I Have No Idea What You Are Talking About!
Finance | November 30, 2009 at 12:22 pmIf that’s your expression when you look at figures and terms scrolling on CNBC or any other business or finance news channel, this article is specifically designed to suit your needs. You would easily understand what the term ’52 week high’ denotes. However, since many years you might be wondering what a P/E ratio is or what do they mean by ‘market cap’, which definitely doesn’t mean a round cap for market to protect against scorching sun. Then what do the terms signify?
Open
The opening time to trade in American stock markets is 9.30 am EST and closing is 4.00 pm EST. The market is operative from Monday to Friday, closed on bank holidays and weekends. The price of any given stock at 9.30 am EST is known as an opening price or generally termed as ‘Open’. Trading is also done in ‘pre-market’ hours i.e. from 8.00 am to
9.30 am EST and ‘after hours’ i.e. from 4.00 pm to 6.30 pm EST. The ‘open’ price is generally affected by these two trading sessions.
Prior Day’s Close
‘Prior Day’s Close’ is the price of any given stock at 4.00 pm EST i.e. closing period. However, it’s not necessary that the price of a stock mentioned as ‘prior day’s close’ would be same as next day’s ‘open’ because the ‘after hours’ and pre-market’ sessions is operative in between.
High
‘High’ refers to the highest price of any given stock in that particular given trading day.
Low
‘Low’ refers to the lowest price of any given stock in that particular given trading day.
Volume
‘Volume’ means the quantity of shares of a specific given stock traded in any given day. It is an important piece of information noted by traders and investors because if the number mentioned in volume is quite high, it becomes simple to buy and sell shares and the prices are bound to fluctuate. However, if the number of volume is low, it becomes quite difficult to get or sell a stock at the price comfortable to you.
Average Volume
This is an average of the quantity of shares traded of a specific stock during a long period, generally 365 days (or a year). Comparing this number with the ‘Volume’ of a stock at any specific day gives you vital information about the company. If the number is quite higher than the ‘average volume’, some significant information is or about to be revealed.
Market Cap or Market Capitalization
If the number of outstanding shares is multiplied by the amount of dollar that is equivalent to the stock price, you get ‘market cap’. There are 3 categories under which the listed companies are divided: large cap, mid cap, and small cap. A company is considered as a large cap when the above calculation gets an amount between $10 and $200 billion. It is mid cap when between $2 and $10 billion, and small cap when it is between $2 billion and $500 million.
52 Week High
This is highest level reached by the price of a specific stock anytime in past 52 weeks, or a year.
52 Week Low
This is lowest level reached by the price of a specific stock anytime in past 52 weeks, or a year.
Earning Per Share or EPS
EPS is calculated by dividing the company’s annual profit by the quantity of outstanding shares. For Example, the annual profit of company ‘A’ is $24 billion and the quantity of outstanding shares is 4 billion. The EPS calculated is $6.
P/E
P/E is Price to Earning Ratio. P/E is derived by dividing the annual earning each share of last year by the prevailing stock price of a specific stock. For Instance, if the stock price company ‘X’ is $55 and the annual earning each share for last year was $5. The P/E is 11. Price to Earning ratio can be used to compare the worth of like stocks, depending on the growth level.
F P/E
F P/E is Forward Price to Earning Ratio. As the name suggests, this ratio is used to determine the future P/E, specifically subsequent financial year, of any specific stock. For instance, if the stock price of company ‘Y’ is $55 and the anticipated annual earning each share for the subsequent year is $11, the F P/E is $5.
Beta
A tool used to measure how volatile a stock is compared to the ups and downs of the market, is ‘Beta’. Generally the figure of beta for any stock varies between 0 and 2 (excluding 2). If the volatility of the stock is in sync with the market, beta is 1. If volatility is more, beta is more than 1. If volatility is less than the market fluctuations, beta is lesser than 1. For instance, if the bet of stock ‘Z’ is 1.2, the volatility of this share is 20% more than the volatility of the market.
Dividend
A part of the company’s profit is distributed among the shareholders is dividend. This can be quarterly, half-yearly or yearly, depending on the profitability of the company. Usually, it’s given every quarter. It is given because you are a partial owner of the company.
Yield
Yield is nothing but the percentage of annual amount a shareholder receives over the price he paid to buy the stock (stock price). Generally the annual amount received is calculated by multiplying the recent dividend by 4. For instance, stock price of company ‘B’ is $160 and the recent dividend given per share was $1. So the calculation of ‘Yield’ is $1 x 4 / $160 which equals to 0.40. So the yield is 40%.
Shares
The total quantity of shares issued by the company for trading in American stock market is called Shares. Generally, the quantity is very high like millions or more.
Institutionally Own
Out of total quantity of shares issue in public by the company, some are bought by financial institutions. So the percentage of such shares is known as ‘Institutionally Own’. For instance, company ‘C’ has issued 40 million shares, out of which 2, 00,000 shares are bought by some mutual fund and insurance companies, the percentage of ‘Institutionally Own’ is 20%.
Read this article a couple of times and watch CNBC tomorrow to test yourself on how much do you remember.
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This article is really very great and effective for beginner.
I must say that its one of the most read article. It should be read by all in today’s finance world.
There are many other segments but for the start this is very much decent. It is explained well.
Though I have knowledge about all this but yet I always believe in learning again and again and this is the article where you can learn the basics
I always had confusion in all these terms, after readin these and some other books as well it has helped.