Terminology

Terminology explains all the terms used in the financial world in a simple language such as Investments, Insurance, Concept, Ideas and new words

What is the Multi Commodity Exchange (MCX)?

What is the Multi Commodity Exchange (MCX)?

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 …

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Price Elasticity

Price Elasticity

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. …

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Unlimited Company

Unlimited Company

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 …

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Pairs Trade

Pairs Trade

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 …

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Operating lease

Operating lease

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 …

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What is the Alpha & Beta of a stock

What is the Alpha & Beta of a stock?

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 …

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What are Preference Shares?

What are Preference Shares?

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. …

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MCLR Rates

MCLR Rates

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 …

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Overdraft

Overdraft

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 …

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What is NEFT? National Electronic Funds Transfer

What is NEFT?

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 …

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Barter

Barter

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 …

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Prepayment

Prepayment

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 …

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What is Russell 3000?

What is Russell 3000?

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 …

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What is the Marginal Cost of Funds based Lending Rate (MCLR) means?

What is the Marginal Cost of Funds based Lending Rate (MCLR)?

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 …

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What is an Audit?

What is an Audit?

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 …

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What is the Intrinsic Value of a Stock?

What is the Intrinsic Value of a Stock?

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 …

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What is High-Frequency Trading (HFT)?

What is High-Frequency Trading (HFT)?

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 …

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What is Capital Expenditure?

What is Capital Expenditure?

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

What is Side Pocketing?

What is Side Pocketing?

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 …

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What is Special Economic Zone (SEZs)?

What is Special Economic Zone (SEZs)?

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 …

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What is Bullion?

What is Bullion?

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. …

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What are Hedge Funds?

What are Hedge Funds?

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’ …

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What is Forex?

What is Forex?

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 …

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What is Mark-to-Market (MTM)?

What is Mark-to-Market (MTM)?

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

What is Bottom Line?

What is Bottom Line?

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

What is Volume?

What is Volume?

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 …

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What is Appreciation?

What is Appreciation?

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

What are B2B and B2C?

What are B2B and B2C?

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

What is ESG?

What is ESG?

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 …

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What is Shadow Banking?

What is Shadow Banking?

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

What is qualified institutional Placement (QIP)?

What is Qualified Institutional Placement (QIP)?

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

What is Topline?

What is Topline?

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

What are Microfinance Institutions (MFIs)?

What are Microfinance Institutions (MFIs)?

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

What is Credit Limit?

What is Credit Limit?

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

What is Custodian?

What is Custodian?

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 …

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What is Collateral?

What is Collateral?

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 …

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What is Digital gold?

What is Digital gold?

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. …

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What is Corporate Social Responsibility (CSR)?

What is Corporate Social Responsibility (CSR)?

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. …

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What is a Sector?

What is a Sector?

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 …

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What are AT-1 Bonds?

What are AT-1 Bonds?

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 …

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Who are Anchor Investors?

Who are Anchor Investors?

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 …

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What is Liability?

What is Liability?

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

What is a Budget?

What is a Budget?

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 …

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What is Riskometer?

What is Riskometer?

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 …

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What are Block Deals?

What are Block Deals?

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 …

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What are Bonds?

What are Bonds?

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 …

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What is a Credit Rating?

What is a Credit Rating?

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 …

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What is Dalal Street?

What is Dalal Street?

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

What is the Annual General Meeting (AGM)?

What is the Annual General Meeting (AGM)?

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 …

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What are Penny stocks?

What are Penny stocks?

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

What is Credit Score?

What is Credit Score?

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 …

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What is a Recession?

What is a Recession?

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 …

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What are Bulk Deals?

What are Bulk Deals?

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

What is Bankruptcy?

What is Bankruptcy?

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

What is Foreign Portfolio Investment (FPI)?

What is Foreign Portfolio Investment (FPI)?

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

What is a Trade Deficit?

What is a Trade Deficit?

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

What is SGX Nifty?

What is SGX Nifty?

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. …

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What is CASA Ratio?

What is CASA Ratio?

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 …

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What is Stop Loss?

What is Stop Loss?

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 …

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What is a Subsidiary?

What is a Subsidiary?

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 …

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