Net Present Value The net present value of a project is the sum of the present values of all the

cash flows (positive as well as negative) that are expected to occur over the life of the project. Benefit Cost Ratio It is defined as the present value of benefits (cash inflows) divided by the present value of costs (cash outflows). A project is considered worthwhile if the benefit cost ratio is more than 1 and not worthwhile if the benefit cost ratio is less than 1. Internal Rate of Return The internal rate of return of a project is the discount rate which makes its NPV equal to zero. In the NPV calculation we assume that the discount rate is known and determine the NPV. In the IRR calculation, we set the NPV equal to zero and determine the discount rate that satisfies this condition. Payback period It is the length of time required to recover the initial cash outlay on the project. Accounting rate of return It is also referred to as the average rate of return on investment, and is a measure of profitability which relates income to investment, both measured in accounting terms. Initial Public Offering The first public offering of euquity shares of a company, which is followed by a listing of its shares on the market, is called an initial public offering. Authorised Capital The amount of capital that a company can potentially issue, as per its memorandum, represents the authorised capital. Cumulative and Non-cumulative Preference Shares Cumulative preference shares entitle the shareholders to receive dividends for previous years in which dividend was not paid. A company cannot declare equity dividends unless dividends on cumulative preference shares are paid with arrears. Participating and Non-participating Preference Shares The holders of participating preference shares get a share in the profits of the company after a certain rate of dividend is paid to the equity shareholders of the company. This is in addition to the fixed rate of dividend declared on preference shares before any equity dividend is paid. The holders of Non-

participating preference shares can get only a fixed dividend and do not get any share in the surplus left after paying equity dividend. Redeemable and Non-redeemable Preference Shares Redeemable preference shares are repayable at par or at premium after a specified period. Nonredeemable preference shares are not repayable, except when the company goes into liquidation. In India the redemption period do not exceed twenty years. Convertible and Non-convertible Preference Shares Convertible preference shares can be converted into equity shares at the option of the preference shareholders in accordance with certain predetermined terms. Non-convertible shares do not carry such an option. Deep Discount Bond A deep discount bond does not carry any coupon rate but is issued at a steep discount over its face value. It is also referred to as a zero interest coupon bond. Convertible Debentures A convertible debenture is a debenture that is convertible, partially or wholly, into equity shares. These are of two types Fully Convertible Debentures (FCB) and Partially Convertible Debentures (PCB). Floating Rate Bonds Conventional bonds carry a fixed rate of interest. Floating rate bonds, on the other hand, earn an interest rate that is linked to a benchmark rate such as the Treasury bill interest rate. Indexed Bonds The payoff of a typical indexed bond consists of two parts. The first part represents a fixed amount and the second part represents a variable component whose value is dependent on some index. Private Placement A private placement is an issue of securities to a select group of persons not exceeding 49. Preferential Allotment When a listed company issues shares or debentures to a select group of persons in terms of the provisions of Chapter XIII of SEBI Guidelines, it is referred to as a private placement. The issuer has to comply with various provisions, relating to pricing, disclosures, lock-in period and so on.

Qualified Institutional Placement A QIP is an issue of equity shares or convertible securities to Qualified Institutional Buyers (QIB) in terms of the provisions of Chapter XIIIA of SEBI Guidelines. Financial Closure It means that all the sources of funds required for the project have been tied up. Technical Analysis It is the science of recording, usually in graphic form, the actual history of trading (price changes, volume of transactions, etc) in a certain stock or in the averages and then deducting from that pictured history the probable future trend. Call Market A market in which trading for individual stocks only takes place at specified times. All the bids and asks available at the time are combined and the market administrators specify a single price that will possibly clear the market at that time. Commission brokers Employees of a member firm who buy or sell securities for the customers of the firm. Contrarian It is an investment strategy that attempts to buy (sell) securities on which the majority of other investors are bearish (bullish). Fiduciary A person who supervises or oversees the investment portfolio of a third party, such as in a trust account, and makes investment decisions in accordance with the owners wishes is known as fiduciary. January Effect It is a frequent empirical anomaly where risk-adjusted stock returns in the month of January are significantly larger than those occurring in any other month of the year. Real Estate Investment Trusts (REITs) Investment funds that hold portfolios of real estate investments. Trough The culmination of a bear market at which prices stop declining and begin rising.

Value Stocks Value stocks are the stocks that appear to be undervalued for reasons besides earnings growth potential. These stocks are usually identified based on high dividend yields, low P/E ratios, or low priceto-book ratios.