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Paid up Capital
The amount of capital, both equity and preference, paid up by the shareholders against the capital subscribed to by them.

Paper profit (or loss)
If you own a security or other investment that increases in value, but you don't sell it, the gain is your paper profit, or unrealized gain. But if you sell at the higher value, your paper profit becomes an actual profit, or realized gain. The same relationship applies if the security has lost value. Your paper loss isn't realized until you sell.

Par value
Par value is the face value, or named value, of a share or bond.

Pari Passu
A term used to describe new issue of securities which have same rights as similar issues already in existence.

Pay In/Pay Out
The days on which the members of a Stock Exchange pay or receive the amounts due to them are called pay in or pay out days respectively.

Payout ratio
A payout ratio is the percentage of a company's net earnings that is distributed to its shareholders as dividends.

Penny stock
Stocks in U.S., that trade for less than $1 a share are often described as penny stocks. Penny stocks change hands over-the-counter (OTC) and tend to be extremely volatile. Their prices may spike up one day and drop dramatically the next, reflecting the unsettled nature of the companies that issue them and the relatively small number of shares in the marketplace. While some penny stocks may produce big returns over the long term, many turn out to be worthless. Institutional investors tend to avoid penny stocks, and brokerage firms typically warn individual investors of the risks involved before handling transactions in these stocks. However, penny stocks are sometimes marketed aggressively to unsuspecting investors.

Portfolio
If you own more than one security, you have an investment portfolio. You build the portfolio by buying additional shares, bonds, mutual funds, or other investments. Your goal is to increase the portfolio's value by selecting investments that you believe will go up in price. According to modern portfolio theory, you can reduce your investment risk by creating a diversified portfolio that includes enough different types, or classes, of securities so that at least some of them may produce strong returns in any economic climate.

Positive yield curve
When the interest rate on a long-term bond is higher than the interest rate on a shorter-term bond of the same quality, the relationship between the two, called the yield curve, is positive. That's the norm, since if you're tying up your money for an extended period, you want to earn more than someone who is investing for just a few months. When the reverse is true, and interest rates on short-term investments are higher than the rates on long-term investments, the yield is negative, or inverted. That typically occurs if inflation spikes after a period of relatively stable growth or if the economic outlook is uncertain.

Power of attorney
A power of attorney is a written document that gives someone the authority to act for you or on your behalf.

Preferred Shares/Preference shares
Owners of this kind of shares are entitled to a fixed dividend to be paid regularly before dividend can be paid on equity shares. They also exercise claims to assets, in the event of liquidation, senior to holders of equity shares but junior to bondholders. Holders of preference shares normally do not have a voice in management.

Premium
When used in connection with investments, the term premium usually describes the amount you pay for a security over its stated value, or the amount you collect over the stated value when you sell. For example, if you sell a bond with a face value of $1,000 for $1,200, you collect a premium of $200. In a more general sense, a security or group of securities that command higher prices than others are said to sell at a premium, either to comparable securities or to the market as a whole. A premium is also the amount you pay to purchase certain financial products, such as options, annuities, or insurance policies.

Present value
The present value of a future payment, sometimes called the time value of money, is what the money is worth now in relation to what you anticipate it will be worth in the future based on the earnings you expect. For example, if you're earning 10% annual interest, Rs.1,000 is the present value of the Rs.1,100 you expect to have a year from now. The concept of present value is useful in calculating how much you need to invest now in order to meet a certain future goal, such as buying a home. Many personal investment handbooks and online financial services sites provide tables and other tools to help you calculate these amounts based on different interest rates. Inflation has the opposite effect from interest on the present value of money, accounting for loss of value rather than increase in value. For example, in an economy with 5% annual inflation, Rs.100 is the present value of Rs.95 next year.

Price-to-book ratio
Some financial analysts use price-to-book ratios to identify shares they consider to be overvalued or undervalued. You figure this ratio by dividing a shares market price by its book value per share. Other analysts argue that book value reveals very little about a company's financial situation or its prospects for future performance.

Price-to-cash flow
You find a company's price-to-cash flow ratio by dividing the market price of its share by its cash receipts minus its cash payments over a given period of time, such as a year. Some institutional investors prefer price-to-cash flow over price-to-earnings as a gauge of a company's value. They believe that by focusing on cash flow, they can better assess the risks that may result from the company's use of leverage, or borrowed money.

Price-to-earnings ratio (P/E)
The P/E is the relationship between a company's earnings and its share price, and is calculated by dividing the current price per share by the earnings per share. A stock's P/E, also known as its multiple, gives you a sense of what you are paying for a stock in relation to its earning power. For example, a stock with a P/E of 30 is trading at a price 30 times higher than its earnings, while one with a P/E of 15 is trading at 15 times its earnings. If earnings falter, there is usually a sell-off, which drives the price down. But if the company is successful, the share price and the P/E can climb even higher. Similarly, a low P/E can be the sign of an undervalued company whose price hasn't caught up with its earnings potential or, conversely, a clue that the market considers the company a poor investment risk. Stocks with higher P/Es, which are typical of companies that are expected to grow rapidly in value, are often more volatile than stocks with lower P/Es because it can be more difficult for the company's earnings to satisfy investor expectations. The P/E can be calculated two ways. A trailing P/E, the figure reported in newspaper stock tables, generally uses earnings for the last four quarters or financial year. A forward P/E generally uses earnings for the past two quarters and an analyst's projection for the coming two.

Price-to-growth flow (P/GF)
Price-to-growth flow is a method of stock evaluation that considers money spent on research and development (R&D) as an important factor in assessing a technology company's value and potential for growth. Proponents of this view, particularly analysts at the California Technology Stock Letter, maintain that a company's potential for growth through research and development can compensate for its having low (or no, or negative) earnings per share because R&D can lead to profits in the future. According to these analysts, P/GF can be a more appropriate gauge for assessing whether to invest in technology companies than traditional measures such as price-to-earnings ratio (P/E). To calculate a company's growth flow, you add its R&D spending per share to its earnings per share, and then divide its current stock price by this sum.

Price-to-sales ratio
A price-to-sales ratio, or a stock's market price per share divided by the revenue generated by sales of the company's products and services per share, may sometimes identify companies that are undervalued or overvalued within a particular industry or market sector. For example, a corporation with sales per share of Rs.28 and a share price of Rs.92 would have a price-to-sales ratio of 3.29, while a different stock with the same sales per share but a share price of Rs.45 would have a ratio of 1.61. Some financial analysts and money managers suggest that, since sales figures are less easy to manipulate than either earnings or book value, the price-to-sales ratio is a more reliable indicator of how the company is doing and whether you are likely to profit from buying its shares. Other analysts believe that steady growth in sales over the past several years is a more valuable indicator of a good investment than the current price-to-sales ratio.

Primary market
If you buy shares, bonds, futures contracts, or options when they are initially offered for sale, and the money you spend goes to the issuer, you are buying in the primary market. In contrast, if you buy a security that's already on the market, and the amount you pay goes to an investor who is selling the security, you're buying in the secondary market.

Profit margin
A company's profit margin is a ratio derived by dividing its net earnings, after taxes, by its gross earnings minus certain expenses. Profit margin is a way of measuring how well a company is doing, regardless of size. Profit margins can vary greatly from one industry to another, so it can be difficult to make valid comparisons among companies unless they are in the same sector of the economy.

Profit taking
Profit taking is the sale of securities after a rapid price increase to cash in on gains. Profit taking sometimes causes a temporary market downturn after a period of rising prices as investors sell off shares to lock in their gains.

Program trading
Normally used by institutional investors and arbitrageurs in U.S., program trading is the purchase or sale of a basket, or group, of 15 or more stocks with the combined value of $1 million at the same time. In some cases, programmed trades are triggered automatically when prices hit predetermined levels. Large-scale program trading can cause abrupt price changes in a stock or group of stocks and may even have a dramatic effect on the overall market. The New York Stock Exchange (NYSE) and other exchanges have instituted circuit breakers, which halt trading for a period of time when prices fall 10% or more in a single day.

Prospectus
A prospectus is a formal written offer to sell shares or securities to the public. It is prepared by the Lead Manager to the Issue, making disclosures for investor protection, as per guidelines laid down by Securities and Exchange Board of India (SEBI) and the Companies Act, 1956. The prospectus must be filed with the SEBI and is intended to help investors make an informed investment decision.

Put option
Buying a put option gives you the right to sell the specific financial instrument underlying the option at a specific price (called the exercise or strike price) to the writer, or seller, of the option before the option expires. You pay the seller a premium for the option, and if you exercise your right to sell, the seller must buy. Selling a put option means you collect a premium at the time of sale. But you are obligated to buy the option's underlying instrument if the option buyer exercises the option. Not surprisingly, buyers and sellers have different goals. Buyers hope that the price of the underlying instrument drops so they can sell at the exercise price, which is higher than the market price. This way, they could offset the price of the premium, and hopefully make a profit as well. Sellers, on the other hand, hope that the price stays the same or increases, so they can keep the premium they've collected and not have to lay out money to buy.

Put-call ratio
Since investors buy put options when they expect the market to fall, and call options when they expect the market to rise, the relationship of puts to calls, called the put-call ratio, gives analysts a way to measure the relative optimism or pessimism of the marketplace. The customary interpretation is that when puts predominate, and the mood is bearish, stock prices are headed for a tumble. The reverse is assumed to be true when calls are more numerous. The contrarian investor, however, holds just the opposite view. For example, a contrarian believes that by the time investors are concentrating on puts, the worst is already over, and the market is poised to rebound.