The Basics of Stock Market
Basics of Stock Market
The Basics of Stock Market are crucial to gaining a clear understanding of the market. The following are some basic terms you should be familiar with: Long term capital gain, Face value, Promoter, and Dividend. Hopefully, these definitions will help you navigate the stock market and make informed decisions. There are a few more concepts to explore as well. But if you're still confused, keep reading! You'll learn how to spot scams, read company reports, and avoid losing money!
Long term capital gain LTCG
The terms "short-term capital gain" (STCG) and "long-term capital gain" (LTCG) refer to two different types of investments. Long-term capital gains occur when an asset is sold for a price higher than its original cost. The amount of the gain is the difference between the initial investment price and the selling price plus cost inflation, which is based on a cost-inflation index published by the government.
Long-term capital gains are those from the sale of an asset, such as equity-oriented mutual funds, and are generally defined as periods of twelve months or more. Short-term capital gains, on the other hand, are those made on the sale of an item within a year. These gains are subject to ordinary income tax rates. However, if you're selling a stock or bond for over a year, you may have more time to sell the investment.
Investors who sell equity shares after a certain amount of time must pay LTCG tax on the profits. However, this tax is waived for shares purchased before 2005. Investors who sell equity after 2005 will have to pay a 10% tax on the entire amount of their gain. LTCG tax is a great way to encourage investors to stay invested in the stock market for the long term. However, the tax may discourage some investors from investing in the stock market.
Dividend
What is a dividend? Dividends are regular payments made by a company to its shareholders for their investments. They can come in the form of cash, stock, or property, depending on the circumstances. Coca-Cola, for example, pays out 2% of its earnings to its shareholders, so if you buy shares at $40 each, you would get $60 every year. It makes sense to buy stocks from companies that pay out dividends, since this means you'll be gaining some of the company's stability.
Dividends are paid out to shareholders by private companies and public companies. Not all companies pay out dividends, and there is no law that forces them to. Dividends can be paid out monthly, quarterly, or yearly. Some companies pay special dividends irregularly, or even none at all. Dividend payments are not guaranteed, and not all shareholders receive the same amount. Dividends can be paid out to common and preferred stock, although a preferred stock typically has a greater claim to the dividends.
Face value
When purchasing stocks, it's important to know about the face value of the shares. This is the amount that you'll be paid at maturity. However, many investors do not realize that the face value is also known as the par value. You can use this information to make an informed decision about whether a stock is worth investing in. In this article, we'll explain what the face value of a stock is and how to find out what it is.
The face value of a stock refers to the value per share as listed in the corporate charter. A bond, on the other hand, has a predetermined value listed on its certificate. For instance, a $1000 bond with a three-per-cent coupon shows a $1000 face value. The par value of securities issued by an organization is the value of that organization's real or minimum value. The process of assigning a face value is designed to protect creditors and fix the maximum liability of the shareholders.
Promoter
A promoter is a person or company that raises capital for a company by using marketing strategies to increase demand for its shares in the stock market. The promoter of a particular stock is paid in equity shares of the company's holding company. These shares are worth a proportionate amount to the total amount of capital raised and thus influence the total trade volume of equity shares. The promoter of a particular stock is not necessarily a stockbroker.
The promoter of a stock can be the company itself or a subsidiary or holding company. A promoter can own 10% or more of the equity capital of another company. They may also hold a majority of the shares in the company. This means that a promoter can be an insider in a company. Therefore, an investor should exercise caution when assessing the holding of a promoter. There are certain signs of insider status that investors should consider before investing in the stock market.
Top Line & Bottom Line
The Topline and Bottom Line of the stock market are important indicators of the financial health of a company. Basically, the top line represents the sales and revenues of a company. The bottom line is the company's net profit, after all expenses such as taxes and interest charges are deducted. Consequently, the bottom line reflects the company's performance in the long term. When a company's bottom line has fallen, that company's stock price will likely suffer.
The top and bottom lines of a company are related but separate. If the top line is growing, this is a good sign. If the bottom line is declining, the company is likely to lose market share and profitability. The top line may be more important than the bottom. A company's bottom line may be smaller than its top line, but its sales might increase more quickly. If the top and bottom lines diverge, that's a red flag.
Share Split
The Basics of Stock Market Share Split - What is it? A stock market share split is a process where a company divides its shares into two or more new shares of equal value. This process increases the liquidity of the stock market because the value of each share is lower. Shareholders will therefore have more money to spend on other investments. The benefits of a stock market share split are countless. In this article, we'll review the benefits and disadvantages of a stock split.
A stock split transaction is reflected in the Transactions report. The "Split" column will display the new ratio of the shares. For example, a 2-for-1 split would have a "Split Ratio" of 2.0, while a 1-for-2 reverse split would be a "Split Ratio of 0.5". To change the ratio, you can double-click the relevant transaction and change the purchase price or sell price of a specific share. However, some changes will not be reflected in your current holdings, so be sure to check this before making any changes.
Bonus shares
The stock market and bonus shares go hand in hand. These are similar in that they both increase liquidity in a stock and increase the total share capital issued by the company. However, there are some key differences between these two types of shares. Bonus shares are cash-neutral, and the share price gets adjusted by the bonus ratio. For example, if the share price before the bonus is Rs 200, then the post-bonus share price will be Rs 100, and the market value will be equal to the amount of money before the bonus was distributed.
A bonus issue is different from a stock split. It is a method by which a company gives its existing shareholders additional shares for free. It increases the company's liquidity by lowering the share price. Moreover, it enables the company to raise more funds without paying dividends. Hence, it is a good option for companies experiencing liquidity issues. In this way, bonus issues increase their liquidity and investor participation.
Who decides share prices?
Share prices are decided by organized exchanges. Large, established companies list their shares on the New York Stock Exchange and the American Stock Exchange. Smaller, newer firms list their shares on NASDAQ, an electronic system that tracks stock prices. These exchanges determine the value of a share based on various factors, such as the company's earnings and profitability. But there are other factors that also affect share prices, including investor behavioural factors.
The demand and supply of a particular stock are determined by traders. They look at various factors, such as a company's history of earnings, changes in the market, and how much profit they think is reasonable to expect. Once they know what the company's worth is, they bid up the price. When demand and supply are equal, the share price will move up or down within a narrow range. In other words, a company's stock price will fluctuate.
Share prices fluctuate, but it's impossible to predict how they will change. They fluctuate wildly based on the forces of supply and demand, or supply and demand. If there were a secret to stock prices, people would be able to buy and sell shares at a lower price than they currently do. Alternatively, stock prices could move up or down in response to news and other events. So, the answer to the question, "Who decides share prices?" is complex and confusing.
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