Terminologies in the financial system

Omoruyi
(2003) gives the following as common concept in finance for which the business
student should be familiar with:
1.     
Accrued interest: interest that is due on any fixed investment or
security arising since last interest payment date

2.     
Arbitrage: a simultaneous purchase and sale of different securities –
mortgage, future contracts, options in different markets to profit from price
differences
3.     
Averaging down: buying more of a security at a lower price than the
original purchase with the aim of reducing the average cost per unit of the
security
4.     
Balanced portfolio: a portfolio which offers the owner what he requires
in a way of safety income and growth to meet his psychology
5.     
Basis point: a phrase used to describe the difference in debenture or
bond yields, with one basis point representing one hundredth of a percentage
point. Thus, if bond or debenture A yield 50% and Bond B yields 75% the
difference is 25basis point
6.     
Bid and offer- bid (represented by +sign) is the price that a
prospective buyer is willing to pay; while offer (represented by -sign) is the
price the seller will accept. The two prices are referred to as a ‘Quotation’
7.     
Blue chip popular, active and nationality known ordinary share usually
with long dividend records in good/bad times. It has active and good investment
qualities
8.     
Capital – to the economist, it means any thing of long term value i.e.
factory goods, inventory, properties, machinery. To the investor it may mean
the financial assets invested in securities, cash, house and other fixed assets.
9.     
Capital good: assets or goods used to produce goods
10. Capital gain or loss: profit or loss resulting from
the sale of a capital goods or assets
11. Collateral trust bond – a bond or debenture stock
that is secured by collateral deposit with a trustee
12. Commission: fees charged by the stockbroker and
issuing house for buying or selling securities on behalf of a client based on a
scale approved by the regulatory stock exchange, currently, a maximum stock
brokerage, fee on secondary market transactions 2.75% of the consideration in
the Nigerian stock market
13. Contract note – a note or confirmation stating the
details of sale or purchase of a security and forwarded to a client immediately
the transaction i concluded. Therefore, there are sales contract note for sale
transaction and purchase contract note for all purchase transactions.
14. Cross deal: it is a transaction in which the same
broker sells and purchases the same stock for different persons. The broker
dells and purchase contract note for all purchase transactions
15. Cum dividend: this means a transaction in share
acquired with the pending dividend thereon. If you buy a share quoted cum
dividend, you will receive the pending divided
16. Ex-dividend: means without dividend. A share sold
ex – dividend does not entitle the seller to receive the pending dividend
17. Buy order: an order to sell a security
18. Debenture stock: a certificate of indebtedness of a
company usually secured by lien on any asset and hence backed only by the
general credit worthiness of the issuer
19. Debenture clerk: an employee of a member of a stock
exchange, who executes buy and sell orders on the trading floor of the exchange
for his company and its client
20. Dealing clerk: an employee of a member of a stock
exchange, who executes buy and sell orders on the trading floor of the exchange
for his company and its clients
21. Discount: the price at which a bond, debenture
stock, preferred stock sells below its per value. This does not include
ordinary shares
22. Shareholders equity: this represents the
shareholders interest in the affair of the company
23. Face value: the amount which appears on the face of
the debenture stock or bond. It is also called the nominal value. It is
different from the market value. It is used to calculate interest payable
24. Flat: this means the debenture or bond is stated at
cost or nominal value as opposed to being stated with interest or discount
bonds and debenture stocks that do not include accrued interest are said to be
traded flat
25. Intangible asset – an asset that cannot b seen or
touched physically, e.g. goodwill, patent, copyrights.
26. Investment dealer – This is a security firm that
brings together many buyers and sellers unlike the stockbroker who buys and
sells on behalf of clients and being paid commission. In Nigeria, some stock broking
firms have the licence to act both as stockbrokers and investment dealers
(Issuing House). The investment dealer also bring new issues of stock and
shares to the market (primary market)
27. Leading indicators: these are statistical data
which indicate highest and lowest position of some economical variable in the
economy. The data can be related to stock price, employment level, capital
investment, profit, inflation, commodity price
28. Leverage: this is a fixed charge (Interest on loan),
on earning usually expressed per share
29. Price limit: this is an order on the stockbroker to
a specific buy or sell order price by the client
30. Locked in: this occurs when an investor is
discouraged by the disappointment of unfavourable price movement on the stocks
i.e. below cost in the portfolio that he cannot get out. It can also arise from
legal or from contractual restrictions on the sale of his shares
31. Maturity: the date in which contractual duration of
the income instrument is due to be rapid
32. Margin: buying on margin indicate credit purchase by
the broker, for his client by buying securities on credit against acceptable
collateral in excess of amount deposited
33. Net asset value: this is total asset less total
liability of the entity indicate the ‘Net Worth’ of the entity
34. Net tangible assets: this is total asset less
intangible assets and less all liabilities
35. Over – brought: a stock or securities that attracts
excess patronage resulting in higher price than the basic market fundamentals
dictates
36. Over solid: a security whose price has fallen very
fast against market fundamental dictates
37. Price earning ratio: this is a company’s market
price relative to its earnings expressed in an ordinary terms
38. Counter party: the trading partner, usually  stock broking firm on the trading floor upon
sale or purchase of a given security
39. Message history: the trading information of a
particular trading day detailing what transpired on the trading floor
40. Technical suspension: temporary suspending price
movement on a security currently on public offer at the primary market
41. Over the counter: trading in securities not listed
on the exchange by brokers/dealers upon direct negotiation
42. Redemption price: the price at which a bond will be
repaid back on maturity
43. Short sale: the sale of a security owned by the
broker but in his custody with the hope to repurchase back when pricing fall.
This is however illegal if no prior contractual agreement
44. Short position: the total number or amount of
stocks and not covered up at a particular date
45. Short dividend bonus: a payment of dividend in form
of stock rather than cash but being paid at current market value of the stock
46. Stock split: this is the division of a unit of
stock into smaller unit with aim of reducing the share price, however, the
value of the share remains the same
47. Street name: the holding of securities owned by the
client in the share box of the stock broking firm is said to be held in ‘Street
Name’
48. Share box load: this is the total units and current
market value of the various securities owned by the stock broking firm, which
is being traced upon dynamically. The stock broking firm is not expected to buy
and hold stocks in the share box but should evolve changing share box position
49. Thin market: stock market with few bids and offers
resulting in wide price ranges
50. Certificate movement register: this is register
maintained by the stock broking firm detailing information contained in the
security document for submission at the registrar for verification. It contains
the following items: date of receipt to system, shareholders Name, Name of
security, unit, and certificate No. Agents (Jobber), date of dispatch, dispatch
staff, status of the stock, and name of the collector, where collector and
where the security is to be verified by the owner and remarked whether verified
or need further evidence to be presented to the registrar i.e. Banker’s
confirmation or the stockbroker indemnity
51. Bearish or bullish: when condition, suggest lower
prices, a Bearish situation is said to exist. If however, higher prices appear
warranted, the situation is said to be bullish
52. Closing of books (register): this is a period when
the distribution of any kind is to be made. It is to be decided by the
respective company in consultation with the relevant stock exchange. It is
generally fixed to consider accounts at the end of the period to which they
refer dividend and bonus etc
53. Ex right: the buyer of a stock selling ex right is
not entitled in the issue being made
54. Listing: a stock or bond’s admission to trading
rights on a stock exchange based on its size, profitability, shareholder and so
on
55. Market capitalization: the value of a firm as
determined by the market pricing of its issued and outstanding common stock
56. High/low index: an index indicating yearly highs
and lows on  a moving average basis used
to predict pattern changes

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