Guide for Investment Terminology
Terms Related to the Securities Market
1- Capital Market Authority (CMA)
The Securities and Exchange Board of India (SEBI) is the regulatory authority established under the SEBI Act 1992 and is the principal regulator for Stock Exchanges in India. SEBI's primary functions include protecting investor interests, promoting and regulating the Indian securities markets.It is the body concerned with regulating and
monitoring the India financial market, This Law empowers the
authority to oversee the regulating and controlling of the financial
market, through issuing regulations and
rules that aim to protect investors and ensure justice and efficiency in the
market.
2- Capital Market Authority Board
The Board is made up of five experienced and
competent full time members appointed by
a Royal Order. It comprises a chairman, vice chairman and three members. Its
most important function is to develop internal by-laws for the Authority and determine how staff,
advisors, auditors and any other experts are recruited to carry out the tasks
and functions assigned.
3- Indian stock exchange
The purposes of indan stock market includes providing,
creating and managing the mechanism of securities, carrying out the work of
clearing, settlement and the depositing of securities, in addition to
registering their ownership and publishing the information related to them.
Tadawul has the right to participate in any other activities related to the
above, in accordance with the Capital Market Law and for the purpose of
achieving its objectives.
4- The Committee for the Resolution of Securities Disputes
This committee is established by the Capital Market
Authority. It is made up of specialized legal advisors appointed by the board
of the Capital Market Authority for a three-year term, subject to renewal. The
task of the Committee for the
Resolution of Disputes is to look into the disputes that fall within the
scope of the provisions of Capital Market laws and regulations, as well as
rules, regulations and instructions of
the authority and market in respect to public and private rights.
5- Trading
Buying or selling
securities after being listed in
the financial market.
6- Commodities exchange
Similar to the stock exchange where forces of supply
and demand meet and prices are determined accordingly. However, it differs from the stock exchange in that it deals with
the assets themselves (i.e., the commodities) such as oil, minerals
and other commodities
7- Money market
This is the market for trading in short- term securities. In most cases, the
banking system handles these transactions. The most important institutions of this market are central banks, commercial
banks and money-exchange companies.
8- Primary market
It is also called the IPO’s market. It is the market
where the securities issued for the first time are sold. Banks and investment
companies are the main players in this market.
9- Fundamental analysis
The analysis that studies the conditions of the
organization and the conditions of its related industry in order to determine
the fair value of the securities.
Fundamental analysts (i.e., proponents of fundamental analysis) believe
that the fair value of the securities is based on the intrinsic value of the
security, which in turn depends on the ability of the enterprise to make
profits, especially future profits.
10- Technical analysis
The analysis that investigates the historical record
of the movement pattern of the
securities prices and their traded volumes, in order to determine the
trend of the securities prices in the future.
11- Underwriter
A mediator between the securities issuer and the public investor; mostly an investment
company authorized to raise capital from investors on behalf of companies
and governments that issue securities
(shares and bonds). It undertakes to buy the shares that have not been sold to
the public.
12- IPO manger
A bank or an investment company licensed to manage
the IPO of securities under an agreement
with the securities issuer.
13- IPO agent (distributor)
A bank or a licensed investment company that
distributes the IPO to its customers under an agreement with the IPO’s manager
for a certain commission .
It is the cost (commission) incurred by traders in
the market when executing orders.
15- Organized market (stock exchange)
It is an organized market for trading securities.
Trading is supervised by a commission that ensures compliance with stock
exchange regulations. The New York Stock Exchange (NYSE) is the best example of
an organized market, where traders gather in one place to purchase and sell
securities. Trading transactions are usually executed by a member of the stock exchange on behalf
of the investors. Stock market
authorities can sometimes suspend trading in order to restore balance to the
market.
16- Over-the-counter (OTC) market
Trading transactions that are conducted outside the
stock exchange, through multiple communication networks. These networks link
brokers and traders on one hand, and investors on the other. The OTC market
does not have a mechanism to stop the sharp increases and decreases in the
prices of securities, nor the ability to re-balance the market. The most famous
OTC market in the world is NASDAQ.
17- Spot market
The market where securities are delivered and
received on the same day on which the transactions are conducted or settled. It
can also take a short period (a few working days), the number of which is
determined by the authority supervising securities trading.
18- Future contracts market
An organized market where transactions (contracts)
are made on certain assets or securities to be delivered in the future. It has
oversight mechanisms and trading systems that differ from other securities
markets.
19- Initial public offering (IPO)
Offering corporate shares for public trading (IPO) in the financial market for the first
time. Thus it represents a transfer of the company’s ownership from private to
public.
20- Direct trading
To execute selling or purchasing transactions of
securities without the assistance of investment firms and brokerage firms.
21- Indirect trading
To deal in securities with the help of expert houses
and brokerage firms.
22- Market depth
The ability to sell or purchase a certain quantity
of an asset without affecting its price in the market.
23- Market breadth
This describes the condition of the market that
receives a large number of purchase and sell orders in a manner that achieves
stability in the prices of traded securities.
The prices do not constantly change, not as a result of the presence of
a large number of transactions only, but also because the number of orders
above and below the current market price is
high too.
24- Market maker
A securities broker or specialist who is ready at
any time to purchase or sell securities thus
accepts the risk of holding a certain number of a particular security in order to facilitate
trading in that security. Each market makers competes for orders by offering
the buy and sell quotations of a certain number of a shares.
25- Market efficiency
The degree to which stock prices positively or
negatively reflect all the information and all the administrative decisions. So
the efficiency rises or falls when the
market receives this information or decisions.
26- Operational efficiency of the market
It refers to
the extent of transactions cost in the market. It is usually
measured by the variation (price
difference) between the buy and sell price. The relationship between the
operational efficiency and the price difference is an inverse relationship,
where the operational efficiency decreases as the price increases, and rises
when the price decreases.
27- Structural efficiency of the market
This refers to the number of traders in the market.
If the number of traders increased without one or a group of them being able to
impact the prices in the market, then it will be a proof of the existence of a
competitive market and an increased
level of structure efficiency.
28- Market pricing efficiency
It is the ability of the market to properly price a
security. The greater the speed and accuracy of the capital market in pricing
securities, the more efficient it becomes. According to their pricing
efficiency, markets are divided into three levels: weak efficiency markets,
medium efficiency markets, and strong efficiency markets.
29- Weak efficiency
markets
In weak efficiency markets, securities prices
prevailing at a certain point in time reflect the traders’ knowledge of the
past prices of security and its traded
volume.
30- Semi-strong efficiency markets
In medium efficiency markets, securities prices
prevailing at a certain point in time reflect the traders’ knowledge of all the
information published about the company whose shares are being traded, such as
the realized profits, distributed profits (or profits to be distributed) and
other data published in financial statements that affect the movement of
securities prices.
31- strong efficiency markets
In strong efficiency markets, prices prevailing at a
certain point in time not only reflect the published information; they also
reflect everything that can possibly be known about the company, including
internal information about that company. A market is described as highly
efficient if the market value of any security reflects its real value. In other
words, the market prices securities according to the value they should be priced at.
32- Bull (uptrend) market
A general upward trend of share prices that lasts
for a certain period of time, sometimes months or years. This revived market is
the result of increased volume of trading .
33- Level of Resistance and Support
The level of resistance for the price of a security
represents the upper price level of trading in the security, where the pressure
of stock selloff leads to a price decrease.
For example, if a company’s share
is traded between a minimum of 88 SR and
a maximum of 98 SR, the 88 SR price level represents the support level of the
security, and the 98 SR price level represents the resistance level of the
security. When the price of a security breaks through the resistance level,
technical analysis experts in financial markets believe that the security will
reach new higher price levels.
34- Price spread (price difference)
The difference between a security’s bid and ask
price at a specific time.
35- Arbitrage
The purchase of securities from one market for
resale in another market in order to profit from a price difference, without
having to be exposed to risk. Usually these transactions are carried out
between the future market and the spot market.
36- Average price
The average price of a
security during a certain period of time. It is usually calculated by adding
the security price at the beginning to security price at the end of that period and dividing the
result by 2.
37- Lowest price
The lowest recorded price of a security during a
certain period of time.
38- Highest price
The highest recorded price of a security during a
certain period of time.
39- Previous closing price
The final price at which a security is traded on the
last trading day of the previous period.
40- Current closing price
The final price at which a security is traded on the
last working-day trading session.
41- Fair Share Price
The price that reflects all the company’s present
and future economic and financial fundamentals. It is determined through
assumptions and expectations about the future performance of the company in
question.
42- Overvaluation
A share price is considered overvalued if it exceeds
the share’s fair value. One of the criteria used to measure the degree of overvaluation
of the share is to look at the price-earnings ratio (P/E). When this ratio is
significantly higher than the average of the entire market, or of other
markets, or of the sector in which the company operates, the share is
overvalued.
43- Undervaluation
A share price is undervalued when it is traded at a
price lower than the share’s real value suggested by the standard valuation
methods, such as high earnings or reputation of a company. This may sometimes
occur when traders are no longer interested in a company’s share for one or
more reasons.
44- Risk Lovers
Investors who tend to focus on high-risk investments
hoping to achieve high returns. This could lead to losing part or all of an
investor’s capital. This group of people often includes young investors who
have a lot of years ahead to invest their savings and compensate for their loss
or for their need to spend.
45- Risk averse Investors
Investors who prefer lower risk investments, unless the return on the
investment is significantly higher so that they compensate for a small increase
in risk. Risk-averse investors usually seek to protect their capital.
Terms Related to Traded Securities
46- Security
Securities, especially stocks and bonds that are
issued by business institutions, are the main product traded in capital
markets. A security represents a deed
that gives its holder the right to get a predetermined ratio of the return (in
the case of bonds and preferred shares), or share in the total revenue earned
by the company in the case of common stock.
47- Common Stock
A security
that represents a stake in the capital of a joint-stock company. It grants the
investor many rights, the most important of which are: the right to attend
general assembly meetings, receiving dividends when distributed, the right to
vote and the priority to subscribe in the company’s new stocks issuance.
48- Preferred Stock
A class of shares that gives its holder a set of
rights which the holder of common stock doesn’t have. These include the
priority of preferred shareholders to get a predetermined percentage of company
profits, and the priority over holders of common stock in obtaining their
rights in the event of a company’s liquidation.
49- Defensive Stock
A stock, the return of which is not expected to
decrease during recessions, but may achieve returns higher than the market
average. Usually, it represents corporate stocks whose activity is not normally
affected by the state of the overall economy or by the resulting business cycle
fluctuations. They are therefore
perceived as low risk stocks.
50- Treasury Stocks
Stocks that the issuing company repurchase through
the market under certain controls. The company can hold these stocks, re-issue
or cancel them. These shares are not part of the company capital, and they
don’t pay dividends.
51- Stock Dividends (bonus shares)
Dividends paid to stockholders in a form of stocks,
often in place of a dividend paid in cash.
Also known as bonus shares.
52- Cash-paid Stocks
Stocks that are paid for in cash. An example of such
stocks would be stocks of companies and
commercial banks in some countries where the laws require buyers to pay for
them in cash instead of other tangibles.
53- Non-cash stocks
Stocks whose value is collected in form of tangibles
other than cash, like machinery, buildings and lands. Usually, the nature of
these contributions, and how to evaluate and determine stocks in exchange for
them, are determined according to the law of the joint-stock companies.
54- Bearer stocks (payable to the holder)
Stocks that do not carry the owner’s name in their
ownership certificate, as is the case with banknotes issued by the Saudi
Arabian Monetary Agency. Therefore, a
shareholder must keep the certificate of ownership in a safe place since it is
the only proof of ownership.
55- Income stock
Ordinary stock of companies that tend to pay most of
their net profits as cash dividends to their shareholders, such as service
companies.
56- Speculative stock
Stocks of companies with high risk relative to any
potential positive returns or capital gains.
57- Cyclical stock
Stocks of companies that mirror the overall economic
performance. Their revenues and earnings, and therefore their share prices,
rise when economic growth is strong, and decreases when growth is slowing down.
58- Listed stock
Stocks of companies that meet the requirements for
listing in the capital market. These requirements must be compiled with by all
companies as a prerequisite for their listing in the capital market.
59- Unlisted stocks
Stocks that the issuing company did not apply for
its listing in the financial market, or else they did not meet the listing
requirements of the capital market.
60- Beta factor
Beta of a stock or asset is a measurement that
describes the relation of its returns with that of the financial market as a
whole. It is used as a systematic risk measure of a security or asset.
61- Allotment notice/letter
A letter sent to the investor by the issuing
company, indicating the number of shares allocated to him.
62- Ex-date
The date on or after which a security is traded
without a previously declared dividend or distribution. After the ex-date, a
stock is said to trade ex-dividend.
63- Price correction
A term that describes a short term steady decline in
the financial market. This usually comes after a period of substantial rise in
stock prices in the market.
64- Flotation
The process of offering company shares for sale in
the stock exchange. It is also called new issue.
65- Diversification
A risk management technique that mixes a wide
variety of investments and a number of securities [within a portfolio].
66- Bond
A certificate of debt according to which a holder
(the creditor) is guaranteed payment by the issuer (debtor or borrower). The
bondholder (creditor) is payable original investment plus predetermined
interest (a fraction of the bond value) by a specified future date (maturity
date).
67- Convertible bond
A certificate of debt which grants the holder the
option to exchange it with a number of common stocks in the same issuing
company based on a predetermined ratio.
68- Perpetual bond
A bond with no maturity date that pays coupons
forever. This type of bond usually comes in the form of preferred stock.
69- Conversion ratio
The number of shares of common stock that will be received in
exchange for each convertible bond or preferred share when the conversion takes
place.
70- Callable bond
A bond that can be redeemed in part or in full by the
bond issuer prior to its maturity.
71- Call price
The price payable to bond holder when redeeming the
security prior to the maturity date. This price is usually equal to the face
value plus a call premium.
72- Face value of the security
The nominal value of a security stated by the
issuer. The security could be a bond or
common or preferred stock. It does not mean the value paid by subscribers when
the security is offered for an IPO. The security may be issued at an additional
price (issue premium) or discounted prices in some cases (less than the par
value).
73- Market value of the security
The price at which securities are traded in the
stock market at a certain time.
74- Book value of a common stock
The value of the total equity (shareholder equity)
that excludes preferred stock, divided by the number of issued common shares
outstanding.
75- Capital gains (losses)
Profits (losses) resulting from the difference
between the securities buy price and sell price.
76- Cash dividend
Money paid to stockholders. The distribution can be
done annually, semi annually or quarterly.
77- IPO prospectus
A document that provides details about an investment
offering for sale to the public, to be used by investors in the evaluation of
the security to be issued, the issuer, and the method of subscription.
78- Efficient portfolio
Portfolio that has a maximum expected return for a
certain level of risk, or a minimum level of risk for any expected return.
79- Privilege for an additional issue
Privilege giving current stockholders the right to
buy in a new offering all the shares that have not been sold in the original IPO.
The amount of shares that can be bought are in proportion to the share of each
shareholder in the company.
80- Rights issue
With the issued rights, existing shareholders have
the privilege to buy a new common stock from the firm in proportion to their
current equity of the existing shares.
81- Stock split
A corporate action in which a company’s existing
shares are divided into multiple shares. This does not entail an increase in
the shareholder equity, because the par value and market value of the share are
decreased in proportion to the approved split ratio. If the share’s par value
was 50 SR, its market value was 500 SR, and the number of issued shares was
1,000,000 shares, and if the split was at a rate of 5 to 1, then the values after the split would
be as follows: the share’s nominal value
would be 10 SR, its market value would be 100 SR, and the number of shares
outstanding would be 5,000,000 shares.
82- Investment fund
A collective investment scheme or channel designed
to invest funds on behalf of investors and give them the opportunity to
participate in the fund’s profits, managed by a fund manager, for a certain
fee. Investment funds can be open-end or closed-end. Major types of investment
funds include: stock funds, bond funds, commodity funds and money market funds.
83- Open-end investment fund
An investment fund whose units may increase or
decrease. The investor can redeem his investments whenever he wants, in
accordance with the fund policy.
84- Closed-end investment fund
An investment fund with a limited (fixed) number
of units. The value of the units
invested in the fund cannot be redeemed unless there is a buyer for these
units. Units of this type of fund can be traded in a stock exchange, like
stocks.
85- Record date
A date in which a shareholder must be the lawful
owner of a given company’s shares to be entitled to receive a dividend of that
company.
86- Insider trading
An illegal trading which is based on inside
information that is not available to the public. Examples of insider
information: changes in the executive management, financial position of the
company, merger and acquisition decisions, or similar that have not been
disclosed to the public. Persons who do not work for a company but can have
access to material information about that company and illegally trade in its
shares as a result of having access to that information, are considered to be
in possession of insider information.
Terms Related to the Financial
Statements of Companies
87- Fiscal year
Annual accounting period for business. For most
companies it is a calendar year that runs from January 1st to December 31st.
For some other companies the fiscal year runs from June 1st to May 31st.
88- Revenues
Revenues are money received by a company in exchange
for sold products or services provided. Revenues are different from profits in
a sense where profits are the remaining of revenues after deducting costs and
expenses. In their financial statements, Saudi companies that provide services
such as electricity and communications report their income as “revenues”; on
the other hand,o manufacturers of specific products, such as food and clothing,
often describe their income as “sales”.
89- Gross profit margin
The proportion of money left over from revenues
after accounting for the cost of goods sold (COGS). It is expressed as a
percentage. For example, suppose company ABC earned SR 100,000 in sales, and
incurred SR 75,000 in COGS-related expense. ABC’s gross profit margin would be
25%, i.e., (100,00 – 75,000) divided by 100,000.
90- Net profit (net income)
Net profit or net income available to owners after
deducting all of a company’s obligations from revenues in a specified period of
time.
91- Retained earnings
The accumulated net income retained for reinvestment
in a business, rather than being paid out in dividends to stockholders. They
are recorded under shareholders’ equity on the balance sheet. They are
sometimes called “retained surplus”.
92- Capital structure
A mix of a company’s long-term debt, specific
short-term debt, common equity and preferred equity. Common equity consists of
(capital + reserves + retained earning).
93- Authorized capital
The approved capital of a joint-stock company that
is registered with the official agencies.
94- Paid up Capital
Part of the authorized capital which was subscribed
by the shareholders.
95- Paid in Capital
Part of the subscribed capital which was paid by the shareholders.
96- Cash flow statement
A Financial statement that shows a company’s cash
flows (receipts, payments, net cash) during a specific period.
97- Statement of financial position (balance
sheet)
Financial statement that provides an overview of a
company’s position on a given date. It lists assets, liabilities, and
shareholder equity (net assets).
98- Company book value
The net asset value of a company, or total assets
after deducting liabilities. A company’s book value is considered one of the
indicators used by investors to evaluate the company shares .
99- Income statement
A financial statement showing net profits or losses
of a company over a specific period, usually for a quarter, semi-annual or a
full year.
100- Quarterly financial statement
A fiscal year is divided into four quarters , each consists of three
months. Regulators require all publicly listed companies to issue quarterly
financial reports to report their financial results during that quarter.
101- Assets
All properties, both tangible (like cash, equipment,
buildings, machinery, etc.) and intangible (like trade marks or goodwill), that
are owned by individuals or businesses.
102- Current assets
Highly liquid assets that can be converted into cash
in a short time, usually a year or less. These include cash, inventory,
accounts receivable, commercial securities and others.
103- Fixed assets
Long-term assets that are of a productive nature. In
general, they are not sold or bought within the usual business operations of
the company. Examples are: machines, buildings and equipment.
104- Liabilities
Liabilities are obligations owed by the company.
They include: accounts payable (suppliers), payable wages and salaries, payable
dividends, payable taxes and any other outstanding debts.
105- Current liabilities
Short-term financial obligations that are paid off
within one year or less. They are paid by using current assets, or by using
other (new) current liabilities. Obligations that are due within one fiscal
year or less appear under current liabilities. Common examples are: accounts
payable (suppliers), notes payables and loans.
106- Collateral
Assets used to secure loans.
107- Insolvency
Inability of a company to meet its obligations
(debts) as they become due.
108- Operating leverage
Measure of fixed costs in a company’s operating
structure. The higher the measure of fixed costs in a company’s operations, the
higher is its operating leverage, and the higher its operational risk.
109- Financial leverage
The amount in a company’s capital structure that is
obtained from fixed-cost financing sources, such as loans, bonds and preferred stock. The higher
the measure of these elements in the total capital structure of the company,
the higher its financing leverage, and the higher its financing risk.
110- Cost of sales
Figure representing the direct costs of production,
buying the materials or services sold by the company. Included in the direct
costs are production costs, marketing costs, and salaries.
111- Annual financial report
A statement that must be provided annually to the
shareholders of a public company. It includes the financial position, income,
retained earnings and cash flows. The report does not provide only financial
particulars, it also includes general information about the company.
112- Shareholders’ equity
Total assets minus total liabilities of a
corporation.
It includes paid up capital, retained earnings and
all reserves established by the public company.
113- Expenses
Costs incurred by a company while conducting its
business. They are divided into: costs or revenue expenditure; and capital
expenditure. Revenue expenditure includes: the expenses incurred by the company
during the accounting period. The capital expenditures include expenses whose
effect lasts for more than one accounting period.
114- Statutory reserve
The mandatory reserve, which is required to be
deducted annually under the Company Law by a certain percentage of the net
profit before taxes (if any) unless the company bylaws specify a larger
percentage.
115- (General) voluntary reserve
The amount that is voluntarily deducted annually
based on the company’s general assembly decision as part of the net profit
before taxes (if any).
Terms related to financial indicators
116- Return on equity (ROE)
The amount of return on owners’ investment,
represented by shareholder equity. It is
calculated by dividing the net profit (net income) by total equity.
117- Financial broker
An individual or firm that charges a fee or
commission for executing buy and sell orders submitted by an investor. The
broker acts as a “middleman” specializing in shares and bonds, and also acts as
a broker-agent on behalf on the client.
118- Detailed IPO prospectus
A document published by the issuer prior to offering
the new securities for an IPO. It
contains terms and conditions of the offering, plus detailed information that
an investor needs to make an informed investment decision.
119- Authorized person
An authorized person is someone who is authorized by
CMA to engage in the securities business.
120- Debt ratio (indebtedness)
An indicator that measures the proportion of two
types of liabilities, current and long-term, to total assets. This ratio shows
the leverage of the company (i. e. how much it relies on debt to finance its
assets).
121- Ratio of dividends per share to share price
This ratio
measures the distributed earnings per share to its price in the market. It is
calculated by dividing the dividends distributed, or to be distributed, per share by the market
share price.
122- Earnings per share (EPS)
Earnings per common share. It is calculated as
follows: net profit (net income) divided by the number of ordinary shares
outstanding.
123- Price to earnings ratio (earnings multiple,
p/e ratio )
Called the earnings multiple or P/E ratio, it is measured by dividing the share
price in the market (closing price) of the last 12 months by the earnings per
share.
124- Return on assets (ROA)
A ratio that measures the return generated from the
use of overall assets of the company. It is calculated by dividing the net
income by total assets.
125- Price change in SR
The difference in the price of a security between
two periods. For example, a company’s share price change during the trading day
equals the difference between the closing price and the opening price.
126- Percentage change in price
The percentage change in the price of securities
between the two periods. It is calculated as follows: (the price change between
the two periods/ the price of the base period) x 100.
127- Compound interest
Interest computed cumulatively so that its value
increases over time. Its calculated based on the total amount, which represents
the invested principal plus the previously gained interest.
128- Trading value (SR)
The total value of shares traded during a specific
period for a specific security or of the overall market.
129- Number of executed deals
Total deals that were executed during a certain
period.
130- Total market value
Calculated by multiplying the number of securities
issued by the market price at the end of a specific period.
131- Market value (%)
Calculated by dividing the total market value of the
company by the total market values of all listed companies multiplied by 100.
132- Turnover ratio
Turnover ratio =(the value of a company’s traded
shares in a given period / total market value of the company) x 100.
133- Free float (outstanding shares)
The portion of a company’s shares that is available
to the public for trading.
134- Price/ book value ratio
The premium (over the book value) paid by an investor
per ordinary share for a company. It is calculated by dividing a company’s
total market value by its book value.
135- Return on investment (securities)
Return on investment in securities is divided into
capital return and income return. The capital return is calculated by dividing
the realized profits from the sale of securities by the amounts invested . The
income return on securities is the revenue earned by investors in the form of
dividends (on shares) or received interest (on bonds).
Other Terms
136- Macroeconomic information
Information that reflects the overall condition of
the domestic economy, or global economy. It also includes information and data
covering international events or political affairs in a country.
137- Microeconomic information
Information that covers the economic and financial
aspects related to a particular sector or company. Usually, the impact of this
information is limited to the same
sector or company . Examples of this kind of information: news of a merger
between two companies, new technologies or products introduced by a company…etc
138- Ticker symbol
An abbreviated name of the listed company that is
approved by the regulator of trading.
139- Gross domestic product (GDP)
The total cash value of all goods and services
produced within a domestic economy during a specified period. It consists
private consumption, private investment, government expenditure and net
exports.
140- Asset Valuation Models (investment)
The tools used for the valuation of assets,
investment or securities. In the valuation process, basic data of the asset or
investment to be evaluated are used, like future cash flows, prevailing
discount rates and any data that affect the asset cash flow to be evaluated.
141- Reallocation of portfolio assets
Changing the assortment of the investment portfolio,
either by adding new investments that match the investor’s goals or by changing
the portfolio investments due to changes in the investor’s goals, risk level,
or the duration available to the investor.
142- Merger
Combination of two or more companies, whereby the
companies involved cease to exist and a new company is established.
143- Acquisition
A corporate action joining two or more companies, as
a result of which all companies legally involved in the process cease to exist,
with the exception of the company that carried out the acquisition. This
company keeps its original name and legal entity.
144- Full disclosure
A requirement that publicly-traded companies release
and provide for the free exchange of all facts that are relevant to their
ongoing business operations, in order to guide the users of financial
statements in making decisions.
145- Holding company
The parent company that owns a controlling stake in
a subsidiary, giving it the right to vote and control the operations of the
subsidiary companies.
146- Corporate governance
A framework that determines the rights and
responsibilities among the various parties such as boards of directors,
managers, shareholders and other stakeholders in the company.
147-Inflation
Inflation is a continuous increase in the general
level of prices of goods and services during a specific time . Inflation leads
to the deterioration of the purchasing power of the society members.
148- Sector
A sector represents a group of companies operating
in one activity or area. Usually, the performance of any company’s stock is
measured relative to the overall average
performance of other companies in the same sector. The reason for this is to
compare the performance of the company’s stock to similar stocks in the same
sector.
149- Risk
Risk is defined as volatility in revenues and
earnings, which may include loss. Investments have different proportions of
risk. In general, the higher the risk level, the higher is the likelihood of
earning higher returns. An individual’s tolerance of risk determines the risk
levels he can bear, taking into consideration his investment objectives and the
required period of time for investing.
