terms of stock trading

COMPOUND GROWTH RATE

compound growth rate is an important indicator of a company’s long-term prospects. it is the year-over-year growth rate of an investment over a specified period of time.
A company’s growth rate of profits is compounded over a number of years, at least five, to see how it has growth and what is likely to lie for it in the future.
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.

COST BENEFIT ANALYSIS

A cost benefit analysis indicates how well, or poorly, a planned action will turn out to be . Although a cost benefit analysis can be used for almost anything, it is most commonly done on financial questions. Since the cost benefit analysis relies on the addition of positive factors and the subtraction of negative ones to determine a net result, it is also known as running the numbers

it is also defined as a course of action comparing the cost of a line of action and the benefit to be derived from it, e.g. raising a bank loan against securities to buy equity shares. Assuming that the interest rate is 21%, one will enough to outstrip the cost. Companies have to constantly perform this exercise to determine the benefit of alternative courses of action against a certain cost.

CUMULATIVE PREFERENCE SHARES

Cumulative preference shares will accumulate any dividend that is not paid when due. therefore it is a PREFERENCE SHARES whose dividends will keep on accumulating  until the time  time  the company is in a position to declare dividends. The accumulated dividends of the preference shares are to be paid first; only then can dividend for equity shareholders can be paid. These preference shares may have a clause guaranteeing their conversion into equity shares at par after a stated number of years.

COVERED CALL

covered call is an options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This is often employed when an investor has a short-term neutral view on the asset and for this reason hold the asset long and simultaneously have a short position via the option to generate income from the option premium.
in simple words covered call aims at selling certain shares at certain prices on a future date. If the seller actually possesses the shares the contract or the call is covered and If he doesn’t,in that case  he will have to buy the shares from the market, and if the price has fallen then  he will make a profit. If it has risen above the contracted price, he will have to buy the shares at a loss, since he is not covered.

CASH COW

in general business, a cash cow is a product or a business unit that generates unusually high profit margins: so high that it is responsible for a large amount of a company’s operating profit. This profit far exceeds the amount necessary to maintain the cash cow business, and the excess is used by the business for other purposes.

therefore, in stock market a cash cow indicates a  share which yields a consistent  high rate of dividends. Also, a currently profitable business,  used to fund other enterprises.

BOOK PROFIT

book profit is defined as a Profit which has been made but not yet realized through a transaction, such as a stock which has risen in value but is still being held. also called unrealized gain or unrealized profit or paper gain or paper profit. As a noun, unrealized profit, when shares which an investor holds have appreciated in price, but the shareholders hasn’t sold any. It induces a sense of well-being, without bringing in any tangible profit .These unrealized profits can be misleading for investors as well, especially investors who are exploring the stock market. After making a book profit, the market could experience a sudden downturn, leaving the investor right back where he or she started, or with even less money. It is only in the verbal use of the term, i.e. to sell shares when they have appreciated in price. That real profit comes.

A business can use a book profit to suggest to investors that it is performing well, but this information should be used carefully. Since the profit has not yet actually occurred, it could vanish with a sudden change in the market.

ASSET FINANCING

Usually this includes financing of assets like : accounts receivables, finished goods inventory, real estate, and/or equipment. With asset financing, a company uses its assets as collateral to obtain capital.This converts particular assets of a company into liquid cash in exchange for a security interest to be paid to a bank or a financing company. Distinct from borrowing from banks. Usually it take the forms of loans against accounts receivable (which is an asset). But increasingly a company’s inventories and fixed assets are being used or mortgaged  to raise loans for fulfilling various aims and objectives of the organisation.

ASSET COVERAGE

Asset coverage is the ratio between the tangible assets that are in hand and the amount of money that is owed in the way of loans, and other debts to vendor partners, preferred stock holders, and others.  asset coverage,  determines  how much of the net assets of the company would be necessary to cover the current outstanding indebtedness of the business.there fore in simple words asset coverage is a company’s net assets covering a debt. the concept is most importantly considered when a company goes into liquidation.  From the total book value of the assets are deducted the claims of creditors, and the ratio of what remains to the total number of preference shares represents the asset coverage for such shares. The asset coverage for equity shares is the ratio obtained after deducting all creditor’s dues and the value of the preference shares, divided by the number of equity shares. The result is also called the net book value of equity shares.

value of preference ratio
————————————— = net book value of equity shares.
no. of equity shares