary market. The primary market is where a newly created stock is sold to the general public. The creator of …
A bulk deal is a transaction in which the total amount of shares purchased or exchanged exceeds 0.5 percent of the total number of shares in a publicly traded company. Bulk transactions can be completed at any time during the day’s trade hours via the usual trading window. ltwletsthinkwise.com
A correction is characterised as a decrease in value of more than 10% but less than 20%. A correction is described as a drop of 10% to 20% in value over a independent set period of time. It could last anywhere from a few days to a few months in most cases. It could, however, go …
When an individual or an entity is unable to repay its debts, they may declare bankruptcy. A court is usually involved in the mediation process after a bankruptcy is declared. After the lender files a lawsuit against the borrower due to non-payment, the court considers the individual or company bankrupt. ltwletsthinkwise.com
A Foreign Portfolio Investment (FPI) is a method of investing in a foreign country. That is the buying of financial assets and securities in countries other than one’s own by investors. The FPI path is used by the majority of individual investors who wish to invest outside of their home country. ltwletsthinkwise.com
The difference between a country’s exports and imports is known as a trade deficit. When a nation imports more than it exports, it has a deficit. It indicates that the company has paid more money on imports than it has received from exports to other countries. ltwletsthinkwise.com
The SGX Nifty is a Nifty 50 derivative that is listed on the Singapore Stock Exchange (SGX). That is a Nifty 50 futures contract that is actively traded. SGX Nifty is open from 6:30 a.m. to 11:30 p.m. Indian time. It often predicts the position of Indian stocks within the first few hours of trade. …
The CASA ratio is the proportion of deposits in current and savings accounts to overall deposits in a bank. A higher CASA ratio indicates that a bank has more cheap cash. This is because a bank’s interest rate on savings account deposits is smaller than the rate on other types of deposits. Furthermore, the most …
The sum on which the government measures tax is referred to as taxable revenue. This figure covers all earnings but does not include any deductions. Your wages, as well as other sources of revenue such as interest, rental income, and so on, are all put together. Subtract Rs 2.5 lakh from that – the first …
A stop-loss order is an electronic order that allows an investor to set a cap on the price at which a stock order will be placed. Assume an investor wants to sell if the stock price falls below a certain level. The investor can set the stop-loss order at the price, and the order will …
In the case of stocks, the record date refers to dividend payouts. When a corporation declares a dividend, it therefore specifies who is called a shareholder. This is the group of owners that will be paid a dividend. Typically, the firm specifies a deadline on which an owner must own shares in order to receive …
A subsidiary is a business that operates under the control of another business. The parent or holding company is the ‘other’ company. A subsidiary may either be built from the ground up or acquired. Since the parent corporation owns a large amount of shares in the subsidiary, it has the ability to exert control over …
