 Bonus/Split:
To stimulate investor interest in the scrip, reward shareholders,
or increase liquidity of the stock, companies come out with bonus
issues or split the share. In the case of a bonus issue, you will
be issued additional shares of the same face value. In the case of
a split, the face value of the share is reduced (from Rs 10 to Rs
5, for instance).
Dividend Yield: This figure (in per cent) measures the
dividend returns on equity. Just divide the dividend per share by
the share price to arrive at this. Remember to exclude special dividends
(as the chances of these being repeated are remote) before calculating
this.
Earnings Guidance: Companies in India have recently started
providing earnings guidance (projected profit for the coming year).
This is important information for the equity investors, as the current
market price is based on future expected earnings.
Entry/Exit Load: This is the extra price (over and above
the NAV) you have to pay at the time of entering or exiting a fund
scheme. For example, assume that the NAV is Rs 100 and the entry
or exit load is 1 per cent each. In this case, you have to pay Rs
101 to buy an unit, while you will get only Rs 99 when you redeem
it.
Expense Ratio: While managing funds, asset management companies
incur several expenses. In addition to this, they also charge asset
management fee. The ratio of all expenses (including the AMC fee)
expressed as apercentage of total assets is known as the "expense
ratio". SEBI has fixed a ceiling of 2.5 per cent on this; most
funds charge less than this, a function of competition.
Growth/Balanced/Income Funds: Equity funds are also known
as "growth funds" as they try to grow your money faster
by taking higher risks. Debt funds, on the other hand, try to earn
you regular income and are also known as "income funds".
As the name suggests, "balanced funds" invest in equity
as well in debt.
Growth/Dividend Option: These options are available for all
types of funds (equity, debt, balanced). Want regular dividends
to meet your expenses? Go for the dividend option. But if you want
your money to grow, just opt for the growth option.
Net Asset Value: This is the value at which the subscription
or redemption of mutual fund units is done. It is arrived at by
calculating the net assets of the fund and dividing this by the
number of units outstanding. All open end schemes declare this figure
on a daily basis now.
Open/close end funds: Some mutual fund schemes allow you
to buy or sell units on a regular basis and they are known as "open
end" schemes. But in some other cases, you have to invest only
at the time of the fund's initial public offering and hold on till
its maturity date. These are known as "close end" schemes.
To create some liquidity some "close end" schemes are
listed on the stock exchanges.
P/B Ratio: This ratio is related to valuations. First,
the net worth (equity capital plus free reserves) is divided by
the number of outstanding equity shares to arrive at the book value
per share (BV). Then, the market price is divided by this book value
to arrive at the "P/B ratio". A high P/B ratio (greater
than 1) usually means the market thinks highly of a company's prospects.
P/E Ratio: Also P-E Multiple. Once you divide the net profit
of a company by number of outstanding equity shares, you get the
earnings per share (EPS). P/E ratio tries to establish the relationship
between the current market price and the EPS. A high P/E usually
means valuations are high and that the market thinks highly of a
company's prospects.
Volume/Turnover: Volume and turnover indicate the trading
interest in any counter. Volume is the number of shares changing
hands. This multiplied by the share price gives the total turnover
in any counter.
-compiled by Narendra Nathan
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