Stock market terms

Bull—a stock market operator who believes that share prices are
going to the bull, giving an upward thrust. The bull's action causes
buying pressure in the market place and pushes up the share prices.

Bull cycle—an extended period during which share price is generally
rising and the stock market indices show an upward move.

Bullion—gold, silver, or any other precious metal in bulk. Not in
the form of coins.

Bull market—continue rise in the price of stocks, sustained by
buying pressure of investors or bulls. News of favorable economic
growth, political development budgetary concession etc.can cause a
bulls market.

Bull position—buying without making a correspondence sale, hoping to
sell the shares at higher prices when market is to rise. Also known
as long position.

Bull Run—continuous uptrend of bull market.

Breakout—when shares move between support level and resistance level
for a time period and then shares moves any side either upward or
downward this is called breakout. Breakout means to break certain
levels.

Broker---A member of the stock exchange who is licensed to buy or
sell shares on his own behalf or on the behalf of his clients. He
charges commission in fix % on the gross value of deal. Brokers also
provide various financial services like dealing in bonds, commodity,
manages portfolio etc.

Bubble--- when a stock price is pushed to an abnormally high level,
not supported by any strong reason and fundamental, it is said to
have developed a bubble .

Bull—a stock market operator who believes that share prices are
going to the bull, giving an upward thrust. The bull's action causes
buying pressure in the market place and pushes up the share prices.

Bear spread—Option making strategy in which one buys a combination
of calls and puts of the same security at different strike prices to
make profit from fall of price of security .alternatively one buys a
put option of short maturity and another of long maturity to profit
from the difference between two put options as price falls.

Bear Trap----an movement of share price downwards, encouraging
investors to sell short. When market gets correct itself and prices
goes up investors get in bear trap.

Beating The Market getting a higher return on investment is higher
than the market averege possible but difficult

Bid Price—It is price which at which one is ready to buy share.

BIFR—Board for industrial and financial reconstruction.

Blue chip stock—shares of well knownand established companies which
have shown consistent growth over past many years and is expected
to repeat the same in future and have better prospectus.

Mahindra Satyam News

Mahindra Satyam, formerly Satyam Computer Services, continues to shine in the stock market. The stock, which has rallied more than 30% in the last seven days, crossed Rs 100 on July 23, and is now back among the top-five Indian IT companies’ list in terms of market capitalisation (with market cap of about Rs 12,000 crore) after Infosys, TCS, Wipro and HCL Tech.As of today, Mahindra Satyam’s market cap is greater than that of its parent company, Tech Mahindra.

Attributing the recent move up in its stock price to a bridge-up, Sanju Verma, CEO - Institution Biz, Proactive Universal Group, said the stock was still trading at a discount. “A lot of analysts are still not factoring in the 1100-1200 acres of land that Satyam holds. If they assume the company has Rs 300 crore of liabilities outstanding against that, even then, the land is still valued at something like close to Rs 11 per share. If you add this Rs 11 per share to the Rs 7 EPS you are talking of purely on the back of earnings momentum, the stock is still available at dirt cheap multiples,” she said.
On technicals, Rajat Bose, technical analyst said, "It’s a buy and it was a buy, the next target is Rs 120 and probably that target will be met sooner or later and once that level of Rs 120 is crossed then it is going to move further up. So if you ask me what are the sectors that I think in the next leg of upswing, IT is definitely one and Mahindra Satyam will definitely do well there."
In fact, the stock in back in the good books of mutual fund managers.

Today's market

The benchmark indices ended higher and continued their run-up for the second straight day. Huge upsurge in auto, realty and metal stocks helped the Nifty to end the week above the 4550 level. Power, telecom, technology and capital goods stocks were the other gainers. The markets rallied for the second straight week post the budget week.

Over 2-2.5% surge in US markets late Thursday night due to good earnings and economic data, more than 0.5% upside in European markets and 0.4-2% gains in Asian markets also helped our markets to remain on the higher side in the second half of the trade. They were volatile in the first half of the trade.

Avul Pakir Jainulabdeen Abdul Kalam

All during his five-year tenure, the 75-year-old A P J Abdul Kalam's
preferred menu at the table was idli, dosa and sambar besides curd-rice,
pickle and pappad, recalls a senior aide.

A habitual late-eater at night, the missile-man had made it clear to the
comptroller of household in Rashtrapati Bhavan to prepare all his meals
only from the general kitchen, which caters to other staff members in the
Presidential estate.

Stopping the practice of a number of attendants in waiting till the
President finished his dinner and retired for the night, Kalam insisted on
holding back only one person to warm up his meals, which he used to take
well-past midnight.

There have been occasions when Kalam required some help from other aides
during the night. Leaving aside protocol, Kalam, who has earned a
reputation of being a people's President, picked up the phone and directly
seek the information he required.

"He was a no requirement man," recalls his Press Secretary S M Khan.

During the entire tenure, the family kitchen specially meant for the
President was never operational. Not even when his 50-odd relatives had
come to the Rashtrapati Bhavan.

Kalam insisted that he make the payments for the expenditure incurred
during the stay of the relatives. The President, who skips lunch, had also
a love for fruits of any type. "Anything that was seasonal would satisfy
him. We had created a verandah garden for him in which citrus japonica
(China orange) grew.

"Though tasting very bitter, the President used to have them because of
its rich Vitamin-C content," OSD Brahma Singh said.

Defying the age-old principle of early to bed..., Kalam used to sleep
around 1-1:30 am and used to get up at around 6:30 am. He was the only
President, whose daily list of engagement was about 10.

Recounts his secretary P M Nair about his experience four years back. "It
was the morning of July 14, 2003. 8:40 am. The rax in my office rang. It
was the President at the other end."

In his usually cool and composed voice, Kalam told him "Mr Nair, last
night I could not sleep because my bedroom was leaking.

"I froze. Any other President, and my head would have rolled, though no
fault of mine," Nair said in his 'thank you' note to officials of
Rashtrapati Bhavan.

Sensing his embarrassment, the rocket-scientist spoke in a comforting
tone. "Don't worry, I know you will immediately set things right in my
bedroom but I am worried about those houses in the President's estate
where they may not have a second bedroom to shift to when the only one
that is available leaks."

Nair responded saying, "Sorry sir, I shall act just now."

Basic Terms - Must know

Asset
Anything on a company's books considered as having a posiaaative
monetary value. Assets include all things like holdings of obvious
market value (cash, real estate), (inventory,
aging equipment), and other quantities (pre-paid expenses,goodwill)
considered an asset by accounting conventions but possibly having no
market value at all.

Book value
Per-share value of shareholders' equity excluding goodwill and
other intangible assets.

Cash flow
Cash flow is essentially the movement of money into and out of your
business; it's the cycle of cash inflows and cash outflows that
determine your business' solvency.

Cash flow analysis is the study of the cycle of your business' cash
inflows and outflows, with the purpose of maintaining an adequate
cash flow for your business, and to provide the basis for cash flow
management.

Compound Annual Growth Rate - CAGR
The year-over-year growth rate of an investment over a specified
period of time.

The compound annual growth rate is calculated by taking the nth root
of the total

percentage growth rate, where n is the number of years in the period
being considered. This can be written as follows:

Debt-to-Equity Ratio
A company's debt divided by its equity . This ratio is used as a
relative measure of debt, but it

isn't always useful since equity is a complicated number. It's
sometimes better just to look at a

company's total debt per share, which you can either look up or
calculate since Debt per share =

eps/ roe x Debt/Equity:

Depreciation
Method to account for assets whose value is considered to decrease
over time.

The total amount that assets have depreciated by during a reporting
period is shown on the cash

flow statement , and also makes up part of the expenses shown on
the income statement . The

amount that assets have depreciated to by the end date of the period
is shown on the balance sheet.

EBIT
Earnings Before Interest and Taxes; intended to be a measure of the
amount of cash generated
by a company's operation

EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization;
intended to be a measure of the

amount of cash generated by a company's operations (but leaving out
the costs of financing and

taxes - the "I" and the "T").

The danger with EBITDA is that if the "D" and "A" represent a "using
up" of an asset that will have

to be replaced in the future, then they really are operations-
related expenses, making EBITDA too liberal a number.

EVA

Economic Value Added, a measure of the superiority of the return a
company is able to realize on

invested capital above the baseline return expected by the
investment community. The formula is

EVA = NOPAT - ( C x Kc )

where C is the amount of capital a company plans to invest in a
project, and Kc is the cost of

capital, i.e. the return rate expected by investors. Positive EVA
means the project will add value

for shareholders; negative EVA means they would be better off if
management just gave them the

money as a dividend.

EVA is analogous toearnings; but where earnings expenses debt
financing only, the C x K term

c

in EVA is expensing the cost of all capital, equity as well as debt.

Equity
The portion of a company's assets that the shareholders own, as
opposed to what they've

borrowed: equal to total asset minus liabilities. Also
called "owners' equity" or "shareholders' equity".

Liability
An obligation to pay. These include accounts payable, and bond and
bank debt.

Liabilities are shown on the balance sheet Note that a liability is
not necessarily an evil thing for a

company. Technically it's just an asset that they have temporary
control over but don't own. If it's

a useful asset and if the cost of "borrowing" it is cheap, then a
liability can be a positive thing.

One example: if a retailer sells a gift certificate, they have to
show a liability for the value of the

merchandise they will be obligated to hand over when the giftee
shows up to redeem it; but in the

meantime they already have the cash the gifter paid, and they can
use it any way they want -- this

liability is really an interest-free loan

Operating Expenses
Expenses associated with running a business but not considered
directly applicable to the current

line of goods and services being sold. These include Sales and
Marketing, R & D, and General

and Administrative costs (including the salaries of people working
in these areas).

Operating Income
Operating Income is the pre-tax, pre-interest profit from the
company's operation

Operating profit margin
Ratio of operating income to sales revenue

P/E Ratio
The ratio of a stock price to its company's annual earning per share

Return on Assets
Earning divided by total assets

This number tells you "what the company can do with what it's got",
ie how many dollars of profits

they can achieve for each dollar of assets they control. It's a
useful number for comparing

competing companies in the same industry. The number will vary
widely across different

industries. Capital-intensive industries (like railroads and nuclear
power plants) will yield a low

return on assets, since they have to own such expensive assets to do
business. (And if they have

to pay a lot to maintain these assets, that will cut into the ROA
even more, since the maintenance

costs will decrease their earnings). Shoestring operations (software
companies, job placement

firms) will have a high ROA: their required assets are minimal.

Return on Equity
Earning divided by equity

The idea is that this tells you the number of dollars of profits the
company can earn for each dollar

of shareholders' equity; but return on asset is probably a better
number to look at. (After all, their

profitability is a function of all assets they control, not just of
the equity portion of assets. Note that

ROE is bigger than ROA, since equity is a subset of assets).

Balance sheet - Example

Balance sheet

The Basics

Accounting contains three financial statements:

Balance Sheet The Balance Sheet shows a snapshot of your company right now--how it is doing financially at the present time.

Income Statement The Income Statement is the camcorder that records a period of time; in accounting terms, it's to see how you received the earnings (i.e. net profits) between your beginning balance sheet to the ending balance sheet for a certain period.

Cashflow Statement The Cashflow Statement keeps track of your company's cash as it flow in and out during a time period.
Balance Sheet

The Balance Sheet is divided into two financially equal sides, so they can "balance."

Assets reside on the left column, and Liabilities + Owner's equity reside on the right (i.e. Assets = Liabilities + Owner's Equity).

The key component for the balance sheet is to connect the things (left side) to the people who own these things (right side).

Assets (i.e. "What we have") are organized on the balance sheet in descending order of liquidity (i.e. how easy it is to covert an asset into cash).

The following represents the order on the Balance Sheet:

* Cash - readily available funds you can use now
* Accounts Receivable - money owed to you
(e.g. for items you sold on store credit but haven't received money)
* Inventory - all available materials that will be sold; includes rawmaterials lemon, sugar, water) and finished goods (lemonade)
* Prepaid Expense - expense you paid beforehand, to be used in the future
* Fixed Asssets - items you use over and over, and aren't normally for sale

Liabilities + Owner's Equity (i.e. "Who owns it") are organized into the following:

* Accounts Payable (Liability) - the value of the inventory you borrowed & now owe; usually have to be paid back in 30 daysNotes Payable (L) - the loan amount in money you borrowed and must owe; payable over long-termTax Liability (L) - taxes you owe the government Original Investment (Owner's Equity) - your personal money invested in your business Retained Earnings (O) - earnings from past accounting periods; shows retained "net profit"
* Earnings [Week, Month, Year] to Date (O) - earnings from present accounting period; shows period's "net profit" (i.e. bottom line)

Income Statement

The Income Statement acts as the camcorder that illustrates how the Net Profit was gained between the beginning balance sheet and the ending balance sheet. It shows if your business was profitable in a certain period. To get Net Profit, use:

* Earnings = Sales - (Costs of Goods Sold + Expenses)Gross Profit = Sales - Cost of Goods Sold Net Profit = Gross profit - Expenses Note: We haven't deducted taxes, and dividends paid. These will subtract the earnings (i.e. Net Profit).

Cashflow Statement

When learning how to read a financial statement, remember this: The Cashflow Statement is probably the most important sheet in your small business accounting papers, as it keeps track of your cash.

Remember that you can be profitable, but without necessary cash, your business is in serious trouble. You can't spend your earnings, otherwise known as "paper profits"; you can only spend cash to fund your operating capital (e.g. fixed costs).

Good cashflow management means delaying your payables as long as you can, while speeding up your collection of accounts receivable money owed to you.

The cashflow statement accounts for collections, inventory paid, fixed asset investment, and expenses paid.

Learning how to read a financial statement is not that difficult. Most people avoid it because of this reason.

Once you understand the basic concepts on how to read a financial statement, you'll be on track to building a great company.
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