Stock Investing – learn the language.

1. MARKET CAPITALIZATION: Market capitalization is used to measure the economic size of a corporation. It is defined as the current market value of a corporation’s total outstanding shares. It is calculated by multiplying the total outstanding shares of a corporation by its current market price per share.

2. DILUTION: EPS or earnings per share is a commonly used metric to measure the performance of a corporation. It is calculated by dividing the corporation’s reported earnings by its total outstanding shares. Whenever the number of outstanding shares of a corporation increases, the EPS is said to be diluted.

The total outstanding shares of a corporation can increase due to i) issuance of additional shares ii) conversion of convertible securities.

3. LIQUIDITY: Liquidity is defined as the ability to convert an asset to cash quickly. In the case of the equity markets, liquidity or market liquidity is the ability to buy or sell a share quickly.

4. DIVIDEND: Dividend is a payment received by a shareholder from the corporation. A corporation can decide to distribute a portion of its income or earnings as dividends to its shareholders. The actual dividend received is proportionate to the shareholding in the corporation. Dividend income is taxable.

5. BUYBACK: A corporation may decide to buyback or repurchase a certain number of its outstanding shares from the market. A buyback may be to increase shareholding percentage or to decrease supply in a highly volatile market.

6. OUTSTANDING STOCK: Outstanding stock is the total number of shares that have been issued by the corporation and is currently held by the investors.

7. IPO: Initial public offering or IPO is the first time a private corporation makes its shares of stock available, for investment, to the public.

8. MARGIN: Margin is the amount deposited as collateral by an investor in order to trade certain types of securities.

9. PRIMARY MARKET: Primary market is the market that trades in the very first or initial issue of stocks of a private corporation.

10. SECONDARY MARKET: Secondary market is the market that trades in the stocks of a public listed company.