Corporate Finance Terminology Glossary

Acquisition - the purchase of one company by another business entity. Acquisition of Assets - an acquirer purchases the selling company's assets. Acquisition of Stock - an acquirer purchases the capital stock of the target company. Basis Point - the smallest measure used for quoting interest yields. Blue Sky Laws- state laws covering the issue and trading of securities. Bond - a debt issued for a period of more than a year. Book Value - a company's total assets minus intangible assets and liabilities. Break-Even - the level of revenues and expenses at which a project would make zero profit. Bullet Loan - a term loan that calls for no amortization and a lump sum payment at maturity. Capital Budget - a company's plan for capital expenditures (acquisition of fixed assets). Capital Expenditures - money used to acquire or improve fixed assets. Capital Stock - stock authorized by a firm's charter. Capitalization - the debt and equity combination that funds a company's assets. Cash and Equivalents - assets that can be converted into cash immediately. Cash Flow Coverage Ratio - the ratio of financial obligations to earnings before interest, taxes, depreciation and amortization. Cash Flow From Operations - a company's net cash flow resulting directly from its regular operations. Collateral - assets which can be repossessed in the event of default on a loan. Commitment Fee - a fee paid to a financial institution in return for its commitment to lend funds that have not yet been advanced. Compensating Balance - excess balances left in a bank account to provide indirect compensation for loans or services. Compound Interest - Interest paid on previously earned interest as well as on the principal. Consolidation - the joining of two or more companies to form a new company. Corporation - a legal entity which is separate and distinct from its owners, and can own

assets, incur liabilities, and issue stock. Coverage Ratio - a formula used to assess the adequacy of cash flow generated through earnings for the purposes of meeting debt and lease obligations. Current Assets - assets that could be converted to cash in less than a year. Current Liabilities - salaries, interest, accounts payable and other debts due within one year. Current Ratio - a measure of debt paying ability, current assets divided by current liabilities. Depreciation - the charge to amortize the cost of long-term assets over the useful life of the assets. Discounting - calculating the present value of a future amount. E.B.I.T. - Earnings Before Interest and Taxes. E.B.I.T.D.A. - Earnings Before Interest, Taxes, Depreciation and Amortization. EDGAR - Electronic Data Gathering and Exchange accesses S.E.C filings to investors. Equity Kicker - warrants issued in conjunction with privately placed debt. General Partner - a partner who has unlimited liability for the obligation of a partnership. General Partnership - a partnership in which all partners are general partners. I.P.O. - Initial Public Offering. A company's first sale of stock to the public. Insolvency Risk - the risk that a company will not be able to satisfy its debts. Insolvent - a firm whose liabilities are greater than its debts. Intangible asset - goodwill, intellectual property, patents, copyrights, trademarks, etc. Interest - the price paid for borrowing money. Liquid Asset - an asset that is easily converted into cash. L.I.B.O.R - the London Interbank Offered Rate of interest that international banks in London charge each other for borrowing money. Long-Term Debt - a debt with a maturity of more than one year. Management Buyout - a leveraged buyout in which the acquiring group is led by the

company' s management. Management Fee - the fee charged by the management company to an investment fund based on the fund's average assets. Merger - the combination of two companies. Net Worth / Stockholders' Equity - includes common stock, surplus and retained earnings. Offering Memorandum - a document that outlines the terms of securities to be offered in a private placement. Operating Cash Flow - earnings before depreciation minus taxes. Perquisites - personal benefits such as a company car, expense account, office decor, etc. Present Value - the current value of cash to be received in the future. Prime Rate - the interest rate at which banks lend money to their best customers. Principal - the total amount of a loan. Private Placement - the sale of a bond or security directly to a limited number of investors. Pro Forma Financial Statements - financial statements which have been adjusted to reflect future events. Quick Ratio - a calculation of a company's financial strength and liquidity - determined by subtracting inventories from total current assets and dividing by current liabilities. Replacement Cost - the cost of replacing a company's assets. Reserve - an accounting entry that properly reflects contingent liabilities. Restrictive Covenant - an agreement placing constraints on the operations of a borrower. Retained Earnings - earnings retained by a company for reinvestment in its operations rather than paid out as of dividends. Return on Assets (R.O.A.) - an indicator of profitability, determined by dividing net income by total average assets. Return on Equity (R.O.E.) - indicator of profitability, calculated by dividing net income by average common stockholder equity. Secured Debt - debt which is covered by specific assets in the event of a default. Senior Debt - debt which has a priority claim on the assets of a company.

Subordinated Debt - a debt whose holders have a claim on the company's assets only after senior debtholders claims have been satisfied. Target Firm - a company which is has been identified as a candidate for acquisition by another company. Term Loan - a bank loan for a specified amount with repayment schedule, often at a floating interest rate and a maturation date from one and ten years. Unsecured Debt - debt which is not covered by specific assets in the event of a default. Warrant - a security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price. Yield - the percentage rate of return paid on an investment. Zero Coupon Bond - a bond in which the principal and interest are paid at the maturity date rather than in increments over the life of the contract.

FINANCIAL TERMS

Accounts Payable

Amounts owed by the business for purchases made on credit. These amounts are paid by the business after a time lag that is measured by Days Payable Outstanding (DPO). Amounts due to the business from customers for merchandise or services purchased on credit. The business does not receive payment for these amounts immediately, and the delay before payment is measured by Days Sales Outstanding (DSO). Expenses that the business has incurred for which it has not received, or will not receive, an invoice, and that have not yet been paid. The total amount of depreciation expense recorded to date for the company's fixed assets. On the balance sheet, this value is subtracted from the gross value of

Accounts Receivable

Accrued Expenses

Accumulated Depreciation

Property, Plant and Equipment to derive a net figure. Acid Test Ratio Acquisition Cost See quick ratio. The amount actually paid to purchase an asset. This includes all costs associated with the purchase, such as installation, freight, and sales tax. Financial statements describing the actual operations of the business. Actuals often pertain to the "historical" period before the start of the forecast period, but as time goes on, additional imported Actuals will generally overlap with the forecast. The amount paid by investors for stock over and above its par value. See also contributed capital. Another term for net income. The recognition of part of an intangible asset's cost as an expense during each year of its useful life. Items that are amortized include goodwill, start-up expenses and purchased patents. Anything that has future economic value. In addition to items such as cash and equipment, assets can include intangibles such as goodwill. The expected annual return on an investment, including interest and dividends, expressed as a percentage. A method of inventory valuation whereby the total cost of all units bought or produced is divided by the number of units. Losses for uncollectible accounts receivable. A financial statement that lists the assets, liabilities, and equity of a company at a certain point in time. The total amount of indirect compensation that the business will provide to employees for each forecast year. Benefits are either statutory, such as payroll taxes and worker's compensation; or discretionary, such as health insurance, life

Actuals

Additional Paid-in Capital After Tax Income Amortization

Asset

Average Annual Return

Average Cost

Bad Debt Expense Balance Sheet

Benefits

insurance, and 401(K) plans. Book Value The value of an asset for accounting purposes. For assets where depreciation is taken or reserves booked, this is often expressed as a net book value. The book value of a company is the excess of assets over liabilities, which is equivalent to total owner's equity. An analysis tool that models how revenue, expenses, and profit vary with changes in sales volume. Breakeven analysis estimates the sales volume needed to cover fixed and variable expenses. The sales level at which revenues equal expenses (fixed and variable). The process of determining and recording the expected financial results of a future period, generally the next fiscal year. In some organizations budgeting is limited to financial items that are shown on the income statement, while in others the budgeting process produces the three major statements (Income Statement, Balance Sheet, and Cash Flow Statement). After the target time period begins, the budgeting process frequently includes tracking actual financial figures against the forecast as well. There is considerable overlap between the activities of budgeting and forecasting. Budgeting usually involves a more detailed account structure and a finer time scale than forecasting, which typically covers between three and seven years of higher-level projections. A long-term lease of property, plant, or equipment in which the lessee acquires essentially all the risks and benefits associated with the ownership of the leased item. Because it most closely resembles the financing of an asset purchase, a capital lease is treated as a long-term debt rather than as a rental. Cash plus investments of very high liquidity and safety, such as money market funds and treasury bills. See also minimum cash balance. A financial report that expresses a company's performance in terms of cash generated and used. In an accounting system, the list of accounts to which transactions are posted. A term used to refer to a financial statement in which all items are expressed as percentages of another item in the statement. For example, a common-sized balance

Breakeven Analysis

Breakeven Point Budgeting

Capital Lease

Cash & Equivalents

Cash Flow Statement

Chart of Accounts Common-Sized

sheet might show all values as a percentage of total assets. Common Stock Equivalents Contra Accounts Convertible preferred stock plus convertible bonds, stock options, and warrants.

Accounts, such as Accumulated Depreciation, that offset a related account, usually an asset. The contra account is subtracted from the related account to arrive at the net book value. The total amount paid to the business for its common and preferred stock. The difference between revenue and the associated variable costs. This is an important concept in breakeven analysis. Another term for expenditure. See also expenses. Another term for cost of sales. All the costs associated with the goods or services that were sold during a specified accounting period, including materials, labor, and overhead. A set of conditions agreed to in a formal debt agreement and designed to protect the lender's interests. Covenants may include restrictions on debt/equity ratio, working capital, or dividend payments. See also management goals. Assets that are convertible to cash within one year in the normal course of business. This usually includes cash, accounts receivable, inventory, and prepaid expenses. See also non-current assets. Obligations that will come due within a year from the current date. These usually include accounts payable, accrued expenses, and the portion of long-term obligations due within one year. See also non-current liabilities. Current assets divided by current liabilities. This ratio is a measure of a company's ability to meet its financial obligations in a timely manner. The number of days a business takes to pay its accounts payable, on average.

Contributed Capital Contribution Margin

Cost Cost of Goods Sold Cost of Sales/Services (COS) Covenants

Current Assets

Current Liabilities

Current Ratio

Days Payable

Outstanding (DPO) Days Sales Outstanding (DSO) Debt Debt to Equity Ratio The number of days a business takes to collect on its accounts receivable, on average. A form of liability that represents money borrowed from banks or other institutions. The ratio of total debt to owners' equity, used as a measure of leverage and ability to repay obligations. The ratio of total debt to tangible equity, used as a measure of leverage and solvency. Typical values for this ratio vary from one industry to another. Lower values for the ratio represent a better financial condition. A liability that arises when a customer pays for goods or services before delivery is complete; for example, a one-year service contract billed in advance. Under accrual accounting, revenue must be booked when the obligation is fulfilled, not when cash is paid or received. An entity defined for reporting purposes. The recognition of part of an asset's cost as an expense during each year of its useful life. There are several acceptable methods for calculating this expense, including straight-line depreciation and various accelerated methods. See also doubledeclining balance, straight-line method, and sum of the years' digits. Expenses, such as labor, overhead, and materials, that vary in direct proportion to units produced or services rendered. Wages paid for activities directly related to production of units sold or services delivered, considered part of cost of sales. This does not include management and administrative salaries, which are treated as operating expenses or overhead. Also referred to simply as labor. A method of recording accelerated depreciation. Also called the 200 percent declining balance method, this system applies twice the annual straight-line rate to the undepreciated balance of the asset's depreciable cost each year of the asset's useful life. For example, if the asset has a depreciable value of $1,000,000 and a useful life of five years, the double-declining balance method would record

Debt to Tangible Equity Ratio

Deferred Revenue

Department Depreciation

Direct Costs

Direct Labor

Double Declining Balance (DDB)

$400,000 of depreciation the first year, $240,000 the second year, $131,429 the third year, $114,286 the fourth year, and $114,285 the fifth year. See also straight-line method and sum of the years' digits. DPO DSO Earnings Before Interest and Taxes (EBIT) See days payable outstanding. See days sales outstanding. Net income before income tax expense and interest expense. This is a popular measure for comparing the earning power of companies, because it eliminates the impact of capital structure and effective tax rates, two non-operating factors. Net income divided by the number of outstanding shares of common stock and equivalents. See earnings before interest and taxes. See earnings before interest, taxes, depreciation, and amortization. Technical measures that analysts use to forecast events in economic systems; for example, Gross Domestic Product and Consumer Price Index. A general term for various technical measures of profit in which adjustments are made to the traditional accounting definition of Net Income. Such adjustments are typically made in order to better estimate the future value of a business. Also known as net worth or owners' equity. Equity is the net value of a company's total assets, less its total liabilities. All purchases made by a business, whether in cash or on credit; not equivalent to expenses. Also known as costs. Resources used to support the ongoing operations of a business for a specified time period; not equivalent to expenditures or costs. See first in, first out.

Earnings Per Share (EPS) EBIT EBIT/DA Economic Indicators

Economic Profit

Equity

Expenditures

Expenses

FIFO

Finished Goods First In, First Out (FIFO)

Inventory ready for sale. A method of inventory valuation whereby the goods first purchased or manufactured are considered the first ones sold. During periods of inflation, the FIFO method shows inflated profits compared to the last in, first out (LIFO) method. The 12-month period, not necessarily coinciding with the calendar year, chosen to constitute a single year for external financial reporting and taxes. The last month of a company's fiscal year. Another term for Property, Plant and Equipment. See also depreciation. The ratio of net Property, Plant and Equipment book value to tangible equity, used as a type of efficiency ratio. Typical values for this ratio vary from one industry to another. Higher values for the ratio represent a more capital-intensive company, which may be good or bad depending on the industry and how well the assets are being used to generate revenues. Expenses that are assumed not to vary with sales volume within the expected range of sales volumes, such as rent or administrative costs. This is an important concept in breakeven analysis and in distinguishing between gross margin and contribution margin. See also variable costs. The period of time for which a business is modeled. Depending on the forecast start month, the first year of the forecast period may not be a complete forecast year. See also Forecast Year. The month and year on which the forecast period begins. See also Forecast Year. Most people choose the forecast year to coincide with either the January-December calendar year or the fiscal year of the business, but this is not a requirement. Depending on the forecast start month, the first year of the forecast period may cover less than 12 months. In this case, assumption values that are entered for the first forecast year should represent the correct fraction of the 12-month totals. Financial forecasting is the process of estimating future financial performance. The projected financial performance of a business is measured by using pro-forma financial statements as well as other indicators such as trend analysis, ratio analysis,

Fiscal Year

Fiscal Year End Fixed Assets Fixed Assets to Tangible Equity Ratio

Fixed Costs

Forecast Period

Forecast Start Date Forecast Year

Forecasting

and return on equity. Forecasting often takes a higher-level viewpoint than the related activity of budgeting. In broader terms, forecasting can also refer to estimates of broad economic activity in a country, industry, or financial area. For instance, analysts and economists release forecasts of where interest rates or stock market prices might go in the future. GAAP An acronym for Generally Accepted Accounting Principles. Accountants follow GAAP standards, conventions, and rules in recording and summarizing financial transactions, and in preparing financial statements. GAAP standards are issued by the American Institute of Certified Public Accountants. The accounting term for amounts paid for assets over and above their fair market value. Goodwill arises, for example, when a company purchases another business and pays a price higher than the value of the acquired assets alone. Goodwill theoretically represents the value of the business's name, reputation, and customer relations, which increase the true value of the business beyond the value of its assets alone. Net Sales less cost of sales (including both fixed and variable costs), often expressed as a percentage of sales. Also referred to as gross profit. The total of amounts received (sales for cash) and amounts expected (sales on credit) in return for products sold or services rendered during the given time period. Gross sales reflects sales at invoice values, before sales discounts and credit card fees. Another term for net income. A financial report that shows a company's performance over a specified period of time by subtracting expenses from revenue to obtain net income. Also known as a profit and loss statement (P&L) or an earnings report. Levies on the income of a business imposed by federal and state governments. This expense appears on the income statement simply as Taxes. A long-term asset that represents a financial, legal, or accounting concept rather than a physical item. Examples of intangible assets include: Goodwill , the value of a patent, copyright, or trademark, the value of a franchise or operating rights. Under accounting rules, an intangible asset must have a useful life greater than one year,

Goodwill

Gross Margin

Gross Sales

Income Income Statement

Income Tax Expense

Intangible Asset

and a portion of its value must be amortized over time as an expense. Near the end of the useful life of an intangible asset, when its remaining life is less than one year, the asset must still be classified as a long-term asset. See also tangible asset. Interest Basis The interest rate, such as prime or LIBOR, that is used as a reference point for quoting borrowing rates. For example, using the prime rate as the interest basis, a loan might be offered at prime plus one percent. See also Prime Rate and London Interbank Offered Rate. Money paid by a business in exchange for the use of capital for a specified time period. On the income statement, "Interest Expense (Income)" is a single account that is the net amount of interest income and interest expense. Money received by a business in exchange for the use of capital for a specified time period. On the income statement, "Interest Expense (Income)" is a single account that is the net amount of interest income and interest expense. The cost of borrowing money, expressed as a percentage per period of time, usually one year. Goods purchased or manufactured by a business and held for production or sale. Inventory is often subdivided into raw materials, work in progress, and finished goods. See also Inventory Targets. The numbers of months of inventory that the user requires to be in stock at a given point in time. For Raw Materials, this amount represents the number of months of future production. For Finished Goods, the amount represents the number of months of future sales. The ratio of annual cost of sales to inventory, commonly used as a rough measure of inventory management efficiency. Also known as inventory turnover ratio or simply turns. The expenditure of cash to create additional capital. Investment can be in incomeproducing vehicles such as stocks and bonds, or more risk-oriented ventures such as the purchase of another company. Another term for direct labor. See also salaries and benefits.

Interest Expense

Interest Income

Interest Rate

Inventory

Inventory Targets

Inventory Turns

Investment

Labor

Last In, First Out (LIFO)

A method of inventory valuation whereby the goods most recently purchased or manufactured are considered the first ones sold. In periods of rising prices, the LIFO method shows a lower profit than the first in, first out (FIFO) method. A long-term contract granting use of real estate, equipment or other fixed assets in exchange for payment. All leases entered in the Property, Plant and Equipment Detail are considered capital leases; operating leases should be entered as expenses in the Expenses Detail. See also mortgage. The relationship between debt and equity. A company is considered highly leveraged if its levels of debt are high compared to its equity. Obligations used to fund the operations of a business, including bank loans, accounts payable, and accrued expenses. See London Interbank Offered Rate. See last in, first out. The amount of short-term credit available to a business from banks. A company's ability to generate cash in a timely manner in order to meet its obligations, often measured by the quick ratio or the current ratio. The interest rate used among the most creditworthy international banks for large loans in eurodollars. LIBOR is an important reference number, because loans to businesses can be tied to it on a percentage basis. See also prime rate and interest basis. Any asset that has an economic life greater than one year. Liquid items such as cash are considered to be current or short-term assets. Under accounting rules, intangible assets must always be classified as long-term assets, even if their remaining life is less than one year. Liabilities that represent money borrowed from banks or other lenders to fund the ongoing operations of a business and that will not come due within one year. A set of conditions a business is striving to achieve. These may include

Lease

Leverage

Liabilities

LIBOR LIFO Line of Credit Liquidity

London Interbank Offered Rate (LIBOR)

Long-Term Asset

Long-Term Borrowing

Management Goals

requirements for debt/equity ratio, working capital, or dividend payments. See also covenants. Market Value The price at which an asset would pass from an informed and willing seller to an informed and willing buyer, assuming that goodwill played no role in the transaction. Securities that can readily be converted into cash, including government securities, bankers' acceptances, and commercial paper. The physical inputs to manufacturing, treated as part of cost of sales. Also known as raw materials. An account for current assets that do not fall into the following categories: cash, marketable securities, accounts receivable, other receivables, inventory, and prepaid expenses. An account for current liabilities that do not fall into any of the categories already defined. Examples of predefined categories are accounts payable, accrued expenses, and short-term notes payable. An account for operating expenses that do not fall into any of the predefined categories such as salaries, utilities, advertising, and depreciation. An account for assets not including current assets, property, plant and equipment, intangibles, deposits, and loans made. An account for non-current liabilities not including long-term debt (mortgage debt, lease debt, long-term borrowing, and shareholder loans) and deferred taxes. A long-term debt instrument for the purchase of property by which the borrower uses the property itself for collateral. The acquisition cost of an asset less any accumulated depreciation. See also book value and contra accounts. On a cash flow statement, net income plus non-cash transactions and the net amount of changes in operating assets and liabilities.

Marketable Securities

Materials

Miscellaneous Current Assets

Miscellaneous Current Liabilities

Miscellaneous Expenses

Miscellaneous NonCurrent Assets Miscellaneous NonCurrent Liabilities Mortgage

Net Book Value

Net Cash Provided By Operations

Net Income

Total revenues minus total expenses, including taxes and depreciation, for a specified time. Also known as profit, net profit, or net earnings. Total revenues minus total expenses except the income tax expense, for a specified time. Also known as pretax income. The excess of business expenses over income in a given tax year.

Net Income Before Taxes

Net Operating Loss (NOL) Net Operating Loss (NOL) Carryforward Net Present Value (NPV)

The amount of Net Operating Losses accumulated over past tax years that is available for offsetting taxable income in the current and future tax years. A measure of a project's future value in current dollars. Future income and expenses are summed and then discounted using a required rate of return to adjust for the time value of money. Net present value is, theoretically, the best method for evaluating projects. Gross property, plant and equipment minus accumulated depreciation. This number represents that portion of PP&E acquisition cost that has not yet been recognized as an expense. It is not the same as externally determined measures such as market value. Sales revenue less sales discounts and credit card fees. Assets that are not convertible to cash within one year in the normal course of business. Property and Goodwill are examples of non-current assets. See also current assets. Obligations that will not come due within one year of the current date. See also current liabilities. Expenses not related to the ongoing operations of a company; for example, interest expense, one-time events, and taxes. Income not related to the ongoing operations of a company; for example, interest income and sale of fixed assets. All expenses related to the ongoing operations of a company, including research and

Net Property, Plant and Equipment

Net Sales Non-Current Assets

Non-Current Liabilities

Non-Operating Expense

Non-Operating Income

Operating Expenses

development, sales and marketing, and administrative expenses. Any costs directly attributable to producing goods or services are not included. See also cost of sales. Operating Income Sales revenue minus cost of sales and operating expenses. Similar to earnings before interest and taxes, operating income is examined when the earnings of the core business are analyzed. Also referred to as operating profit, operating earnings, and income from operations. A type of lease, normally involving equipment, classified as a rental not as a purchase over time. An operating lease must be shown as an expense in the Expenses Detail, unlike a capital lease, which is treated as a long-term debt. Another term for operating income. Assets exclusive of current assets and property, plant and equipment. Other assets can include intangibles, deposits, loans made, and miscellaneous non-current assets. Expenses due to activities outside the normal operations of the business, for example, loss from foreign exchange and loss from investments. Income due to activities outside the normal operations of the business, for example, dividends from investments and gain from foreign exchange. Liabilities other than debt, line of credit, and accounts payable, for example, deferred taxes, accrued expenses, and customer deposits. Expenses incurred in operating a business, such as rent, executive salaries, and insurance, that are not directly related to the manufacture of a product or delivery of a service. A portion of overhead can be attributed to cost of sales, usually on a percentage basis; the remainder is considered an operating expense. Another term for equity. The stated value of a share of stock. Par is usually a minimal value (such as $.01) and bears no relation to the market value of the shares. See also contributed capital. Another term for accounts payable.

Operating Lease

Operating Profit Other Assets

Other Expenses

Other Income

Other Liabilities

Overhead

Owners' Equity Par Value

Payables

Payroll

The total wages, not including benefits, paid by a business during each forecast year. A term for expenses recorded in the period in which they occur regardless of whether or not they pertain to a prior or later period. R&D and advertising expenditures are examples of costs that benefit future periods but must be treated as period expenses according to Generally Accepted Accounting Principles (GAAP). The level of detail in terms of time at which data is forecast or reported, specified as months, quarters, or years. Discrete intervals of time. The word period generally refers either to the interval of the entire forecast (as in forecast period) or the granularity of data in financial statements (as in periodicity). Another term for Forecast Period. See Property, Plant & Equipment. The scale at which forecast numbers are displayed. Choices include dollars, hundreds, thousands, and millions. Services, goods, and intangibles paid for prior to the period in which they provide benefit. Prepaid expenses are accounted for as assets until their benefit is realized. A schedule that associates prices with individual products. This list allows you to forecast sales in units and still create projections in dollars. See also Discount List. The market value of a company's stock divided by net income.

Period Expenses

Periodicity

Periods

Plan Period PP&E Precision

Prepaid Expenses

Price List

Price/Earnings Ratio (PE) Prime Rate

The interest rate that banks charge to their most creditworthy customers. The prime rate is an important reference number, because loans to companies are often tied to it on a percentage basis. See also London Interbank Offered Rate and interest basis. A set of financial statements and other schedules that show projected results for a future period. They are called pro-forma financial statements because they have the form of financial statements, but are not prepared from actual operating results. The

Pro-Forma Financial Statements

three major financial statements are the Income Statement, Balance Sheet, and Cash Flow Statement. For external reporting, these statements must conform to Generally Accepted Accounting Principles (GAAP). Profit Profit & Loss Statement (P&L) Prompt Payment Discounts Another term for net income. Another term for the income statement.

Discounts that a business gives to credit customers who pay within a specified period of time; also called sales discounts. On an income statement, this amount is subtracted from Gross Sales to yield Net Sales. Assets used in the operations of a business that have a useful life greater than one year, including land, buildings, machinery, equipment, and furniture. Also known as fixed assets. See also depreciation. The acquisition cost of new property, plant and equipment assets in a given year, minus the proceeds from the sale of existing PP&E. See also depreciation. Current assets, excluding inventory and prepaid expenses, divided by current liabilities. Also known as the acid test ratio. Like the current ratio, the quick ratio is used as a measure of a company's liquidity. It helps estimate a company's ability to meet its current obligations using assets that can easily be converted into cash. Although typical ratios vary from one industry and company size to another, financial authorities recommend that the Quick Ratio should be 1.0 or greater. A comparison of financial statement elements in the form of a quotient. Ratios such as the price/earnings ratio, return on assets, and quick ratio are often used for analyzing financial statements. Another term for materials. Another term for accounts receivable. Net profits kept within a business in the Owners' Equity account after stock dividends are paid.

Property, Plant and Equipment (PP&E)

Purchases of PP&E

Quick Ratio

Ratio

Raw Materials Receivables Retained Earnings

Retired Liabilities Retirement of LongTerm Debt Return on Assets (ROA)

Debt paid off within a given period of the forecast. The repayment of a non-current liability.

Net income for a time period divided by total assets. This ratio is often used to measure profitability or the efficiency with which assets are being employed. Higher values for this ratio indicate better financial performance. The specific value obtained for a business should be evaluated in relation to the returns that can be obtained from alternative investments of capital. Net income for a time period divided by tangible equity. This ratio is sometimes used to measure profitability or the efficiency with which the owners' financial investments are being employed. The value of intangible assets such as goodwill is excluded from this ratio in order to better reflect actual operating profitability. Higher values for this ratio indicate better financial performance. The specific value obtained for a business should be evaluated in relation to the returns that can be obtained from alternative investments of capital. An alternate form of this ratio can also be computed using pre-tax income instead of net income. Net income divided by equity. This ratio is often used as a measure of the return on funds invested in a business. The total income received in exchange for goods or services during a specific accounting period. Revenue can be recorded using either the cash basis (as received), or the accrual basis (as earned). Also referred to as sales or sales revenue. Compensation provided by a business to employees, excluding benefits. On an income statement, Salaries refers only to that portion of compensation (such as administrative and management costs) that does not vary in direct proportion to sales. See also labor. Another term for revenue. The scrap value of an asset. Acquisition cost minus salvage value yields the total amount that an asset is depreciated over its useful life. Another term for equity.

Return on Tangible Equity

Return on Equity (ROE)

Revenue

Salaries

Sales Salvage Value

Shareholder Equity

Short-Term Borrowing

Liabilities that represent money borrowed from banks or other institutions to fund the ongoing operations of a business that will come due within one year. The four-digit code prescribed by the Standard Industrial Classification System to categorize businesses according to the types of activities they perform. A company's ability to satisfy its obligations to creditors when they are due. A company is "technically insolvent" if it has enough assets to pay creditors, but cannot liquidate them quickly enough to meet payment deadlines. A target or average cost that can be used either to value inventory or as a basis of comparison with actual costs. Standard costs can often be used to calculate cost of sales, in which case standard cost refers to the average amount of materials, direct labor and overhead required to produce a single product or service unit. The method of calculating cost of sales that compares the amounts of materials, direct labor and overhead projected in the Cost of Sales assumption (the standard costs) to expenses allocated to the Production department in the Expenses, Property, Plant and Equipment, Payroll and Benefits, and Other Assets assumptions (the variances). Another term for cash flow statement. Another term for equity. The simplest form of depreciation, in which an equal expense is recorded in each year of an asset's useful life. For example, if the asset has a purchase price of $1,200,000, a useful life of four years and a salvage value of $200,000, straight-line depreciation would record $250,000 of depreciation each year. See also sum of the years' digits and double-declining balance. A method of recording accelerated depreciation. Also called the sum-of-digits method, it allows the depreciation of an asset based on an inverted scale of the total digits of the asset's useful life. For example, if the useful life is four years, the years' digits (1, 2, 3, and 4) are summed to produce ten, and 4/10ths of the asset's depreciable cost is recognized as an expense the first year, 3/10ths the second year, and so on. See also straight-line method and double-declining balance.

SIC code

Solvency

Standard Costs

Standard Costs Plus Variances

Statement of Cash Flows Stockholders' Equity Straight-Line Method

Sum of the Years' Digits (SYD)

Tangible Asset

An asset that represents a physical object such as land, furniture, and buildings. Under accounting rules, a tangible asset must have a useful life greater than one year, and must be used in business operations rather than being held for resale. The following types of assets are not considered to be tangible assets: items held for resale, which are considered to be inventory, cash and other liquid assets which are considered as current assets, and abstract assets such as goodwill, which are intangible assets. See also tangible equity. Equity less intangible assets. See the ratios of debt to tangible equity, fixed assets to tangible equity, and return on tangible equity. Levies on the annual income of a business imposed by federal and state governments. On the income statement, this figure does not include property taxes, which are considered an operating expense. Stock that has been reacquired by the company that issued it and is available for retirement or resale. Also called reacquired stock and treasury shares. Another term for inventory turns. A method used to calculate accounts receivable. This allows you to break down receivables into categories that indicate what percentage of the total is paid within specified lengths of time from the sales date. See also days sales outstanding. A method used to calculate accounts payable. It allows the user to break down payables into categories that indicate what percentage of the total is paid within specified lengths of time from the purchase date. See also days payable outstanding. An estimate of the period of time over which an asset will be of use to a company. Along with acquisition cost and salvage value, this measure is used to calculate the amount that the asset is depreciated each year. Expenditures that change in proportion to increases or decreases in sales or production volumes. See also fixed costs. The difference between actual and targeted numbers for revenues, expenditures, or productivity. Variances are usually described as either favorable or unfavorable. See also standard costs.

Tangible Equity

Taxes

Treasury Stock

Turns Typical Collection Pattern

Typical Payment Pattern

Useful Life

Variable Costs

Variance

Working Capital

The net amount of current assets and current liabilities. This is equivalent to a company's liquid assets. A bankruptcy predictor based on the formula derived by Dr. Edward Altman. According to the Altman model, a Z-Score of 3.0 or higher indicates that the company is most likely safe based on the financial data; a score below 1.8 means that the firm is probably headed for bankruptcy. In studies, the Z-Score has been shown to have 90% accuracy of prediction of bankruptcy in the first year of the forecast, and 80% accuracy in the second year.

Z-Score

SHARE MARKET GLOSSARY 1. AGM Annual General Meeting is the annual meeting held for shareholders. If you are holding the share of a company, you should be getting a notice about the AGM. As a share holder you will also receive a copy of the annual report of the company.

2.AMC Asset Management Company used in context with Mutual Funds. 3.AMFI Association of Mutual Funds of India. 4.BOLT BSE on-line trading system. 5.BSE Bombay Stock Exchange. 6.Bearish and Bullish Terms used to indicate the mood of the market, if the sensex zooms it is referred as Bullish Market. 7.Book Closure

Book closure is defined as the period during which a company stops the transfers of shares from one person to another person and makes a note of all the share holders in their register to enable the share holders for rights issue or bonus issue etc., Instead of a period, if it is done on a single day it is known as record date. 8.Bid Price The price at which shares may be bought in the secondary market. 9.Bonus issue A bonus issue is the issue of free shares to existing shareholders as per the record available with the company. After the issue of the bonus shares, the value of the share is reduced to the extent of the bonus declared. The face value of the share remains the same. Bonus shares at the ratio of 1:1 means, one share will be given free for every one share held by the investor. 10.Broker Stockbroker - As per Indian law, stockbroker is a member of a recognized stock exchange. 11.Sub-brokers Stock brokers were allowed to have sub-brokers to assist their clients in investing. However due to evolution of internet based online trading, internet has eliminated the need for sub-brokers. 12.CRR Cash Reserve Ratio.

13.DEMAT Short form Dematerialization of the process of conversion of physical stock document into an electronic document. 14.Digital Contracts Same as Demat. The shares are held in electronic records.

15.Dividend Out of the company's earnings some part of cash may be paid to the share holders of the company, this may be an interim dividend or a final dividend. 16.Dividend Yield The dividend paid on a share expressed as a percentage of its market price. 17.Earnings The profit after tax of the company is indicated as earnings.

18.Earnings

Per

Share

It is a value indicating the profit after tax divided by the weighted average number of shares in issue. 19.EBIT (Earnings before Interest & Tax)

EBIT is the profit or earnings of a company, before taking into account interest, tax and dividends. EBIT is often known as operating profit or PBIT (profit before interest and tax). 20.EGM Extraordinary General 21.Equity The equity in a company is the capital put in by the shareholders plus the profits retained in the business on their behalf. Alternatively, equity can be regarded as the assets minus the liabilities i.e. what is left after the assets have been used to repay the liabilities. The term is also used to refer to shares. 22.Ex-dividend It is an opposite term of cum-dividend, that means the buyer will not have the rights on the bonus or dividend. The seller retains the benefits. 23.F&O 24.FCD 25.FDI 26. FII Futures and Options. Debenture. Meeting.

Fully Convertible Foreign Foreign

Direct Investment. Institutional Investors.

27.GDP -

Gross Domestic

Product.

28.GDR - Global Depository Receipt. 29.Initial Public Offering

Initial Public Offering or IPO is when shares in a company are offered to outside investors for the first time and simultaneously the company arranges to have its shares listed on a recognized stock exchange. This is also known as flotation. 30.Institutional investor

Large financial institutions such as pension funds, unit or investment trusts and insurance companies. 31.Interim results

Unaudited first half figures that provide an indication of the company's trading and profit performance since the last full year accounting period. These figures are reviewed by the Auditors.

32.IPO The IPO or Initial Public Offering is when shares in a company are offered to outside investors for the first time and simultaneously the company arranges to have its shares listed on a recognized stock exchange. This is also known as flotation.

33.Liquidity It is referred as the average number of a company's shares available to be freely traded on the share market. 34.Listed company

A listed company is one whose shares are listed on a stock exchange. 35.Margin money Minimum money required to buy shares during intraday or futures contract. 36.Market Capitalisation The market capitalisation or shortly known as the market cap of a company is the current share price multiplied by the number of shares in issue. 37.MF - Mutual Fund. Please refer Mutual Fund page in this website for more details. 38.NSDL - National Securities Depository Limited. 39.NSE - National Stock Exchange. 40.Offer Price The price at which shares may be sold in the Market. The offer price varies as per the demand in the market. 41.Open interest Open interest is defined as the total number of futures contracts or option contracts that have not yet been exercised, expired, or fulfilled by delivery. If the open interest crosses 95% of the market-wide position ( the number of shares available in the cash market ) then stock exchange system will impose a ban on fresh positions in F & O segment. 42.Operating margin Operating profit as a percentage of the company's turnover or sales.

43.Operating Profit Operating profit is the profit that the company makes, before taking into account interest, tax and dividends. Operating profit is also known as EBIT (earnings before interest and tax) or PBIT (profit before interest and tax). 44.Option An option gives the holder the right, but not the obligation, to buy or sell a specified amount of an asset, probably ordinary shares, at a specified price within a specific time period.

45.PAN - Permanent Account Number. 46.PCD - Partly Convertible Debenture. 47.PBIT PBIT is the profit that the company makes, before taking into account interest, tax and dividends. PBIT is also known as operating profit and EBIT (earnings before interest and tax). 48.P/E Ratio The price/earnings ratio. Higher the P/E ratio indicates that every thing is moving well and share holders are after this stock. P/E ratio serves as an indicator for the investor to make a purchase decision. 49.P & L The profit and loss account of the company. 50.P N ( Participatory Notes ) PNs are participatory notes or the financial instruments used by FIIs ( foreign investors ) that are not registered with Security Exchange Board of India, to invest in Indian capital market. FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with these securities as the underlying. 51.Profit Before Tax Profit before tax is the profit of a company after adding or deducting interest, but before deduction of corporation tax. 52.Proxy A person who is authorized by the share holder to attend the AGM etc., the proxy need not be a share holder of the company.

53.Record date

The purpose of the record date is to finalize the list of the share holders of the company to qualify them for a forthcoming bonus or dividend.

54.Registrar

The appointed agent of a company who keeps a register of shareholders .

55.Rights issue

Offer of shares to the existing shareholders of the company to increase the capital.

56.ROC - Registrar of Companies.

57.SEBI - Securities & Exchange Board of India

It is the Securities Exchange Board of India, it carries out regulatory functions pertaining to the Capital Market. SEBI was setup by the Govt. of India in the year 1988.

58.Sensex

BSE Sensitive Index.

59.Shareholder

A shareholder is a person who holds shares in a company.

60.Shares

A share is issued to a shareholder in exchange for cash or assets. The shares can either be got from primary market(IPO) or secondary market.

61.Stockbroker

The person, who buys and sells equities on a stock exchange on behalf of his clients.

67.Stock Exchange

A stock exchange is an organized market for shares to enable buying and selling.

68.Stock Split

Stocks are split to provide more liquidity in the market, shares are sub divided as per the split ratio. The face value of the shares gets divided according to the stock split ratio.

69.Stop loss - A trigger price placed in the order form to minimize the unexpected loss.

70.T2T - Trade to AGM Annual General Meeting is the annual meeting held for shareholders. If you are holding the share of a company, you should be getting a notice about the AGM. As a share holder you will also receive a copy of the annual report of the company. Book Closure Book closure is defined as the period during which a company stops the transfers of shares from one person to another person and makes a note of all the share holders in their register to enable the share holders for rights issue or bonus issue etc., Instead of a period, if it is done on a single day it is known as record date. Bid Price The price at which shares may be bought in the secondary market. Bonus issue A bonus issue is the issue of free shares to existing shareholders as per the record available with the company. After the issue of the bonus shares, the value of the share is reduced to the extent of the bonus declared. The face value of the share remains the same. Bonus shares at the ratio of 1:1 means, one share will be given free for every one share held by the investor. Broker

Stockbroker - As per Indian law, stockbroker is a member of a recognized stock exchange. Sub-brokers Stock brokers were allowed to have sub-brokers to assist their clients in investing. However due to evolution of internet based online trading, internet has eliminated the need for subbrokers.

Dividend Out of the company's earnings some part of cash may be paid to the share holders of the company, this may be an interim dividend or a final dividend.

DividendYield The dividend paid on a share expressed as a percentage of its market price.

Earnings The profit after tax of the company is indicated as earnings. Earnings Per Share It is a value indicating the profit after tax divided by the weighted average number of shares in issue. EBIT (Earnings before Interest & Tax) EBIT is the profit or earnings of a company, before taking into account interest, tax and dividends. EBIT is often known as operating profit or PBIT (profit before interest and tax). Equity The equity in a company is the capital put in by the shareholders plus the profits retained in the business on their behalf. Alternatively, equity can be regarded as the assets minus the liabilities i.e. what is left after the assets have been used to repay the liabilities. The term is also used Ex-dividend It is an opposite term of cum-dividend, that means the buyer will not have the rights on the bonus or dividend. The Initial Public Offering Initial Public Offering or IPO is when shares in a company are offered to outside investors for seller retains the benefits. to refer to shares.

the first time and simultaneously the company arranges to have its shares listed on a recognized stock exchange. This is also known as Institutional investor Large financial institutions such as pension funds, unit or investment trusts and,insurance.companies. flotation.

Interim

results

Unaudited first half figures that provide an indication of the company's trading and profit performance since the last full year accounting period. These figures are reviewed by the Auditors. IPO The IPO or Initial Public Offering is when shares in a company are offered to outside investors for the first time and simultaneously the company arranges to have its shares listed on a recognized stock exchange. This is also known as flotation. Liquidity It is referred as the average number of a company's shares available to be freely traded on the share market. Listed company A listed company is one whose shares are listed on a stock exchange. Margin money Minimum money required to buy shares during intraday or futures contract. Market Capitalisation The market capitalisation or shortly known as the market cap of a company is the current share price multiplied by the number of shares in issue. Offer Price The price at which shares may be sold in the Market. The offer price varies as per the demand in the market.

Open interest Open interest is defined as the total number of futures contracts or option contracts that have not yet been exercised, expired, or fulfilled by delivery. If the open interest crosses 95% of the market-wide position ( the number of shares available in the cash market ) then stock exchange system will impose a ban on fresh positions in F & O segment.

Operating margin Operating profit as a percentage of the company's turnover or sales. Operating Profit Operating profit is the profit that the company makes, before taking into account interest, tax and dividends. Operating profit is also known as EBIT (earnings before interest and tax) or PBIT (profit before interest and tax). Option An option gives the holder the right, but not the obligation, to buy or sell a specified amount of an asset, probably ordinary shares, at a specified price within a specific time period. PBIT PBIT is the profit that the company makes, before taking into account interest, tax and dividends. PBIT is also known as operating profit and EBIT (earnings before interest and tax). P/E Ratio The price/earnings ratio. Higher the P/E ratio indicates that every thing is moving well and share holders are after this stock. P/E ratio serves as an indicator for the investor to make a purchase decision. P N ( Participatory Notes ) PNs are participatory notes or the financial instruments used by FIIs ( foreign investors ) that are not registered with Security Exchange Board of India, to invest in Indian capital market. FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with these securities as the underlying. Profit Before Tax

Profit before tax is the profit of a company after adding or deducting interest, but before deduction of corporation tax. Proxy A person who is authorized by the share holder to attend the AGM etc., the proxy need not be a share holder of the company. Record date The purpose of the record date is to finalize the list of the share holders of the company to qualify them for a forthcoming bonus or dividend. Registrar The appointed agent of a company who keeps a register of shareholders . Rights issue Offer of shares to the existing shareholders of the company to increase the capital. SEBI (Securities & Exchange Board ofIndia)

It is the Securities Exchange Board of India, it carries out regulatory functions pertaining to the Capital Market. SEBI was setup by the Govt. of India in the year 1988. Shareholder A shareholder is a person who holds shares in a company. Shares A share is issued to a shareholder in exchange for cash or assets. The shares can either be got from primary market(IPO) or secondary market. Stockbroker The person, who buys and sells equities on a stock exchange on behalf of his clients. StockExchange A stock exchange is an organized market for shares to enable buying and selling.

StockSplit Stocks are split to provide more liquidity in the market, shares are sub divided as per the split ratio. The face value of the shares gets divided according to the stock split ratio. Stop loss A trigger price placed in the order form to minimize the unexpected loss.

Share share in which there are frequent and day-to-day dealings, as distinguished from partly active shares in which dealings are not so frequent. Most shares of leading companies would be active, particularly those which are sensitive to economic and political events and are, therefore, subject to sudden price movements. Some market analysts would define active shares as those which are bought and sold at least three times a week. Easy to buy or sell Arbitrage : Business of buying in one exchange and selling in another to take advantage of price differences. Auction : A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. It is done when the seller is unable to deliver the scrips sold by him. The security in question is offered by a member who has ready possession of the scrips.

Bear : An operator who expects the share price to fall Bear Market : A weak and falling market where buyers are absent Blue Chips : Shares of financially sound, well established companies with a track record of good growth and regular payment of dividends. Bonus Shares : Shares allotted to the existing shareholders by capitalising the reserves into additional capital. When market expects a company to come out with a Bonus Issue, the price of the shares normally goes up.

Book Closure: A company closes its register of members for updating the records to facilitate payment of dividends or issue of rights of bonus shares. Book closure is the period during which this process is done and deliveries are not affected in the clearing house. Bourse : A Stock Exchange Bull : An operator who expects the share price to rise and takes position in the market to sell at a later date. Bull Market : A rising market where buyers far outnumber the sellers

Call Option : An option where the buyer gets the right to buy the underlying security at a specified future date. Carry Forward : Settlement where positions are carried forward from one settlement to another settlement. Cash Settlement : Payment for transactions done in one settlement on the due date. Circuit Breaker : A mechanism used to restrain the market when it gets overheated. The Exchange may relax the limit after a cooling off period of about half an hour. Clearing House : It is a legal counter party to both legs of every trade. The netted purchase and sale positions of the trading Members are settled through the Clearing House.

Company Objection : In some cases, the companies send back the certificates received for transfer citing reasons for their inability to do so. The letter sent by the Company is known as Company Objection. Cum Bonus : A share is described as cum bonus when the purchaser is entitled for current bonus

Cum Dividend : A shares is described as cum dividend when the purchaser is entitled for current dividend Cum Rights : A share is described as cum rights when the purchaser is entitled for current rights Day Order :

The quantity that remains untraded is not cancelled until the end of the day. Dealer : A Dealer is a user who works on behalf of the Trading Member Delivery Based Trading : When a share is bought or sold for the purpose of receiving or effecting deliveries. Dematerialisation : Process of converting a security from physical form to electronic form Derivatives : A financial contract between two or more parties and it is derived from the future value of an underlying asset.

Disclosed Quantity : An order entered in the system wherein only a fraction of the order quantity is disclosed to the market. Dividend : Cash payment made to the shareholders out of the profits of the company

Ex Bonus : A share is described as Ex Bonus when the buyer is not entitled for the Bonus. The seller remains the beneficiary. Ex Dividend : A share is described as Ex Dividend when the buyer is not entitled for the Dividend. The seller remains the beneficiary. Ex Rights : A share is described as Ex Rights when the buyer is not entitled for the Rights. The seller remains the beneficiary.

Expiry Date : The date and time after which a writer of an option cannot exercise his rights. Exposure Limit : The limit allowed to the Broker by the Exchange or to the customer by broker. It is the total value upto which one is allowed to hold open positions at any point of time. Futures Contract : An agreement between parties for a specified asset for performance Hedging :

It is protecting an existing asset position from an adverse future position. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market on a fixed date in future. Insider Trading : Trading carried out by people who have access to non public price sensitive information. Limit Order : A buy or sell order where price is specified at the time of order entry

LoMargin : An upfront payment made by the customer to take position in the market. His exposure limit is fixed based on the margin money brought in by him. Mark To Market : A notional profit or loss of a long or short position as compared to the current market price.

Market Order : An order where no price specification is mentioned at the time of placement Offer : The price at which a share is available in the market Offer Price : The price at which a company offers its shares to the public through issue of a prospectus Order Cancellation : A facility available in the trading system where one is allowed to cancel the order placed earlier. Order Modification : A facility available in the trading system where one is allowed to modify an earlier order.

Pay In : The designated day on which the members pay securities and funds to the clearing house

Pay Out : The designated day on which the Clearing House effects payment and deliveries to the members Price Band : It sets up the upper and lower limits for a share's movement on any given day. It is based on the previous trading day's closing price. The system will not accept the orders that are out of bound. Price Rigging : A process where persons collude to artificially increase or decrease the price of a security Put Option : An option where the buyer gets the right to sell the underlying security at a specified future date Quote : Prices at which a share can be bought or sold Record Date : The date on which the beneficial owner of the Corporate Benefits is determined. Rematerialisation : Process of converting the shares from electronic form to physical form Rights Issue :

Issue of new share to the existing shareholders at a price which is normally lower than the current market price of the old shares. It is issued in a fixed ratio to the those shares which are already held AnnualYield Also known as Dividend Yield. Annual yield represents the dividend return from an investment. It is calculated by dividing the dividend per share by the share price, converted to a percentage.

Yield = (Dividend per share / Last market price) x 100

Bollinger Bands Charting method used to analyze and project a stock's price movement. A Bollinger Band marks one standard deviation above the stock's moving price average, and another band marks one standard deviation below this average. Investors use the amount of space between the two bands to gauge the volatility of the market and to guide them in their investment decisions. Developed by John Bollinger, these bands are among the indicators available through our charts features. Cash Settled Warrant Cash settled warrants are settled by a cash payment by the warrant issuer to the warrant holder, e.g. most index warrants. The cash payment will be calculated as determined by the terms and conditions of the warrant. Some warrants may offer the choice to investors for cash settlement or physical delivery (e.g. currency warrants).

Cash Settlement The procedure by which index futures and index options contracts are settled. Because an investor cannot directly buy or sell an index, index futures and option contracts are cash settled by allocating a dollar amount to each index point.

Trade segmen AGM Annual General Meeting is the annual meeting held for shareholders. If you are holding the

share of a company, you should be getting a notice about the AGM. As a share holder you will also receive a copy of the annual report of the company. Book Closure Book closure is defined as the period during which a company stops the transfers of shares from one person to another person and makes a note of all the share holders in their register to enable the share holders for rights issue or bonus issue etc., Instead of a period, if it is done on a single day it is known as record date. Bid Price The price at which shares may be bought in the secondary market. Bonus issue A bonus issue is the issue of free shares to existing shareholders as per the record available with the company. After the issue of the bonus shares, the value of the share is reduced to the extent of the bonus declared. The face value of the share remains the same. Bonus shares at the ratio of 1:1 means, one share will be given free for every one share held by the investor. Broker Stockbroker - As per Indian law, stockbroker is a member of a recognized stock exchange. Sub-brokers Stock brokers were allowed to have sub-brokers to assist their clients in investing. However due to evolution of internet based online trading, internet has eliminated the need for subbrokers.

Dividend Out of the company's earnings some part of cash may be paid to the share holders of the company, this may be an interim dividend or a final dividend.

DividendYield The dividend paid on a share expressed as a percentage of its market price.

Earnings The profit after tax of the company is indicated as earnings. Earnings Per Share

It is a value indicating the profit after tax divided by the weighted average number of shares in issue. EBIT (Earnings before Interest & Tax) EBIT is the profit or earnings of a company, before taking into account interest, tax and dividends. EBIT is often known as operating profit or PBIT (profit before interest and tax). Equity The equity in a company is the capital put in by the shareholders plus the profits retained in the business on their behalf. Alternatively, equity can be regarded as the assets minus the liabilities i.e. what is left after the assets have been used to repay the liabilities. The term is also used Ex-dividend It is an opposite term of cum-dividend, that means the buyer will not have the rights on the bonus or dividend. The Initial Public Offering Initial Public Offering or IPO is when shares in a company are offered to outside investors for the first time and simultaneously the company arranges to have its shares listed on a recognized stock exchange. This is also known as Institutional investor Large financial institutions such as pension funds, unit or investment trusts and,insurance.companies. flotation. seller retains the benefits. to refer to shares.

Interim

results

Unaudited first half figures that provide an indication of the company's trading and profit performance since the last full year accounting period. These figures are reviewed by the Auditors. IPO The IPO or Initial Public Offering is when shares in a company are offered to outside investors for the first time and simultaneously the company arranges to have its shares listed on a recognized stock exchange. This is also known as flotation.

Liquidity It is referred as the average number of a company's shares available to be freely traded on the share market. Listed company A listed company is one whose shares are listed on a stock exchange. Margin money Minimum money required to buy shares during intraday or futures contract. Market Capitalisation The market capitalisation or shortly known as the market cap of a company is the current share price multiplied by the number of shares in issue. Offer Price The price at which shares may be sold in the Market. The offer price varies as per the demand in the market.

Open interest Open interest is defined as the total number of futures contracts or option contracts that have not yet been exercised, expired, or fulfilled by delivery. If the open interest crosses 95% of the market-wide position ( the number of shares available in the cash market ) then stock exchange system will impose a ban on fresh positions in F & O segment.

Operating margin Operating profit as a percentage of the company's turnover or sales. Operating Profit Operating profit is the profit that the company makes, before taking into account interest, tax and dividends. Operating profit is also known as EBIT (earnings before interest and tax) or PBIT (profit before interest and tax). Option

An option gives the holder the right, but not the obligation, to buy or sell a specified amount of an asset, probably ordinary shares, at a specified price within a specific time period. PBIT PBIT is the profit that the company makes, before taking into account interest, tax and dividends. PBIT is also known as operating profit and EBIT (earnings before interest and tax). P/E Ratio The price/earnings ratio. Higher the P/E ratio indicates that every thing is moving well and share holders are after this stock. P/E ratio serves as an indicator for the investor to make a purchase decision. P N ( Participatory Notes ) PNs are participatory notes or the financial instruments used by FIIs ( foreign investors ) that are not registered with Security Exchange Board of India, to invest in Indian capital market. FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with these securities as the underlying. Profit Before Tax Profit before tax is the profit of a company after adding or deducting interest, but before deduction of corporation tax. Proxy A person who is authorized by the share holder to attend the AGM etc., the proxy need not be a share holder of the company. Record date The purpose of the record date is to finalize the list of the share holders of the company to qualify them for a forthcoming bonus or dividend. Registrar The appointed agent of a company who keeps a register of shareholders . Rights issue Offer of shares to the existing shareholders of the company to increase the capital. SEBI (Securities & Exchange Board ofIndia)

It is the Securities Exchange Board of India, it carries out regulatory functions pertaining to the Capital Market. SEBI was setup by the Govt. of India in the year 1988.

Shareholder A shareholder is a person who holds shares in a company. Shares A share is issued to a shareholder in exchange for cash or assets. The shares can either be got from primary market(IPO) or secondary market. Stockbroker The person, who buys and sells equities on a stock exchange on behalf of his clients. StockExchange A stock exchange is an organized market for shares to enable buying and selling.

StockSplit Stocks are split to provide more liquidity in the market, shares are sub divided as per the split ratio. The face value of the shares gets divided according to the stock split ratio. Stop loss A trigger price placed in the order form to minimize the unexpected loss. Share share in which there are frequent and day-to-day dealings, as distinguished from partly active shares in which dealings are not so frequent. Most shares of leading companies would be active, particularly those which are sensitive to economic and political events and are, therefore, subject to sudden price movements. Some market analysts would define active shares as those which are bought and sold at least three times a week. Easy to buy or sell Arbitrage : Business of buying in one exchange and selling in another to take advantage of price differences. Auction : A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. It is done when the seller is unable to deliver the scrips sold by him. The security in question is offered by a member who has ready possession of the scrips.

Bear : An operator who expects the share price to fall Bear Market : A weak and falling market where buyers are absent Blue Chips : Shares of financially sound, well established companies with a track record of good growth and regular payment of dividends. Bonus Shares : Shares allotted to the existing shareholders by capitalising the reserves into additional capital. When market expects a company to come out with a Bonus Issue, the price of the shares normally goes up. Book Closure: A company closes its register of members for updating the records to facilitate payment of dividends or issue of rights of bonus shares. Book closure is the period during which this process is done and deliveries are not affected in the clearing house. Bourse : A Stock Exchange Bull : An operator who expects the share price to rise and takes position in the market to sell at a later date. Bull Market : A rising market where buyers far outnumber the sellers

Call Option : An option where the buyer gets the right to buy the underlying security at a specified future date. Carry Forward : Settlement where positions are carried forward from one settlement to another settlement. Cash Settlement : Payment for transactions done in one settlement on the due date. Circuit Breaker : A mechanism used to restrain the market when it gets overheated. The Exchange may relax the limit after a cooling off period of about half an hour. Clearing House : It is a legal counter party to both legs of every trade. The netted purchase and sale positions of the trading Members are settled through the Clearing House. Company Objection : In some cases, the companies send back the certificates received for transfer citing reasons for their inability to do so. The letter sent by the Company is known as Company Objection. Cum Bonus : A share is described as cum bonus when the purchaser is entitled for current bonus

Cum Dividend : A shares is described as cum dividend when the purchaser is entitled for current dividend Cum Rights :

A share is described as cum rights when the purchaser is entitled for current rights Day Order :

The quantity that remains untraded is not cancelled until the end of the day. Dealer : A Dealer is a user who works on behalf of the Trading Member Delivery Based Trading : When a share is bought or sold for the purpose of receiving or effecting deliveries. Dematerialisation : Process of converting a security from physical form to electronic form Derivatives : A financial contract between two or more parties and it is derived from the future value of an underlying asset. Disclosed Quantity : An order entered in the system wherein only a fraction of the order quantity is disclosed to the market. Dividend : Cash payment made to the shareholders out of the profits of the company

Ex Bonus : A share is described as Ex Bonus when the buyer is not entitled for the Bonus. The seller remains the beneficiary. Ex Dividend : A share is described as Ex Dividend when the buyer is not entitled for the Dividend. The seller remains the beneficiary.

Ex Rights : A share is described as Ex Rights when the buyer is not entitled for the Rights. The seller remains the beneficiary.

Expiry Date : The date and time after which a writer of an option cannot exercise his rights. Exposure Limit : The limit allowed to the Broker by the Exchange or to the customer by broker. It is the total value upto which one is allowed to hold open positions at any point of time. Futures Contract : An agreement between parties for a specified asset for performance Hedging : It is protecting an existing asset position from an adverse future position. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market on a fixed date in future. Insider Trading : Trading carried out by people who have access to non public price sensitive information. Limit Order : A buy or sell order where price is specified at the time of order entry

LoMargin : An upfront payment made by the customer to take position in the market. His exposure limit is fixed based on the margin money brought in by him. Mark To Market : A notional profit or loss of a long or short position as compared to the current market price.

Market Order : An order where no price specification is mentioned at the time of placement Offer : The price at which a share is available in the market Offer Price : The price at which a company offers its shares to the public through issue of a prospectus Order Cancellation : A facility available in the trading system where one is allowed to cancel the order placed earlier. Order Modification : A facility available in the trading system where one is allowed to modify an earlier order. Pay In : The designated day on which the members pay securities and funds to the clearing house

Pay Out : The designated day on which the Clearing House effects payment and deliveries to the members Price Band : It sets up the upper and lower limits for a share's movement on any given day. It is based on the previous trading day's closing price. The system will not accept the orders that are out of bound. Price Rigging : A process where persons collude to artificially increase or decrease the price of a security

Put Option : An option where the buyer gets the right to sell the underlying security at a specified future date Quote : Prices at which a share can be bought or sold Record Date : The date on which the beneficial owner of the Corporate Benefits is determined. Rematerialisation : Process of converting the shares from electronic form to physical form Rights Issue : Issue of new share to the existing shareholders at a price which is normally lower than the current market price of the old shares. It is issued in a fixed ratio to the those shares which are already held AnnualYield Also known as Dividend Yield. Annual yield represents the dividend return from an investment. It is calculated by dividing the dividend per share by the share price, converted to a percentage.

Yield = (Dividend per share / Last market price) x 100

Bollinger Bands Charting method used to analyze and project a stock's price movement. A Bollinger Band marks one standard deviation above the stock's moving price average, and another band marks one standard deviation below this average. Investors use the amount of space between the two bands to gauge the volatility of the market and to guide them in their investment decisions. Developed by John Bollinger, these bands are among the indicators available through our charts features.

Cash Settled Warrant Cash settled warrants are settled by a cash payment by the warrant issuer to the warrant holder, e.g. most index warrants. The cash payment will be calculated as determined by the terms and conditions of the warrant. Some warrants may offer the choice to investors for cash settlement or physical delivery (e.g. currency warrants).

Cash Settlement The procedure by which index futures and index options contracts are settled. Because an investor cannot directly buy or sell an index, index futures and option contracts are cash settled by allocating a dollar amount to each index point.

MUTUAL FUND-GLOSSARY

1. Active Management Ongoing supervision of a portfolio and its holdings to achieve maximum results. Active management is one of the main benefits of investing in a mutual fund. 2. Adjustable Rate Mortgage Funds (ARMs) A fund that invests primarily in adjustable rate mortgage securities. Funds in this category usually attempt to maintain a relatively stable net asset value, but can still be volatile in times of rising or falling interest rates. During periods of rising interest rates, investors stand to make more money, but homeowners faced with the prospect of paying more tend to prepay, prematurely canceling the investor's expected income. During periods of falling interest rates, the value of adjustable rate mortgages decreases relative to other fixed income securities. 3. Adviser The company that takes primary responsibility for managing a mutual fund. The adviser receives an annual fee for this service, usually ranging between 0.50% and 1% of a fund's total assets.

4. Aggressive Growth Funds A fund with an investment objective of rapid growth of capital. Aggressive growth funds usually include funds that invest in smaller companies, funds that invest heavily in a single industry, and funds that employ riskier investment techniques such as leveraging and short selling. 5. AMBAC Indemnity Corporation One of the largest private insurers of municipal bonds. This insurance provides that the bonds will be purchased from an investor at par value should the bond issuer default. Municipal bond funds featuring insured bonds tend to provide a higher degree of safety than funds without such insurance, but they also tend to offer a lower yield. 6. Annual and Semi-annual Reports Reports issued twice a year to a fund's shareholders detailing the fund's performance, portfolio holdings and current investment strategy. 7. Appreciation An increase in a fund's value. 8. ARMs (Adjustable Rate Mortgage Funds) ARMs are mortgages that require the real estate buyer to pay an interest rate that is periodically adjusted. The amount of the rate is tied to some index outside the control of the lender, such as the interest rate on U.S. Treasury bills. Like fixed-rate mortgages, ARMs are often grouped by a government agency and sold as a single security, with investors receiving payments out of the interest and principal on the underlying mortgages. Funds that invest primarily in these ARM-backed securities are called Adjustable Rate Mortgage Funds. 9. Asian Funds A fund that invests primarily in the stocks of companies located in Asia. These funds appeal to investors who believe that Asia potentially represents a growth area, and want to capitalize on that growth. 10. Ask Price Also known as the offering price, the ask price is the amount at which a mutual fund's shares can be purchased. To calculate the ask price, add a fund's current net asset value per share to its sales charge, if any. 11. Asset allocation fund A fund that invests in a variety of asset classes, including domestic and foreign stocks and bonds, money market instruments, precious metals, and real estate. Some asset

allocation funds maintain a relatively fixed allocation between asset classes, while others actively alter the mix as market conditions change. 12. Asset-backed security A debt instrument collateralized by credit card receivables, auto loans, or other assets and securitized by a bank or other financial institution. 13. Assets A fund's investment holdings and cash. Holdings can include stocks, rights, warrants, options, bonds, CDs, RANs TANs and BANs. 14. Automatic Investment A shareholder service that allows the periodic withdrawal of a specified amount from the shareholder's bank account to be invested in his or her mutual fund account. Some mutual fund groups also offer this service as a payroll deduction plan. (See also "dollar cost averaging.") 15. Automatic Reinvestment A shareholder service that authorizes dividend and capital gain distributions to automatically purchase more fund shares. Taxes still must be paid on the amount reinvested even though no funds are received directly by the investor. 16. Automatic Withdrawal A shareholder service that entitles an investor to fixed payments, every month or quarter. The payment comes from the dividends, income and/or realized capital gains on securities held by the fund. This service is often chosen by retirees who want to receive a regular income supplement. 17. Average Annual Total Return A standard measurement of fund performance that includes dividends, gains, and changes in share price. 18. Average Life The weighted average maturity date of a portfolio of bonds. 19. Backdating Backdating is used in relation to funds that offer declining proportional sales charges of larger purchases. This permits investors to count previous purchases of the fund's shares in qualifying for reduced loads or sales charges on subsequent purchases. 20. Back End Load

One of three possible sales charge schedules imposed by funds that charge fees. A back end load, or "deferred sales charge," is a fee charged when fund's shares are sold. The amount of the fee usually varies depending on how long the investment is held-generally the longer the time period, the smaller the fee. Funds sold under several sales charge options usually refer to the shares sold with a back end load as class B shares. 21. Balanced Fund A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. This broader diversification across asset classes tends to further reduce risk.

22. Balanced Target Maturity Funds A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. This broader diversification across asset classes tends to further reduce risk. 23. Barbell A bond management strategy where the portfolio is invested primarily in short-term and long-term bonds, but in few bonds with intermediate maturities. In theory, this approach allows one portion of the portfolio to take advantage of high yields, while the other portion tempers risk. 24. Basis Point (BP) The smallest measure used in quoting yields on fixed income securities. One basis point equals one percent of one percent, or 0.01%. 25. Benchmark Index Indicators used to provide a point of reference for evaluating a fund's performance. The most common benchmark for equity-oriented funds is the S&P 500 Index. For fixed-income funds it is the Lehman Brothers Aggregate Bond Index.

26. Beta A measure of a fund's risk, or volatility, compared to the market which is represented as 1.0. A fund with a beta of 1.20 is 20% more volatile than the market, while a fund with a beta of 0.80 would be 20% less volatile than the market. 27. Bid Price

Also known as the "sell" price, the bid price is the price at which a fund's shares are bought back by the fund. The bid price of a fund share is usually its net asset value. 28. Bond Fund A fund that invests primarily in bonds, whether they are issued by corporations, municipalities, or the U.S. government and related agencies. Bond funds generally emphasize income over growth, and can generate either taxable or tax-free income. 29. Bottom-Up An investment strategy that first seeks individual companies with attractive investment potential, then proceeds to consider the larger economic and industry trends affecting those companies. 30. Breakpoint Dollar levels of investment in a fund that qualify you for reduced sales charges. The purchases may either be made in a lump sum or by accumulating shares. 31. Call Risk The possibility that bonds will be re-paid (or "called") prior to maturity. This possibility increases during periods of falling interest rates. 32. Capital Appreciation The profit made on an investment, measured by the increase in a fund share's value from the time of purchase to the time of sale. 33. Capital Appreciation Funds A fund that invests primarily in common stocks the manager believes will provide maximum capital appreciation. Capital appreciation funds often resort to aggressive investment techniques, such as rapid portfolio turnover, leveraging, and investing in unregistered securities in order to achieve their objectives. 34. Capital Gain Distributions A distribution to shareholders of profits realized from the sale of securities in a fund's portfolio. Capital gain distributions are usually paid yearly, and are currently taxable at a rate up to 28%. 35. Capital Growth Also called capital appreciation, capital growth is an investment objective of many stock funds. Capital growth is achieved when the market values of a fund's holdings increase, causing the fund's net asset value per share to increase. 36. CDSC (Contingent deferred sales charge)

A type of back end load sales charge, a contingent deferred sales charge is a fee charged when shares are redeemed within a specific period following their purchase. These charges are usually assessed on a sliding scale, with the fee reduced each year the shares are held. 37. Certificate A physical document representing the mutual fund shares owned. Certificates are rarely issued, in the interest of economy and convenience. Shares are now recorded by the Transfer Agent, or in a brokerage account (known as "street name.") 38. Classes of Shares Various classes of a single portfolio are distinguished by the type of sales charge they levy. In general: -- Class A shares carry a front-end load. -- Class B shares carry a back-end load (also known as a contingent deferred sales charge). -- Class C shares carry an ongoing charge (usually in the form of an annual 12b-1 charge).

39. Clone Fund A fund launched to mirror a closed fund. For example, fund managers may decide to close a fund that has grown so large it is no longer able to establish positions in smaller securities. They could then launch a new fund in the closed fund's image. While both funds would have the same investment objective, they would generally be run by different managers and would invest in different securities. 40. Closed-End Fund A fund that offers a limited number of shares. The shares of closed-end funds, which are typically listed on one of the major stock exchanges, are bought and sold through brokers. The price of the shares is determined by the pressures of supply and demand rather than by the value of underlying assets. 41. Closed to New Investors Occasionally a manager may declare a fund "closed to new investors" which means that no new investments will be accepted. This is often a temporary designation, prompted by a tremendous amount of money invested in the fund in a short period of time. The portfolio manager may be concerned about finding enough appropriate securities to add to the fund's portfolio. 42. Collateralized Mortgage Obligation (CMO) A security collateralized with mortgages or mortgage-backed securities. Many CMOs backed by a U.S. government agency are rated AAA. Non-agency CMOs may be lower rated. 43. Commercial Paper

Debt instruments that are issued by established corporations to meet short term financing needs. Such instruments are unsecured and have maturities ranging from 2 to 270 days. Commercial paper is rated by Standard & Poor's and Moody's Investor Service. 44. Commission A fee imposed when funds are bought or sold to compensate the broker for his or her role in the transaction. 45. Common Stock Fund A fund that invests primarily in common stocks. The investment objectives of common stock funds may vary greatly. 46. Compounding Interest earned on interest previously earned and reinvested. For example, if a security paid a fixed interest rate of 10% annually and an investor invested $500, by the end of the first year the investor would have earned $50 in interest. If that interest was reinvested, the investor would enter the second year with $550 invested. At the end of the second year, the investor would have earned $55 in interest -- earning an extra $5 in interest thanks to the reinvestment of the first year's interest. 47. Contingent Deferred Sales Charge (CDSC) A type of back end load sales charge, a contingent deferred sales charge is a fee charged when shares are redeemed within a specific period following their purchase. These charges are usually assessed on a sliding scale, with the fee reduced each year the shares are held. 48. Contractual Plan A program in which a legal vehicle (plan company or participating unit investment trust) agrees to invest a fixed amount in a fund at regular intervals for 10 or 15 years. In exchange, investors in these plans commonly receive other benefits, such as decreasing term life insurance. 49. Convertible Securities Funds A fund that invests primarily in convertible bonds and/or convertible preferred stocks. 50. Convertible Security Corporate securities (usually preferred shares or stock or bonds) that are exchangeable for a set number of another form of security (usually common stock) at a prestated price. 51. Corporate Bond Funds

A fund that invests primarily in corporate bonds. In general, corporate bond funds seek income over capital growth. 52. Country Funds A fund that invests primarily in the securities of a single country. In some cases, country funds also invest in securities outside the single country if those securities are expected to benefit by growth in that country.

53. Country Risk The potential for price fluctuations in stocks sold in foreign countries due to events (political, financial, etc.) in these countries. 54. Credit Rating A measure of a bond issuer's creditworthiness as rated by an independent agency, such as Standard & Poor's or Moody's Investor Services. Ratings are set as a reflection of the perceived financial stability of the issuer, from AAA to D. Bonds rated Baa or higher by Moody's, or BBB or higher by S&P, are considered "investment grade." Conservative investors tend to select funds composed of all AAA rated bonds, or "investment grade" bonds. More aggressive investors, looking for high yields, are more interested in funds that invest in lower rated bonds. 55. Credit Risk The possibility that a bond issuer will default, failing to repay principal or interest as promised. "Credit risk" is also known as "default risk." 56. Currency Risk The potential for price fluctuations in the dollar value of international stocks due to changing currency exchange rates.

57. Current Yield Annual interest or dividend payments expressed as a percentage of a bond's current price. 58. CUSIP (Committee on Uniform Securities Identification Procedures) A standard nine-digit code used to identify securities. 59. Custodian The organization (usually a bank) that keeps custody of securities and other assets of a fund.

60. Deferred Sales Charge A type of back end load sales charge, a deferred sales charge is a fee charged when shares are redeemed within a specific period following their purchase. 61. Depreciation A decline in an investment's value. 62. Derivative A financial security whose value is based on, or "derived" from, a traditional security, asset, or market index. 63. Distribution The payment of dividends and capital gains to shareholders 64. Distributor The organization arranging for the sale of fund shares either directly to the public or through intermediaries, such as financial advisers. 65. Diversification The practice of spreading investments among different securities to reduce risk. Diversification works best when the returns of the securities are varied, so that losses incurred by securities falling in price are offset by gains of those rising in price. By nature, mutual funds are a diversified investment.

66. Dividend Short-term profits, stock dividends or interest income which funds distribute to shareholders. 67. Dollar Cost Averaging A method of investing that calls for the investment of a set dollar amount at regular intervals, regardless of the fund's share price. As a result, more fund shares are bought when prices are low than at high prices, usually bringing down an investor's average cost per share over time. Dollar cost averaging does not, however, guarantee a profit or protect against a loss. 68. Double Exempt Fund A fund that only invests in tax-exempt bonds of issuers from a single state. Income from a double exempt fund is free of federal and state income taxes for investors

residing in the same state as the issuers of the bonds. Double-exempt funds have been particularly popular in the high-tax states of California and New York. Double tax exempt funds are usually subject in part or whole to the Alternative Minimum Tax (AMT). AMT percentage calculations for income tax purposes are available after each year end by contacting the fund directly. 69. Dow Jones Industrial Average (DJIA) The oldest, best known, and most widely quoted stock market index. The DJIA reflects a price-weighted average of 30 actively traded blue chip stocks. These 30 securities represent between 15-20% of the market value of the New York Stock Exchange traded stocks. 70. Dual Purpose Fund A closed-end fund offering two classes of stock in approximately equal amounts. One class (income shares) is entitled to all the income from the fund's portfolio (i.e., dividends from investments). The second class (capital shares) is entitled to all of the capital appreciation from the fund's holdings. At the time a dual purpose fund is established, a date is set on which the fund will be liquidated. At that time, income shareholders receive preference up to the par value of their shares and capital shareholders receive any excess. 71. Emerging Markets Funds A fund that invests primarily in the stocks of companies in, or doing business in, developing countries and emerging markets. Emerging market funds usually have an investment objective of long-term growth and are generally considered aggressive stock funds. 72. Energy Stock Funds A fund that invests primarily in the stocks of companies in the energy business. 73. Environmental Securities Funds A fund that invests primarily in securities issued by environmental-related companies. These include companies involved in hazardous waste treatment, waste recycling, and other related areas. 74. Equity Income Funds A fund that seeks to provide relatively high current income and growth of income by investing a large portion of its assets in stocks. 75. Ethical Fund A fund that only invests in the securities of firms meeting certain social standards. For example, an ethical fund might exclude securities of companies that are known to practice discrimination, that operate in certain countries, or that produce specific products such as alcohol, tobacco, or nuclear weapons.

76. European Stock Funds A fund that invests primarily in the stock of Western European companies.

77. Exchange Privilege A shareholder service that allows shareholders to move their assets from one fund to another fund within the same mutual fund family, usually without any additional sales charge or fees. Fund groups vary in the specific parameters detailing when or how many times an investor may use the exchange privileges. 78. Ex-Dividend Date The date on which a fund's net asset value will fall by an amount equal to a dividend or capital gains distribution. The ex-dividend date is usually the business day immediately following the record date. 79. Expense A fund's cost of doing business. All of a fund's expenses are disclosed in the prospectus as a percentage of assets. 80. Expense Ratio A fund's operating expenses, expressed as a percentage of its average net assets. Funds with lower expense ratios are able to distribute a higher percentage of gross income returns to shareholders.

81. 401(k) Plan An employer-sponsored retirement plan that enables employees to defer taxes on a portion of their salaries by earmarking that portion for the retirement plan. Several investment options, including a range of funds, are generally offered. 82. 403(b) (7) Plan A type of individual retirement account (IRA) designed specifically for employees of qualifying nonprofit organizations (i.e., public schools, public hospitals, churches). A 403(b)(7) plan enables these employees to defer taxes on a portion of their salaries by earmarking that portion for the retirement plan. Several investment options, including funds, are generally offered for investment. 83, Family of Funds A fund's cost of doing business. All of a fund's expenses are disclosed in the prospectus as a percentage of assets.

84. Financial Services Funds A fund that invests primarily in the stocks of companies engaged in providing financial services, including banks, finance companies, insurance and securities or brokerage firms. 85. Fixed Income Security A security that pays a fixed rate of return. This term is usually used in reference to government, corporate or municipal bonds, which pay a fixed rate of interest until the bonds mature, and to preferred stock, which pay a fixed dividend. Fixed income securities offer the guarantee of a fixed return, but do not offer an investor much, if any, potential for growth.

86. Flexible Portfolio Funds A fund that can invest in stocks, bonds and cash in whatever proportion the manager deems appropriate, providing the manager total flexibility to achieve maximum returns. Flexible portfolio funds are sometimes called asset allocation funds. 87. Front-End Load One of three possible sales charge schedules imposed by funds that charge fees. A front end load, or "upfront charge" is a fee charged on the initial purchase of fund shares, and can range from 3% to 8% of the purchase amount. Funds sold under several sales charge options usually refer to the shares sold with a front end load as "Class A shares." 88. Fully Invested The investment of nearly all available assets in securities other than short-term securities (such as savings and money market accounts). When a fund is said to be "fully invested," it usually implies that the fund's manager is confident that the securities markets will be improving. 89. Fund of Funds A fund that invests only in the shares of other open-end funds. Fund of funds were popular during the 1960s but have subsequently fallen out of favor with most investors. 90. General Bond Funds

A fund that invests in bonds without any quality or maturity restrictions. 91. General Municipal Bond Funds A fund that invests primarily in bonds issued by municipalities throughout the country, and which generate federally tax-exempt income. 92. Global Mutual Fund A mutual fund that invests anywhere in the world, including within the United States. These can be either stock or bond funds.

93. GNMA (Government National Mortgage Association) Nicknamed Ginnie Mae, the Government National Mortgage Association is a government owned corporation with the authority to fully guarantee the full and timely payment of all monthly principal and interest payments on the mortgage backed securities collateralized by registered holders. 94. Gold Fund A fund that invests primarily in securities associated with gold, including gold mining, refining and production concerns. Gold funds are also sometimes referred to as precious metals funds. 95. Government Income Fund A fund that invests primarily in securities associated with gold, including gold mining, refining and production concerns. Gold funds are also sometimes referred to as precious metals funds. 96. Growth An investment objective of many stock funds. Current income, if considered at all, is a secondary concern for these funds. Capital growth is achieved when the market value of a fund's holdings increases, causing the fund's net asset value per share to increase. 97. Growth and Income Fund A fund that seeks to provide both growth of capital and a stream of income. This is done by investing primarily in the common stock of companies that have had not only increasing share value, but also a solid record of paying dividends. 98. Growth Fund

A fund that invests primarily in the stocks of companies whose long-term earnings are expected to grow significantly faster than the earnings of the market in general (as represented by the S&P 500 Index). In general, growth funds seek to provide capital gains, rather than dividend income. 99. Growth Index Fund A fund that invests primarily in growth stocks included in one of the major unmanaged stock indices. Growth index funds generally seek to match or exceed the investment performance of the targeted index.

100. Growth Investing An investment strategy to increase capital by buying stocks the manager believes will go up in price, regardless of the stock's current price relative to its underlying value. Growth investing is often discussed in contrast to value investing. 101. Health and Biotechnology Funds A fund that invests primarily in the stocks of companies in the medical industry. 102. Hedge Fund A mutual fund that uses futures to offset investment risk. For example, a fund manager concerned about declining stock prices might hedge his or her holdings by buying a put option of some stocks. Put options, call options and selling short are widely used hedging tools for stock fund managers. Hedging is also used extensively in international funds that attempt to minimize currency risks. The fund's prospectus discloses whether or not a fund engages in hedging. 103. High Current Yield Fund A fund that seeks to provide a relatively high current yield. High current yield funds tend to invest primarily in lower grade fixed income securities without any quality or maturity restrictions. 104. High-Yield Bond Fund A fund that invests primarily in high yield bonds, also referred to as junk bonds. High yield bond funds generally seek high returns and tend to be one of the riskier bond fund investments.

105. Historical Yield Yield provided by a fund (typically a money market fund) over a specific time period. 106. Inception Date

The date a fund was first made available to investors.

107. Income 1) Payments of dividends, interest, and/or short term capital gains earned by securities held by a fund. Income dividends are paid after deducting operating expenses. 2) An investment objective of many fixed income funds. Capital appreciation is not a consideration for these funds. 108. Income Fund A fund that invests primarily in fixed income securities and/or high-yielding stocks. In general, income funds seek to provide current income rather than growth of capital. 109. Index . Indicators used to provide a point of reference for evaluating a fund's performance. The most common indices for stock funds are the Dow Jones Industrial Average and the S&P 500 Index. For fixed-income funds it is the Lehman Brothers Aggregate Bond Index. 110. Index fund A fund that invests in a collection of securities intended to match that of a broadbased index (NOTE: It is not possible for investors to actually invest in the actual index, such as the S&P 500). In general, index funds seek the same or a slightly better return that the index they mirror. Index funds tend to charge low administrative expenses. 111. Individual Retirement Account (IRA) A personal savings plan that offers tax advantages to save and invest for retirement. Contributions are often tax deductible in whole or in part, depending upon individual cirumstances, including compensation levels and participation in an employer sponsored qualified retirement plan. Income derived from investments in a traditional deductible or nondeductible IRA are tax deferred until withdrawn. Under certain circumstances, withdrawals from a Roth IRA are tax free. Tax penalties may apply to IRA distributions taken before age 59 1/2. Contributions to an IRA may not exceed $2,000 per year. Individuals with earned income may contribute up to $2,000 to the IRA of a nonemployed spouse.

112. Inflation Risk The possibility that the value of assets or income will be eroded by inflation (the rising cost of goods and services). Inflation risk is often mentioned in relation to conservative fixed income funds. While these types of fixed income funds may minimize the possibility of losing principal, they expose an investor to inflation risk. 113. Insured Bond A guarantee on a municipal bond that interest and principal will be paid timely and in full. Insured bonds tend to carry a high credit rating but to pay a lower return than comparably rated uninsured bonds. The largest municipal bond insurers include: The Municipal Bond Investment Assurance Corp. (MBIA), Federal Guarantee Insurance Corp. (FGIC), and AMBAC Indemnity Corp. (AMBAC). 114. Intermediate Investment Grade Bond Fund A fund that invests primarily in investment grade fixed income securities with dollarweighted average maturities of five to ten years. 115. Intermediate U.S. Government Fund A fund that invests primarily in government guaranteed fixed income securities with a dollar-weighted average maturity of five to ten years. 116. Intermediate U.S. Treasury Fund A fund that invests primarily in U.S. Treasury bills, notes and bonds with a dollarweighted average maturity of five to ten years. 117. Inter national Fund A fund that invests primarily in the securities of companies located outside of the United States. In general, international investing not only offers diversification and the potential for high returns, but also involves special risks, such as currency concerns, and rapidly changing political scenarios.

118. Investment Company An investment company invests the pooled funds of investors in securities appropriate for its stated investment objectives. For a fee, the investment company provides more diversification, liquidity, and professional management service than is normally

available to individual investors. Mutual funds, known as open-end investment companies, have portfolios that can grow or be reduced, based upon market conditions and investor investment/redemption patterns. Hence the name: they have limitless numbers of shares outstanding. Closed-end funds, also called unit investment trusts, have a fixed portfolio, and a pre-set number of shares outstanding. 119. Investment Grade High quality bonds that are rated Baa or higher by Moody's, or BBB or higher by Standard & Poor's. Investment grade bonds are considered safe, because the rating reflects the perceived financial stability of the issuer. Usually, however, the higher the bond's rating, the lower the interest it must pay to attract buyers. 120. Investment Objective A fund's investment goal. For example, a growth fund typically has an investment objective of providing long-term growth of capital. 121. Investment Style A description of a fund's investment strategy. For example, a growth fund might have a growth oriented style, a value-oriented style, or a blend of the two. Fixed-income funds tend to be managed with either an interest-rate sensitive style or a creditsensitive style. 122. Junk Bond Bonds rated BB or below by Standard & Poor's Corporation and Ba or below by Moody's Investor Service. Junk bonds tend to be more volatile and higher yielding than bonds with higher quality ratings. 123. Junk Bond Fund A fund that invests primarily in lower rated bonds (BB or below by Standard & Poor's Corporation and Ba or below by Moody's Investor Service), also referred to as junk bonds. Junk bond funds generally seek high returns and tend to be one of the riskier bond fund investments.

124. Ladder A fixed income investment strategy that seeks to reduce interest rate risk by investing in fixed income securities with a wide variety of maturities. Though this strategy assures continuous cash flow, there may be some sacrifice of total return, since shorter-term bonds tend to have lower yields than longer-term bonds.

125. Large-Caps

Stocks of companies with market capitalizations of more than $1 billion. Large-caps tend to be well established companies, so that their stocks entail less risk than smallercaps, but which also offer less potential for dramatic growth. 126. Latin American Fund A fund that invests primarily in the securities of companies in Latin American countries. 127. Letter of Intent An agreement calling for an investor to invest a specific amount in a fund over a defined period in order to qualify for reduced sales charges. The reduced sales charge may apply to an individual fund or to all the funds operated by a single investment management firm. 128. Lipper Analytical Services Inc. A leading mutual fund research and tracking firm. Lipper categorizes funds by objective and size, and then ranks fund performance within those categories. 129. Lipper Indices The Lipper Analytical Indices are equally weighted indices of typically the 30 largest mutual funds within their respective investment objectives. Returns are adjusted for the reinvestment of capital gains distributions and income dividends. 130. Liquidity The ease with which an investment can be converted into cash. Shares in a fund are generally considered highly liquid investments because they can be sold on any business day for their then current value (which may be more or less than an investor's original cost).

131. Load A sales charge assessed by certain mutual funds (load funds) to cover selling costs. A front-end load is charged at the time of purchase. A back-end load is charged at the time of sale. 132. Long-Term Funds All funds other than short-term funds (i.e., money market funds). 133. Low-Load A sales charge of 3% or less. 134. Management Fee

The amount a fund pays to its investment adviser for its services. The average annual fee industry wide is about one half of one percent of fund assets. A fund's management fee must be listed in its prospectus. 135. Manager The Firm that provides the fund with investment research and portfolio management services. 136. Manager Tenure How long the portfolio manager has been responsible for a fund's management. 137. Market Capitalization Also referred to as "market cap." Market capitalization is a measure of a corporation's value, calculated by multiplying the number of outstanding shares of common stock by the current market price per share. Market capitalization is usually grouped into four main categories: large-cap, mid-cap, small-cap, and micro-cap. 138. Market Timing Attempting to time the purchase and sale of securities to coincide with ideal market conditions. Mutual fund investors may switch from stock funds to bond funds to money market funds as the strength of the economy and interest rate directions change.

139. Maturity Date The date on which the principal amount of a bond is to be paid in full. 140. Maximum Front-End Load The fee an investor pays when purchasing shares of a fund. A fund has different load breakpoints depending on the purchase total. For example, a fund may charge: 4.5% to $100,000 - 4.0% to $250,000 - 3.0% to $500,000 - 2.0% to $1 Million - 0.0% thereafter 141. Micro-Caps A subset of small-caps. Stocks of companies with a market capitalization of less that $50 million are "micro caps." Micro-caps tend to be new, relatively untested corporations that can offer greater growth potential than larger caps, but also entail greater risk. 142. Mid-Cap Fund

A fund that invests primarily in the stocks of companies with a medium market capitalization (mid caps). 143 .Mid-Caps Stocks of companies with a medium market capitalization, usually defined as between $500 million and $3-5 billion. Mid-caps are often considered to offer more growth potential than larger-caps (but less than small caps) and less risk than small-caps (but more than large-caps). 144. Minimum Purchase The smallest investment amount a fund will accept to establish a new account. Most fund groups also impose a minimum for additional purchases to an existing account.

145. Money Market Fund Money market funds seek to maintain a stable net asset value by investing in the short-term, high-grade securities sold in the money market. These are generally the safest, most stable securities available, including Treasury bills, certificates of deposit, and commercial paper. Money market funds limit the average maturity of their portfolio to 90 days or less. They seek to generate monthly income, and to maintain a stable $1.00 per share net asset value. Some money market funds offer checkwriting privileges. No fees are generally charged to purchase or redeem shares in a money market fund. Several different portfolio types are available: Taxable, taxable government securities, and national or state tax-free. 146. Morningstar An independent mutual fund rating agency that tracks over 7,200 mutual funds. Of those, Morningstar publishes full-page research reports on 1,500. Morningstar's rating system calls for the awarding of between 1 (the lowest) and five (the highest) stars to a fund for its risk adjusted performance over a 3, 5, and 10-year period. Approximately 10% of the funds rated earn five stars. Star ratings are recalculated monthly. 147. Mortgage-Backed Security A security that returns principal and interest monthly as payments are received on the underlying mortgages. They are made up of individual home mortgages guaranteed by

the government agencies. The mortgages are packaged into pools by agencies such as: Government National Mortgage Assn. (GNMA), Federal National Mortgage Assn. (FNMA), Federal Home Loan Mortgage Corp. (FHLMC). Unscheduled repayment of principal can shorten the maturity of the bonds. (See "Prepayment Risk.") 148. Municipal Bond A bond issued by a municipality to finance schools, highways, hospitals, airports, bridges, water and sewer works, and other public projects. 149. Mutual Fund An open-end investment company that combines the money of thousands of people and invests it in a variety of securities in an effort to achieve a specific objective over time. Mutual funds offer the benefits of portfolio diversification (which provides greater safety and reduced volatility), professional management, and stand ready to buy back its shares at the current net asset value. Every fund's prospectus details information on the fund's objectives, fees, the management company, and more. 150. Natural Resources Fund A fund that invests primarily in securities of companies that own, process, transport, or market natural resources, which can include metals, minerals, and forest products. 151. Net Assets The net worth of a fund. 152. Net Asset Value (NAV) The current market worth of a mutual fund's share. A fund's net asset value is calculated daily by taking the funds total assets, securities, cash and any accrued earnings, deducting liabilities, and dividing the remainder by the number of shares outstanding. 153. No Load Fund A fund that sells its shares directly to investors without a sales charge. 154. Objective A fund's investment objective states the financial goals it is aiming for, such as "growth," or "income." 155. Offering Price Also known as the "ask" price, the offering price is the amount at which a mutual fund's shares can be purchased. To calculate the offering price, add a fund's current net asset value per share to its sales charge, if any.

156. Open-End Fund (Also known as "mutual fund.") An investment company that pools money from shareholders and invests in a variety of securities, including stocks, bonds, and money market instruments. They offer growth, income, or both, and the opportunity to invest in everything from a country or industry to the movements of the markets themselves. A mutual fund continually sells new shares to investors and redeems those that are tendered by shareholders.

157. Operating Expenses The normal costs a mutual fund incurs in conducting business, such as the expenses associated with maintaining offices, staff, and equipment. There are also expenses related to maintaining the fund's portfolio of securities. These expenses are paid from the fund's assets before any earnings are distributed. 158. Option Fund A fund which trades options to increase the value of its shares. The fund may either be conservative or aggressive. A conservative fund, commonly called an "option income fund," may buy stocks and increase shareholders' income through the premium earned by writing options on the stocks within the portfolio. An aggressive fund, commonly called an "option growth fund," may buy options in securities that the fund manager thinks will fall or rise sharply in the near term. 159. Pacific Basin Fund A fund that invests primarily in the stocks of companies located in the Pacific Basin, which includes Australia, Hong Kong, Japan, Malaysia, New Zealand, Singapore, and Taiwan. 159. Pacific Ex Japan Funds A fund that invests primarily in the stocks of companies whose primary trading markets or operations are concentrated in the Pacific region (including Asian countries), and which specifically does not invest in Japan. 160. Payment Date The day on which a mutual fund pays income dividend or capital gains distributions to its shareholders. 161. Penalty Plan

A mutual fund accumulation plan in which sales fees for the entire obligation are deducted from shares purchased in the first few years that the plan is in effect. In the event that the investors redeem the shares after a short time, only a small portion of the purchase price will be refunded. Sales charges and penalty plans are regulated by the Investment Company Amendments Act of 1970.

162. Performance A measure of how well a fund is doing. Two commonly used mutual fund performance measures are yield (which measures dividends) and total return (which measures dividends plus changes in net asset value). 163. Periodic Payment Plan A plan in which an investor agrees to make monthly or quarterly investments in a mutual fund as a method of accumulating shares over a period of years. Fixed periodic contributions result in dollar cost averaging. 164. Pooling Pooling is the basic concept behind mutual funds. A fund pools the money of thousands of individual and institutional investors who share common financial goals. The fund uses this pool to buy a diversified portfolio of investments 165. Portfolio A collection of securities owned by an individual or an institution (like a mutual fund). A fund's portfolio may include a combination of stocks, bonds, and money market securities. 166. Portfolio Manager The individual who is responsible for managing a mutual fund's assets. 167. Portfolio Turnover A measure of the trading activity in the fund's portfolio of investments. In other words, how often securities are bought and sold. 168. Precious Metals Fund A fund that seeks an increase in the value of its holdings by investing at least twothirds of its portfolio in securities associated with gold, silver, and other precious metals. Also known as "gold funds."

169. Prepayment Risk The possibility that, as interest rates fall, homeowners will refinance their home mortgages, resulting in the prepayment of GNMA securities, and possible decline in net asset values of GNMA Funds.

170. Principal The basic amount actually invested, exclusive of earnings. 171. Professional Management The pool of shareholder dollars invested in a fund is managed by full-time, experienced professionals who decide which securities to hold, when to buy, and when to sell. 172. Prospectus The official document that describes a mutual fund. It contains information required by the Securities and Exchange Commission on such subjects as the fund's investment objectives, policies, services and fees. A prospectus must be given to every investor. A more detailed document, known as "Part B" of the registration statement, (or "Statement of Additional Information,") is available at no charge upon request. 173. Real Estate Fund A fund that invests primarily in stocks of companies that participate in the real estate industry, such as mortgages and real estate investment trusts, but not real estate itself. 174. Real Return The actual return earned on an investment after factoring in the rate of inflation. 175. Record Date The date on which a shareholder must officially own a stock's shares in order to receive a company's declared dividend or to vote on company issues. 176. Redeem To cash in shares by selling them back to the mutual fund. Mutual fund shares are redeemable on any business day. 177. Redemption Fee A fee charged by some funds when shares are sold (redeemed).

178. Redemption Price The price at which a mutual fund's shares are redeemed (bought back) by the fund. The value of the shares depends on the market value of the fund's portfolio of securities at the time. This value is the same as "net asset value per share." In the newspaper, this amount is shown as the "bid" price. 179. Reinstatement Privilege A shareholder who redeems fund shares, and then changes his or her mind, may have a onetime privilege of reinstating the investment by investing the proceeds of the redemption at net asset value (with no sales charge). There is generally a 30-day time limit for this service. 180. Repurchase Agreement (REPO) A contract under which an investor sells a United States security to a bank or Corporation, and agrees to repurchase the security later at a specified time and price. Purchaser earns interest competitive with money market rates. 181. Revenue Bond A municipal bond used to finance public works such as bridges, tunnels, or sewers. Principal and interest on the bond are paid directly from the revenues of the project, such as tolls. (Opposite: G.O., or General Obligation Bond, which relies on the taxpayers of a municipality to repay the debt.) 182. Right of Accumulation (ROA) A right granted by some mutual funds that allows a shareholder to count existing holdings of the fund along with new purchases in determining the size of the sales fee on the new shares. This right applies to funds that offer discounts on high-volume investments. Thus the fee charged on succeeding purchases is determined by all purchases, past and present, not just by new purchases. 183. Rollover The reinvestment of funds into another, often similar, investment. Often used when securities are maturing, or when moving an Individual Retirement Account

184. R-Squared

The degree to which an asset's correlation with "the market" has explained its fluctuations over a specified period of time. Alpha and beta coefficients are calculated using a procedure known as "regression analysis," where points in a system of coordinates are generated by measuring "market" movements (the "independent variable") along the horizontal "X" axis and correlating them with movements in the asset (the "dependent variable") measured along the vertical "Y" axis. If the plot points clearly defines a straight line, the model will have an R-squared value of close to 1.0, meaning that fluctuations in the market explain close to 100% of the relative volatility in the asset. If the pattern of plot points is largely random, the R-squared value will be near zero, meaning that fluctuations in the market explain virtually nothing about fluctuations in the asset. 185. Russell 2000 A commonly cited index of small-cap stocks. 186. S&P An unmanaged group of stocks often considered representative of the stock market in general. This index is composed of 400 industrial, 20 transportation, 40 utility, and 40 financial companies. 187. S&P 500 Index (Monthly Reinvestment) A broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. Performance figures assume that all dividends are reinvested. 188. S&P 500 Index Fund A fund that invests primarily in the stocks included in the S&P 500 Index. Sometimes referred to as "blue-chip" stocks, they tend to be of large, well-established companies. 189. SAI (Statement of Additional Information) An attachment to the fund's prospectus that contains more detailed, supplementary information. Also referred to as "Part B," the SAI is available at no charge upon request from a fund.

190. Sales Charge An amount charged to purchase shares in many mutual funds sold by brokers or other sales agents. The maximum allowable charge is 8.5% of the initial investment. 191. Science and Technology Fund

A fund that invests primarily in the stocks of companies engaged in science and technology industries. 192. Sector Fund A fund that invests primarily in securities of companies engaged in a specific investment segment. Sector funds entail more risk, but may offer greater potential returns than funds that diversify their portfolios. For example, a sector fund may limit its holdings to securities from a particular country or geographic region, or it may specialize in the securities of energy-related firms, or in companies that produce precious metals. 193. SEC Yield A standardized calculation that the Securities and Exchange Commission requires mutual funds to use when advertising rates of income return. This standardized rate ensures that investors are comparing "apples to apples" when comparing ads from different mutual fund companies. 194. Series Fund Funds that are organized with separate portfolios of securities, each with its own investment objective .195. Settlement Date The date agreed upon by the parties to a transaction for the payment of funds and the delivery of securities. 196. Shareholder An investor. The shareholder is the owner of shares of a mutual fund. 197. Short-Term Fund A fund that invests primarily in securities with maturities of less than one year. Shortterm funds include taxable money market funds and tax-exempt money market funds (also known as short-term municipal bond funds). 198. Signature Guarantee A stamp or seal given by a bank or member of a domestic stock exchange that authenticates a signature. A signature guarantee is typically required by a mutual fund sponsor to conduct certain transactions, such as the change in ownership of an account. 199. Small-Caps Shorthand for small capitalization stocks, small-caps usually have a market capitalization of $500 million or less. In general, small caps tend to be less established

companies that offer more growth potential than larger capitalized companies, but which also entail greater risk. 200. Small Company Growth Fund A fund that seeks aggressive growth of capital by investing primarily in stocks of relatively small companies with the potential for rapid growth. 201. Spread-Load Contractual Fund A contractual plan for purchasing shares of a mutual fund in which sales charges are not concentrated in the first payment or in the first few payments made by the investor. 202. Standard Deviation A measure of the degree to which a fund's return varies from the average of all similar funds.

203. Statement of Additional Information (SAI) An attachment to the fund's prospectus that contains more detailed, supplementary information. Also referred to as "Part B," the SAI is available at no charge upon request from a fund. 204. State Municipal Bond Funds These funds invest in bonds issued by municipalities located all in one particular state. Residents of that state earn income that is exempt from federal, state, and sometimes city income taxes.

205. Stock Fund A fund that invests primarily in stocks. 206. Strip A brokerage house practice of separating a bond into two separate securities: a principal portion (PO) and an interest portion (IO). A variation known by the acronym "STRIPS" (Separate Trading of Registered Interest and Principal of Securities) is a stripped zero-coupon bond that is a direct obligation of the U.S. Treasury. Other strips include Treasuries stripped by brokers, such as TIGERS, and Salomon Brothers' taxexempt M-CATS. 207. Switching

The movement of assets from one fund to another. Also know as "exchanging." An investor will switch mutual funds when their investment objectives change or because of market conditions. This is usually done within a family of funds, but can be done between different fund families. There usually is no charge for a certain number of transactions per year, after which a transaction fee may apply. 208. Symbol The 5-digit identifier code assigned to each mutual fund by NASDAQ. This code is used to identify the correct fund in all transactions. This symbol may only loosely resemble the newspaper listing--these tend to be phonetic abbreviations of fund names. 209. Systematic Withdrawal System An optional service often available to shareholders that would arrange for a fixed amount to be redeemed from an account and sent to the shareholder on a regular basis (usually monthly, quarterly, or semi-annually). 210. 12b-1 Fee The fee--named for an SEC rule--charged by some funds to pay for distribution costs, such as advertising and dealer compensation. The fund's prospectus outlines 12b-1 fees, if any. 211. Target Maturity Fund A fund that invests primarily in zero coupon U.S. Treasury securities, or in couponbearing U.S. government securities targeted to mature in a specific year.

212. Taxable Equivalent Yield The yield that would have to be earned on a security to pay as much, after tax, as what is earned from a tax-exempt bond. 213. Tax-Exempt Bond Fund A fund that invests in municipal bonds. While investors do not pay federal income taxes on the income from these funds, they may be subject to state or local taxes. 214. T-Bill (Treasury Bill) A fixed-income security issued by the U.S. Government. 215. Technology Fund A fund that invests primarily in the stocks of companies engaged in the technology industry.

216. Telephone Switching The movement of an investor's funds from one mutual fund to another on the basis of an order given via telephone. 217. Top Down An investment approach that first seeks to define major economic and industry trends, and then proceeds to identify specific companies that are likely to benefit from those trends. (See also "bottom-up.") 218. Total Return A measure of a fund's performance that takes three factors into account: income dividends, capital gains distributions, and share price appreciation/depreciation. 219. Trade Date The date on which a purchase or redemption of mutual fund shares is conducted. 220. Transfer The process of changing ownership of an account within the same fund.

221. Transfer Agent The organization employed by a mutual fund to prepare and maintain records relating to the accounts of its shareholders. Some funds serve as their own transfer agents. 222. Treasuries Fixed income securities issued by the U.S. government. Treasuries include: Treasury Bills (T-Bills), Treasury Notes, and Treasury Bonds. 223. Triple Tax-Exempt Fund A municipal bond mutual fund whose dividends and interest are exempt from federal, state and local income taxes for residents of a particular state. 224. Turnover Rate The rate at which the fund buys and sells securities each year. For example, if a fund's assets total $100 million and the fund bought and sold $100 million of securities that year, its portfolio turnover rate would be 100%. 225. U.S. Treasury Fund

A fund that invests primarily in financial instruments issued or guaranteed by the U.S. Treasury or its agencies. 226. Underwriter The organization that acts as the distributor of a mutual fund's shares to broker/dealers and investors. 227. Unrealized Gain or Loss Increases or decreases in the prices of securities held by the fund. 228. Utility Fund A fund that invests primarily in securities issued by companies in the utilities industry. 229. Value Investing The investment style of attempting to buy underpriced stocks that have the potential to perform well and increase in price.

230. Variable Annuity A type of insurance contract that guarantees future payments to the holder, or annuitant. Capital accumulates tax-free, often through investment in a mutual fund, and is converted to an income stream at a future date (usually retirement). All monies held in the annuity accumulate on a tax-deferred basis. 231. Volatility The amount by which the price of a security fluctuates as market conditions change. 232. Voluntary Accumulation Plan A plan to acquire additional shares in a mutual fund on a more or less regular basis, at the discretion of the shareholder. 233. Withdrawal Plan A program in which shareholders receive payments from their mutual fund investments at regular intervals. 234. Yield Current income (interest or dividends) paid by a fund, expressed as a percentage of the investment's price. 235. Yield Curve

A graph depicting yield as it relates to maturity. If short-term rates are lower than long-term rates, it is called a positive yield curve. If short-term rates are higher, it is called a negative, or inverted, yield curve. If there is little difference, it is called a flat yield curve. 236. Yield to Maturity (YTM) The effective annual rate of return earned by a bond if held to maturity. This rate takes into account the amount paid for the bond, the length of time to maturity, and assumes coupon payments can be reinvested at the yield to maturity. 237. Zero Coupon Bond Bond issued at a discount which accrues interest that is paid in full at maturity.

AGM Annual General Meeting is the annual meeting held for shareholders. If you are holding the share of a company, you should be getting a notice about the AGM. As a share holder you will also receive a copy of the annual report of the company. Book Closure Book closure is defined as the period during which a company stops the transfers of shares from one person to another person and makes a note of all the share holders in their register to enable the share holders for rights issue or bonus issue etc., Instead of a period, if it is done on a single day it is known as record date. Bid Price The price at which shares may be bought in the secondary market. Bonus issue A bonus issue is the issue of free shares to existing shareholders as per the record available with the company. After the issue of the bonus shares, the value of the share is reduced to the extent of the bonus declared. The face value of the share remains the same. Bonus shares at the ratio of 1:1 means, one share will be given free for every one share held by the investor. Broker Stockbroker - As per Indian law, stockbroker is a member of a recognized stock exchange. Sub-brokers Stock brokers were allowed to have sub-brokers to assist their clients in investing. However

due to evolution of internet based online trading, internet has eliminated the need for subbrokers.

Dividend Out of the company's earnings some part of cash may be paid to the share holders of the company, this may be an interim dividend or a final dividend.

DividendYield The dividend paid on a share expressed as a percentage of its market price.

Earnings The profit after tax of the company is indicated as earnings. Earnings Per Share It is a value indicating the profit after tax divided by the weighted average number of shares in issue. EBIT (Earnings before Interest & Tax) EBIT is the profit or earnings of a company, before taking into account interest, tax and dividends. EBIT is often known as operating profit or PBIT (profit before interest and tax). Equity The equity in a company is the capital put in by the shareholders plus the profits retained in the business on their behalf. Alternatively, equity can be regarded as the assets minus the liabilities i.e. what is left after the assets have been used to repay the liabilities. The term is also used Ex-dividend It is an opposite term of cum-dividend, that means the buyer will not have the rights on the bonus or dividend. The Initial Public Offering Initial Public Offering or IPO is when shares in a company are offered to outside investors for the first time and simultaneously the company arranges to have its shares listed on a recognized stock exchange. This is also known as Institutional investor flotation. seller retains the benefits. to refer to shares.

Large financial institutions such as pension funds, unit or investment trusts and,insurance.companies.

Interim

results

Unaudited first half figures that provide an indication of the company's trading and profit performance since the last full year accounting period. These figures are reviewed by the Auditors. IPO The IPO or Initial Public Offering is when shares in a company are offered to outside investors for the first time and simultaneously the company arranges to have its shares listed on a recognized stock exchange. This is also known as flotation. Liquidity It is referred as the average number of a company's shares available to be freely traded on the share market. Listed company A listed company is one whose shares are listed on a stock exchange. Margin money Minimum money required to buy shares during intraday or futures contract. Market Capitalisation The market capitalisation or shortly known as the market cap of a company is the current share price multiplied by the number of shares in issue. Offer Price The price at which shares may be sold in the Market. The offer price varies as per the demand in the market.

Open interest

Open interest is defined as the total number of futures contracts or option contracts that have not yet been exercised, expired, or fulfilled by delivery. If the open interest crosses 95% of the market-wide position ( the number of shares available in the cash market ) then stock exchange system will impose a ban on fresh positions in F & O segment.

Operating margin Operating profit as a percentage of the company's turnover or sales. Operating Profit Operating profit is the profit that the company makes, before taking into account interest, tax and dividends. Operating profit is also known as EBIT (earnings before interest and tax) or PBIT (profit before interest and tax). Option An option gives the holder the right, but not the obligation, to buy or sell a specified amount of an asset, probably ordinary shares, at a specified price within a specific time period. PBIT PBIT is the profit that the company makes, before taking into account interest, tax and dividends. PBIT is also known as operating profit and EBIT (earnings before interest and tax). P/E Ratio The price/earnings ratio. Higher the P/E ratio indicates that every thing is moving well and share holders are after this stock. P/E ratio serves as an indicator for the investor to make a purchase decision. P N ( Participatory Notes ) PNs are participatory notes or the financial instruments used by FIIs ( foreign investors ) that are not registered with Security Exchange Board of India, to invest in Indian capital market. FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with these securities as the underlying. Profit Before Tax Profit before tax is the profit of a company after adding or deducting interest, but before deduction of corporation tax.

Proxy A person who is authorized by the share holder to attend the AGM etc., the proxy need not be a share holder of the company. Record date The purpose of the record date is to finalize the list of the share holders of the company to qualify them for a forthcoming bonus or dividend. Registrar The appointed agent of a company who keeps a register of shareholders . Rights issue Offer of shares to the existing shareholders of the company to increase the capital. SEBI (Securities & Exchange Board ofIndia)

It is the Securities Exchange Board of India, it carries out regulatory functions pertaining to the Capital Market. SEBI was setup by the Govt. of India in the year 1988. Shareholder A shareholder is a person who holds shares in a company. Shares A share is issued to a shareholder in exchange for cash or assets. The shares can either be got from primary market(IPO) or secondary market. Stockbroker The person, who buys and sells equities on a stock exchange on behalf of his clients. StockExchange A stock exchange is an organized market for shares to enable buying and selling.

StockSplit Stocks are split to provide more liquidity in the market, shares are sub divided as per the split ratio. The face value of the shares gets divided according to the stock split ratio. Stop loss A trigger price placed in the order form to minimize the unexpected loss. Share

share in which there are frequent and day-to-day dealings, as distinguished from partly active shares in which dealings are not so frequent. Most shares of leading companies would be active, particularly those which are sensitive to economic and political events and are, therefore, subject to sudden price movements. Some market analysts would define active shares as those which are bought and sold at least three times a week. Easy to buy or sell Arbitrage : Business of buying in one exchange and selling in another to take advantage of price differences. Auction : A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. It is done when the seller is unable to deliver the scrips sold by him. The security in question is offered by a member who has ready possession of the scrips.

Bear : An operator who expects the share price to fall Bear Market : A weak and falling market where buyers are absent Blue Chips : Shares of financially sound, well established companies with a track record of good growth and regular payment of dividends. Bonus Shares : Shares allotted to the existing shareholders by capitalising the reserves into additional capital. When market expects a company to come out with a Bonus Issue, the price of the shares normally goes up. Book Closure:

A company closes its register of members for updating the records to facilitate payment of dividends or issue of rights of bonus shares. Book closure is the period during which this process is done and deliveries are not affected in the clearing house. Bourse : A Stock Exchange Bull : An operator who expects the share price to rise and takes position in the market to sell at a later date. Bull Market : A rising market where buyers far outnumber the sellers

Call Option : An option where the buyer gets the right to buy the underlying security at a specified future date. Carry Forward : Settlement where positions are carried forward from one settlement to another settlement. Cash Settlement : Payment for transactions done in one settlement on the due date. Circuit Breaker : A mechanism used to restrain the market when it gets overheated. The Exchange may relax the limit after a cooling off period of about half an hour. Clearing House : It is a legal counter party to both legs of every trade. The netted purchase and sale positions of the trading Members are settled through the Clearing House.

Company Objection : In some cases, the companies send back the certificates received for transfer citing reasons for their inability to do so. The letter sent by the Company is known as Company Objection. Cum Bonus : A share is described as cum bonus when the purchaser is entitled for current bonus

Cum Dividend : A shares is described as cum dividend when the purchaser is entitled for current dividend Cum Rights : A share is described as cum rights when the purchaser is entitled for current rights Day Order :

The quantity that remains untraded is not cancelled until the end of the day. Dealer : A Dealer is a user who works on behalf of the Trading Member Delivery Based Trading : When a share is bought or sold for the purpose of receiving or effecting deliveries. Dematerialisation : Process of converting a security from physical form to electronic form Derivatives : A financial contract between two or more parties and it is derived from the future value of an underlying asset.

Disclosed Quantity : An order entered in the system wherein only a fraction of the order quantity is disclosed to the market. Dividend : Cash payment made to the shareholders out of the profits of the company

Ex Bonus : A share is described as Ex Bonus when the buyer is not entitled for the Bonus. The seller remains the beneficiary. Ex Dividend : A share is described as Ex Dividend when the buyer is not entitled for the Dividend. The seller remains the beneficiary. Ex Rights : A share is described as Ex Rights when the buyer is not entitled for the Rights. The seller remains the beneficiary.

Expiry Date : The date and time after which a writer of an option cannot exercise his rights. Exposure Limit : The limit allowed to the Broker by the Exchange or to the customer by broker. It is the total value upto which one is allowed to hold open positions at any point of time. Futures Contract : An agreement between parties for a specified asset for performance Hedging :

It is protecting an existing asset position from an adverse future position. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market on a fixed date in future. Insider Trading : Trading carried out by people who have access to non public price sensitive information. Limit Order : A buy or sell order where price is specified at the time of order entry

LoMargin : An upfront payment made by the customer to take position in the market. His exposure limit is fixed based on the margin money brought in by him. Mark To Market : A notional profit or loss of a long or short position as compared to the current market price.

Market Order : An order where no price specification is mentioned at the time of placement Offer : The price at which a share is available in the market Offer Price : The price at which a company offers its shares to the public through issue of a prospectus Order Cancellation : A facility available in the trading system where one is allowed to cancel the order placed earlier. Order Modification : A facility available in the trading system where one is allowed to modify an earlier order.

Pay In : The designated day on which the members pay securities and funds to the clearing house

Pay Out : The designated day on which the Clearing House effects payment and deliveries to the members Price Band : It sets up the upper and lower limits for a share's movement on any given day. It is based on the previous trading day's closing price. The system will not accept the orders that are out of bound. Price Rigging : A process where persons collude to artificially increase or decrease the price of a security Put Option : An option where the buyer gets the right to sell the underlying security at a specified future date Quote : Prices at which a share can be bought or sold Record Date : The date on which the beneficial owner of the Corporate Benefits is determined. Rematerialisation : Process of converting the shares from electronic form to physical form Rights Issue :

Issue of new share to the existing shareholders at a price which is normally lower than the current market price of the old shares. It is issued in a fixed ratio to the those shares which are already held AnnualYield Also known as Dividend Yield. Annual yield represents the dividend return from an investment. It is calculated by dividing the dividend per share by the share price, converted to a percentage.

Yield = (Dividend per share / Last market price) x 100

Bollinger Bands Charting method used to analyze and project a stock's price movement. A Bollinger Band marks one standard deviation above the stock's moving price average, and another band marks one standard deviation below this average. Investors use the amount of space between the two bands to gauge the volatility of the market and to guide them in their investment decisions. Developed by John Bollinger, these bands are among the indicators available through our charts features. Cash Settled Warrant Cash settled warrants are settled by a cash payment by the warrant issuer to the warrant holder, e.g. most index warrants. The cash payment will be calculated as determined by the terms and conditions of the warrant. Some warrants may offer the choice to investors for cash settlement or physical delivery (e.g. currency warrants). Cash Settlement The procedure by which index futures and index options contracts are settled. Because an investor cannot directly buy or sell an index, index futures and option contracts are cash settled by allocating a dollar amount to each index point. ACCOUNTING is primarily a system of measurement and reporting of economic events based upon the accounting equation for the purpose of decision making. Generally, when someone says "accounting" they are referring to the department, activity or individuals involved in the application of the accounting equation.

AMALGAMATION is a consolidation or merger, as of several corporations. In business, the distinction being that the surviving entity incorporates the asset base of others into its base. Debenture is a long-term debt instrument used by governments and large companies to obtain funds ASSET is anything owned by an individual or a business, which has commercial or exchange value. Assets may consist of specific property or claims against others, in contrast to obligations due others. Bank reconciliation is a routine / process / method, etc, by which you reconcile the bank's balance of your account to your balance of your account as of a specific date BLUE CHIP COMPANY, in the equities market, is typified by a large and creditworthy company. Such a company is renowned for the quality and wide acceptance of its products or services. Blue chip companies consistently make money and pay dividends. RIGHT ISSUE, According to sec. 81 (1) of the Indian companies act 1956 when the company wants to increase the subscribed capital by issue of further shares, such shares must be issued first of all to existing share holders these shares are called right issue. UNDERWRITTING, The act of ensuring the sale of shares or debentures of a company even before offering to the public. ROYALTY. Is a periodical payment for the use of certain property or right. I t is periodical payment in the nature of rent for the use of certain assets or right such as mine, quarries, patent, copy right etc. BOND A Long term debt instrument on which the issuer pays interest periodically, known as Coupon. Bonds are secured by collateral in the form of immovable property. OPTION is the formal reservation of the right to buy or sell property / assets at a certain price and / or within a given time in the future.

Demat account, the abbreviation for dematerialized account, is a type of banking account which dematerializes paper-based physical stock shares. The dematerialized account is used to avoid holding physical shares: the shares are bought and sold through a stock broker. TRAIL BALANCE, The list of ledger account balances prepared for checking the arithmetical accuracy of books of accounts. SUNK COST is the cost expended that cannot be retrieved on a product or service. Accrual basis of accounting, The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received).

IMPUTED COSTS refer to the cost of an asset, service, or company that is not physically recorded in any accounts but is implicit in the product. BUDGET, Is the monetary or/ and quantitative expression of business plans and policies to be pursued in the future period of time.

Zero Base Budget, Is the latest technique of budgeting and it has an increased use as a managerial tool. In this method every year is taken as a new year and previous year is not taken as a base.

Pay Back Period, It represents the length of time required to recover the initial cost of a project.

RATIO Is a mathematical relationship between two related items expressed in quantitative form.

LIABILITY. A claim against a company or an individual acknowledged as due.

Deferred Tax Liability It occurs when a company underpays its taxes due to a difference between how it accounts for asset on its book versus how it accounts for it on a tax basis.

Letter of Credit, A financial instrument issued by a bank on behalf of a purchaser of goods, undertaking responsibility to pay a certain amount during a specified period, for goods delivered.

Opportunity Cost The value or benefits form an alternative proposal.

Par Value The nominal value of a security, also termed as face value. Forfeiture It means cancellation of shares due to the non payment of call money or allotment money. VAT stands for Value added tax, meaning you pay tax only on the Value addition done; be you be a manufacturer, trader of goods or a service provider Base Currency The currencies against which other currencies are quoted. Example, the primary base currency is the U.S. dollar. Bear Market A market in which prices decline sharply against a background of widespread pessimism (opposite of Bull Market). Bear Markets are generally shorter in duration than Bull Markets. Bid The rate at which a dealer is willing to buy the base currency. Bull Market A market characterized by rising prices. Broker An agent who handles investors' orders to buy and sell currency. Counterparty The customer or bank with which a foreign exchange deal is executed. Cross Rate An exchange rate between two currencies, usually constructed from the individual exchange rates of the two currencies, measured against the United States dollar. Day Trading Refers to opening and closing the same position or positions before the close of that day's trading (3:00p.m. EST).

Flat / Square Where a Client has not traded in that currency or where an earlier deal is reversed thereby creating a neutral (flat) position. Example: bought $100,000 then sold $100,000 = FLAT. Forex An abbreviation of foreign exchange. Fundamental Analysis Analysis based on economic factors. GTC "Good Till Cancelled." An order left with a Dealer to buy or sell at a fixed price. The order remains in place until it is cancelled by the client. Interbank Rates The FX rates large international banks quote other large international banks. Normally the public and other businesses do not have access to these rates. Global Forex is one of the few companies able to provide clients with rates provided by multiple global banks. Limit Order An order given which has restrictions upon its execution, where the client may specify a price and the order can be executed only if the market reaches that price. Long A market position where the Client has bought a currency he previously did not own. Normally expressed in base currency terms. For example: long Dollars (short Japanese Yen). Margin Margin is a cash deposit provided by clients as collateral to cover possible future losses that may result from the clients Foreign Exchange trades. Margin Call A demand for additional funds. A requirement by a clearing house that a clearing member (or by a brokerage firm that a client) brings margin deposits up to a required minimum level to cover an adverse movement in price in the market. Offer The rate at which a Dealer is willing to sell the base currency. Open Position Any deal which has not been offset or reversed by an equal and opposite deal. Pip or Points Depending on context, normally one basis point, i.e. 0.0001.

Short A market position where the Client has sold a currency he does not already own. Normally expressed in base currency terms, example, short Dollars (long D. Marks). Spread The difference in prices between bid and offer rates. Stop Loss Order An order to buy or sell at the market when a particular price is reached, either above or below the price that prevailed when the order was given. Technical Analysis Analysis based on market action through chart study, moving averages, volume, open interest, formations, and other technical indicators. Volatility A measure of price fluctuations.