Stock market vocabulary list
If you are interested in the stock market or want to become involved in it, it can be confusing to understand what people are saying when they are talking about it. So many technical, abbreviations and complex terms are used when people are talking about it, that it can sometimes feel that you are listening to people speak a familiar yet foreign language.
To help you with this I have created the below stock market vocabulary list. In the list you will find over 40 commonly used stock market terms, each with a (relatively) simple description/definition of what they actually mean or refer to. Some of these descriptions are relatively long, but hopefully it will better help you to understand the term.
However, if I am being honest, just reading a list of vocabulary/terms where you are told the meaning is not the most effective way to either learn or remember them. The best way is to guess their meaning from the context they are used in.
All the stock market terms which you will find below are included in the four online exercises we have on the stock market where you will do exactly this, learn through context.
To see the online exercise in which a term is included in, just click on the link at the bottom of its definition.
- Assets
This means all the money and objects (e.g. buildings, brand names, products, machinery etc...) that a company has or owns and can be used or sold. The opposite of assets is liabilities. Liabilities basically means its debts, any money that a company has to pay to somebody else (e.g. loans, rent, invoices on goods it has received, taxes etc....).Go to the online exercise for this term
To find out how much a company is worth (how much money you would receive if the company closed down) you have to subtract a company's liabilities from its assets. For example, if a company's liabilities are €5 million and its assets are €6 million. In theory, the owners of the company would receive €1 million after the company closes down. This €1 million is called the company's net worth or equity. The calculation to find a company's equity by subtracting a company's liabilities from its assets is done on a financial document called a balance sheet. - Balance sheet
A balance sheet is a financial report that shows what the financial situation of a company is. A balance sheet shows both what a company's assets (all the money and objects (e.g. buildings, brand names, products, machinery etc...) that a company has or owns and can be used or sold)) are and what its liabilities (all the money that a company has to pay to somebody else in the future (e.g. loans, rent, invoices on goods it has received, taxes etc....)) are.Go to the associated online exercise
In a balance sheet, the company's liabilities are then subtracted from the companys assets. For example, if a company's liabilities are €5 million and its assets are €6 million. In theory, the owners of the company would receive €1 million after the company closes down. This €1 million is called the company's equity.
Although the information contained in a balance sheet is useful for seeing if buying shares is a good or bad investment, a balance sheet is normally used by investors to obtain the amount of a company's equity. The amount of a company's equity is then used in a calculation that measures how well a company is being managed called Return On Equity (ROE). - Bear market
This is used to describe the performance of the stock market. A bear market is a different way to say that the stock market is performing very badly. When the stock market is a bear market, it means the average value of shares or stocks is decreasing/falling. When the stock market is performing very well (i.e. the average value/price of shares is increasing/growing), the stock market is called a bull market.Go to the associated online exercise
- Bull market
This is used to describe the performance of the stock market. A bull market is a different way to say that the stock market is performing very well. When the stock market is a bull market, it means the average value of shares or stocks is increasing/growing. When the stock market is performing very badly (i.e. the average value/price of shares is falling/decreasing), the stock market is called a bear market.Go to the online exercise for this term
- Common stock
Common stock are also known as ordinary shares (they are generally called this outside of America) or just simply shares. On the stock market, you can buy two main types of stocks and shares in companies; 'common stock' and 'preferred stock'. With common stocks the dividend (extra payment) is largely based on the company's profit performance (so if the company makes a large profit, you'll normally receive a large dividend. But if the company makes no profit, you'll receive no dividend). However, it's the company decision how much to give its shareholders (for many years Apple made large profits but didn't pay out dividends on common stock). Also, with common stock, you can vote in shareholders meetings.Go to the online exercise for this term
With preferred stock it is different. Firstly, you are guaranteed to receive a fixed dividend for a period of time which isn't based on the company's profits. Also, if the company goes bankrupt, people who own preferred stock will be the first to receive the money from the selling of the company's assets (buildings, machinery etc...). However, people who own preferred stock/shares can't vote at shareholders meetings. So with owning preferred stock you normally earn a constant return and there is less of a risk of losing your money than with owning common stock. But although common stock is a riskier investment, if everything goes well with the company, you can earn a lot higher return on the money you have invested in this type of shares than in shares that are preferred stock. - Dividend
A dividend is a payment which companies pay/give to the owners of its shares when it makes a profit. When a company makes a profit, it has to decide what it wants to do with the money. Normally, companies give some of this profit to their shareholders as a dividend on each share they own. For example, if a company pays a dividend of $1.20 on each share, if you own 1000 in the company, you will receive $1,200 in dividends.Go to the online exercise for this term
But often companies keep (or retain) some of this profit. This is called 'retained earnings'. Normally, companies use the money they keep as retained earnings to reinvest in the company (e.g. to buy machinery, other companies, buildings etc...), to save for the future or to pay off debts and loans that they have. - Earnings Per Share (EPS)
EPS or Earnings Per Share is a calculation that measures how much profit is being earned on each ordinary share of a company. The EPS is normally used to compare how one company is performing over different years, to see if it is growing and by how much.Go to the online exercise for this term
The calculation to obtain the EPS is done by dividing the net profit/earnings of the company (after taxes) by the total number of the company's outstanding ordinary shares/common stock (the shares that are sold on the stock market and are not preferred stocks/shares). Normally, this calculation is done with the dividend which the company pays to preferred stocks/shares removed from the net profit number.
The EPS isn't very useful to compare growth between companies, because it doesn't take into account the difference in share price. There are better calculations to use to compare performance between companies. For example, the 'P/E ratio' or 'ROE'. - Equity
The word equity has different meanings. In the context of financial English it means the amount of money which is left in a company after the company's liabilities (all the money that a company has to pay to somebody else (e.g. loans, rent, invoices on goods it has received, taxes etc....)) are subtracted from the company's assets (all the money and objects (e.g. buildings, brand names, products, machinery etc...) that a company has or owns and can be used or sold)). For example, if a company's liabilities are €5 million and its 'assets' are €6 million. In theory, the owners of the company would receive €1 million after the company closes down.Go to the online exercise for this term
This €1 million is called the company's equity. Equity is also called/known as a company's 'net worth' or 'shareholder's equity'. The calculation to find a company's equity is done on a financial document called a balance sheet. - Exit point
The exit point means the price at which a shareholder decides beforehand to sell their shares (also called 'close their position') in a company if they reach that price. Normally, an exit point is used by a shareholder as a strategy to minimise losses from an investment. So, if a shareholder buys 100 shares at a price of $10, they could decide to set an exit point of $7, which means that they will sell their 100 shares if the price reaches $7. By doing this, they will have lost $300, but at least they won't have lost all of their money.Go to the online exercise for this term
An exit point can also be set a price to sell shares if the price rises (e.g. sell shares if they increase and reach a price of $14.50). Exit points are also used with many other types of financial securities (e.g. bonds). - File for bankruptcy
Bankruptcy is basically when a company is unable to pay the debts/money it owes to people/organisations (e.g. bank loans, wages, supplier invoices etc...). When a company is 'filed for bankruptcy' (where a company publicly admits it can't pay its debts, or is forced to by one of its creditors (somebody it owes money to)) it means that it either has to reorganise itself and its debts (how to save money and come to an agreement on how it can pay back its debts) or be liquidated (be closed and have all of its assets sold).Go to the online exercise for this term
If a company is forced to close down, the shareholders will probably lose all their money in the shares they own. If the company survives, but is reorganised, the existing shareholders will normally have their current shares replaced with new ones, whose value will be a lot less than what they paid for their original shares. - Financial securities
Financial securities are commonly just called just securities. Basically, they are financial contracts whose ownership can be traded (bought and sold) between people.Go to the online exercise for this term
One common type of securities are stocks and shares. A share, is basically a financial contract between the company and the shareholder, which says that the shareholder owns a part of the company. The share can then be sold by the shareholder to another person, who can then sell it to another person if they want.
Another type of securities are bonds (a type of loan which a government or company issues when it borrows money from investors). This is a financial contract where the company/government promises to pay t he person who owns the bond the value of what the bond was issued or originally sold at (e.g. €10,000) at a fixed date in the future (e.g. 02/10/2018) plus pay the bond owner a fixed interest rate per year (e.g. 5%). Like shares, the ownership of the bond can be traded between people. Other types of financial securities are currencies (e.g. bank notes) and derivatives (e.g. futures, options etc...). - Initial Public Offering (IPO)
An IPO or Initial Public Offering is when a company first sells its shares on the stock market (so, anybody can buy them). The company changes from being a Private Limited Company (Private Corporation) to a Public Limited Company (Public Corporation). Normally, companies do an IPO to raise money to help the company expand/grow. Often, the price of the shares falls after IPO. An IPO is also called a 'flotation' or a 'public offering'.Go to the online exercise for this term
- Insider trading
Insider trading is basically a type of cheating which is illegal to do. It is when a person uses information about a company or a country to trade (buy or sell) in stocks and shares before this information is made public. For example, if your brother works in a company which has just made a very large profit and tells you about it, but nobody else apart from you and some people who work in the company know about this, it is illegal to buy shares in that company before the news of the very large profit is made public.Go to the online exercise for this term
The reason why, is that this information will give you an unfair advantage over other people who don't know about the company's very large profit. If you do buy shares in the company, you will benefit financially as the share price of the company will increase when the news of the very large profit is made public. This is called insider trading, which is using privileged information for your own financial benefit. insider trading not only happens in the stock market, but with the sale of any type of financial securities (e.g. bonds, currencies, derivatives etc...).
It is different to another type of crime connected to the stock market which is called securities fraud. This is where a person deceitfully manipulates or provides false information about securities (e.g. shares in a company, government bonds, commodities etc...) in order to deceive other investors for personal gain. - Liabilities
This means all the money that a company has to pay to somebody else (e.g. loans, rent, invoices on goods it has received, taxes etc....). It basically means a company's debts. The opposite of liabilities is assets. Assets means all the money and objects (e.g. buildings, brand names, products, machinery etc...) that a company has or owns and can be used or sold.Go to the online exercise for this term
To find out how much a company is worth (how much money you would receive if the company closed down) you have to subtract a company's liabilities from its 'assets'. For example, if a company's liabilities are €5 million and its assets are €6 million. In theory, the owners of the company would receive €1 million after the company closes down. This €1 million is called the company's net worth or equity. The calculation to find a company's equity by subtracting a company's liabilities from its assets is done on a financial document called a balance sheet. - Listed
This verb is commonly used to say that a company's shares/stock is traded (bought and sold) on the stock market. It's a different way of saying that the company is a public limited company/public corporation, e.g. 'Apple is listed on the stock market'. It is also used to say in which stock exchange (e.g. New York Stock Exchange, London Stock Exchange etc...) a company's shares are traded. For example, 'Apple is listed on the NASDAQ'.Go to the online exercise for this term
- Market cap
It is the commonly used name for 'market capitalisation'. This calculation/measure is commonly used and measures the size of a company (by finding the total value of all the company's shares owned by investors) and is used to show the risk of buying stocks and shares in that company.Go to the online exercise for this term
It is calculated by multiplying a company's outstanding shares (which means all the shares owned by investors/shareholders and which have not been repurchased by the actual company) by the current market price of the shares. For example, if a company has 250 million outstanding shares and the market price of the shares is $20. The 'market cap' of the company is $5 billion.
The reason why it is used is that it commonly believed that the size of a company affects the risk an investor has of losing their money and the possible amount of profit (also called the return) that an investor could make. With large companies, there is less risk of losing your money than with small companies, but the probability of making a large profit (return) is lower with large companies than with small companies.
The market cap is used to rank/rate companies as 'large cap' (companies which have a 'market cap' of more than $12 billion), 'mid cap' (companies which have a 'market cap' of between $2 and $12 billion) and 'small cap' (companies which have a 'market cap' of less than $2 billion). For example, Apple is a large cap company. - Merger
In theory, a merger is like a marriage, where two companies of a similar/equal size combine to become one. Both companies want to 'merge' because there are mutual benefits for both (e.g. new markets, reductions in costs and expenses etc...) by being one company. An example, is the merger between the car manufacturers Daimler and Chrysler.Go to the online exercise for this term
A merger is different to a takeover/acquisition. With a takeover/acquisition, one company buys another company (which is normally smaller or experiencing financial problems) and they become one company. But what is similar in both mergers and takeovers is what happens to the share price. In both mergers and takeovers, one of the companies tries to buy the other company's stock/shares (by making an 'offering price', the price they will pay for the shares or what value/number of shares the shareholders in the company being bought will receive in the new or in the buying company).
Normally, before the merger or takeover has been completed, the share price of the company which is trying to buy, goes down, while the share price of the other company goes up. After the merger or takeover has been completed and both companies are now one, the stock market (investors in the market) will decide what the appropriate share price of the one company should be. - Outstanding shares
All the shares/stocks in a public limited company/public corporation that are owned by investors or employees are called 'outstanding shares'. This includes all the shares which are owned by public investors and traded on the stock market (which is called the 'public float'), the shares owned by the employees which are restrictive (you are restricted to how and when they can be sold and are not traded on the stock market) and the shares owned by 'controlling interest investors' (investors who own a large quantity of shares in the company and use them to direct/influence how the company is run/managed and are often the owners of the company before it became a public limited company). Any shares that the actual company has bought and owns (called a 'share repurchase'), are not included in 'outstanding shares', because the shares are part of the company.Go to the online exercise for this term
- Preferred stocks
Preferred stocks are also known as preferred shares (they are generally called this outside of America). On the stock market, you can buy two main types of stocks and shares in companies; 'common stock' and 'preferred stock'.Go to the online exercise for this term
With common stocks (which are the most common/normal type of share), the dividend (extra payment) is based on the company's profit performance. So if the company makes a large profit, you'll generally receive a large dividend. However, if the company makes no profit, you'll receive no dividend. Also, with common stock, you can vote in shareholders meetings.
Preferred stock is different. Firstly, because you are guaranteed to receive a fixed dividend for a fixed period of time (e.g. 10 years) and this dividend isn't based on the company's profits. Also, if the company goes bankrupt, people who own preferred stock will be the first to receive the money from the selling of the company's assets (buildings, machinery etc...). However, people who own preferred stock can't vote at shareholders meetings.
So with owning preferred stock you normally earn a constant return and there is less of a risk of losing your money than with owning common stock. But although common stock is a riskier investment, if everything goes well with the company, you can earn a lot higher return on the money you have invested in this type of shares than in shares that are preferred stock. - Price to Earnings Ratio (P/E ratio)
The 'P/E ratio' or 'Price to Earnings Ratio' is a calculation used to evaluate the level of profit a company is making in comparison with the price of its shares. Because it takes into account the share price, it is commonly used by investors to compare stocks/shares between different companies. It basically shows which stocks and shares are a better investment.Go to the online exercise for this term
It is calculated by dividing the price of the share (one share in Fingers plc costs $15, while one in Tyson plc costs €100) by the EPS (Earnings Per Share) of the company ($5 for both Fingers plc and Tyson plc). So, the P/E ratio for Fingers plc is $15 divided by $5 = 3 and the P/E ratio for Tyson plc is $100 divided by $5 = 20. In theory, the lower the P/E ratio a company has, the better the company is operating and the better the value of the share is. In the above example, shares in Fingers plc are a better investment than shares in Tyson plc.
Normally, companies who have a P/E ratio of between 1-70 are seen as making a good level of profit in comparison with their share price and their shares could be undervalued and their price may rise in the future. Companies with a high P/E ratio (100 or above), aren't making a good level of profit in comparison with their share price and their shares could be overvalued and their value may fall in the future. - Private Limited Companies
A 'private limited company' (often called a 'private corporation' in America) is a type company whose shares are not traded (sold or bought) on the stock market. Private limited companies (which is often shortened to 'Ltd' at the end of a company name, e.g. 'Johnson Cars Ltd') are normally medium to large companies where the owners/shareholders have limited liability (where the owners/shareholders will only lose the money they have invested in the company if the company goes bankrupt/closes down because of financial problems).Go to the online exercise for this term
Companies whose shares can be sold on the stock market (to the public) are called 'public limited companies'. With private limited companies, if one of the owners/shareholders wants to sell their shares in the company they first have to offer them to the other owners/shareholders first before offering them to somebody else. The name private limited company is used in the majority of countries where English is spoken except for America, where as I said before they are often called private corporations in addition to other names there as well. - Public float
The 'public float' or 'float' means the proportion/percentage of all of a company's shares (with is commonly called outstanding shares) that are owned by the general public/small investors and are traded (bought and sold) on the stock market. The public float doesn't include shares that are owned by company employees and are restrictive (you are restricted to how and when they can be sold and are not traded on the stock market) or investors who own a large quantity of shares in the company and use them to direct/influence how the company is run/managed (who are often called 'controlling interest investors' and are often the owners of the company before it became a public limited company). For example, the public float in Apple is over 99% of all the outstanding shares, but in Facebook the public float is only a little over 50%.Go to the online exercise for this term
- Public Limited Companies
A 'public limited company' (often called a 'public corporation' in America) is a type company whose shares are traded (sold or bought) on the stock market and can be bought by the public. Public limited companies (which is often shortened to 'plc' at the end of a company name, e.g. 'Lloyds plc') are normally large to very large companies where the owners/shareholders have limited liability (where the owners/ shareholders will only lose the money they have invested in the company if the company goes bankrupt/closes down because of financial problems).Go to the online exercise for this term
Companies whose shares aren't and can't be sold on the stock market (to the public) but whose owners/shareholders have limited liability, are called 'private limited companies'. The name public limited company is used in the majority of countries where English is spoken except for America, where as I said before they are often called public corporations in addition to other names there as well. - Retained earnings
When a company makes a profit, it has to decide what it wants to do with the money. Normally, companies give some of this profit to their owners (who are called shareholders). This is called a dividend, an extra payment. The dividend is given to the shareholder through the shares they own in the company. For example, if a company pays a dividend of $1.20 on each share, if you own 1000 in the company, you will receive $1,200 in dividends. But often companies keep (or retain) some of this profit. This is called 'retained earnings'. Normally, companies use the money they keep as retained earnings to reinvest in the company (e.g. to buy machinery, other companies, buildings etc...), to save for the future or to pay off debts and loans that it has.Go to the online exercise for this term
- Return
A return basically means the profit you make/earn (e.g. interest, dividend, increase in value etc...) from investing your money. This can be from buying and selling stocks and shares, bonds, investing in a company, putting your money in a bank etc... Normally, a return is measured as a percentage. It has a very similar meaning to yield, but there is a difference in what is included when they are calculated.Go to the online exercise for this term
With stocks and shares, the return combines the dividend (the extra payment you receive for owning a share) and the increase in the share's value on the stock market. With yield, only the dividend is used to calculate it and not the increase in share value. For example, with shares in Apple, if you bought its shares in January 2009 when they had a price of $82.33 and then sold them in January 2011 when they had a price of $348.48, the return on your investment would be be nearly 350%. But because Apple didn't pay its shareholders any dividends on the shares they owned at this time, the yield would have been 0%. - Return on Equity (ROE)
The 'ROE' or 'Return on Equity' is a calculation that is used to measure how efficiently a company is being run/managed. It is used to compare the performance of different companies to see which company's shares are a better investment. It basically compares the net profit (after taxes) of a company to its level of equity (the money left in a company when you subtract how much money a company owes (called a company's liabilities) from the value of things it owns and the money/cash it has (called a company's assets)).Go to the online exercise for this term
The calculation for ROE is Net Profit divided by Equity and the result is multiplied by 100. For example, if a company's net profit/earnings is $2,000,000 and its equity is $13,000,000 then the company's ROE is $2,000,000 divided by $13,000,000 x 100, which is 15.4%.
If a company has a ROE percentage of 10% or above, it shows that the company is being managed/run well and efficiently. If the percentage is below 10% then it suggests that company isn't being run as efficiently as it could be and may not be a good company to invest your money in. - Rights issue
A rights issue is when a company creates completely new shares in the company and then tries to sell them to its shareholders. The reason it does this is to make/raise money (it is often done when they need extra money to make a large investment like to buy another company). Because a rights issue increases the total number of shares for a company, but the total value of the company doesn't change, the price of each company share will decrease/fall as a consequence (this is called to 'dilute the stock').Go to the online exercise for this term
With a rights issue, the company has to offer the new shares to their existing shareholders first. They normally offer the new shares at both a lower price than the current share price and with an additional discount/reduction in price (so when the share price falls the shareholders who have bought the new shares should make a profit). For example, the price of a company's share before a rights issue is $4. The company offers the new shares in the rights issue at a price of $3.50, but to existing shareholders it adds a discount of 30 cent per share, so the shareholders only have to pay $3.20 per share. After the rights issue, the share price on the stock market falls to $3.70 because of the new shares that have been added. - Secondary offering
Basically, this means when a large number of shares in a company are sold for the first time on the stock market for the public to buy. A secondary offering normally happens months or years after a company goes public and first sells its shares in the IPO/flotation. Normally, only a part of a company's shares are sold to the public in the IPO/flotation. The rest of the shares are kept by the original owners and employees.Go to the online exercise for this term
With a secondary offering, normally some or one of these original owners sell part or all of their shares in the company to the public through the stock market. All the money earned from the sale of shares in a secondary offering goes to the previous owner of the shares and not to the company. - Securities fraud
It is a type of crime where a person deceitfully manipulates or provides false information about securities (e.g. shares in a company, government bonds, commodities etc...) in order to deceive investors for personal gain. It can involve making misleading statements, omitting important facts, or engaging in fraudulent activities to manipulate stock prices. An example of securities fraud would be if a company knowingly lies about the financial position of the company in order to attract new investors in the company or to raise the value of its shares.Go to the online exercise for this term
It is different to 'insider trading' (which in theory is a type of securities fraud, but is different) because with insider trading the people who are doing it are not deceiving or lying to others, they are just illegally using privileged information they have for their own benefit. - Share index
A share index or stock market index (as it is known in America) is used to show the average combined share price performance of the shares or market value of a group of different companies. Its main purpose is to show investors and people who in work in the industry what the general situation or trend is in the stock market.Go to the online exercise for this term
There are 100s of different share indices/indexes which are used to measure the share price/market value performance of companies in different countries (e.g. the 'Dow Jones Industrial Average', which measures the average share price performance of 30 of the largest American companies), industries/sectors (e.g. the 'Amex Oil Index' which measures the average share price performance of the world's largest oil companies). There are also global, regional and stock exchange 'share indices'. - Shareholder
This is the name for somebody who owns a part of either a 'private limited company' or a 'public limited company'. A shareholder is a person who has/owns/holds shares (a part ownership) in a company. For investing their money in a company (by buying shares), shareholders normally receive an extra payment called a dividend if the company makes a profit (i.e. the company earns more money than it spends).Go to the online exercise for this term
- Stake
This commonly used word means what percentage of a company that somebody owns. For example, 'she has a 5% stake in the company' is just a different way of saying 'she owns 5% of the company'. Stake is normally used with percentages. In addition, it is normally only used when somebody owns a lot of shares in a company (1% or above).Go to the online exercise for this term
- Stock Exchange
A stock exchange is the place/organisation where the trading (the buying and selling) of stocks and shares happens. When a company decides to sell its shares to the public, they choose a place/organisation where people can buy its shares from. This is called a stock exchange.Go to the online exercise for this term
There are over a 100 different stock exchanges in the world. New York has 3 different stock exchanges of which the 'New York Stock Exchange' and 'NASDAQ' are the two most famous. So, if you wanted to buy shares in Microsoft, the only place/organisation you can buy or sell them on is the NASDAQ stock exchange in New York. More and more some companies shares are traded (bought and sold) on more than one stock exchange. For example, the shares for the oil company BP are traded on both the London Stock Exchange and the New York Stock Exchange.
The stock market has a different meaning to stock exchange. The stock market means all the places/organisations where stocks and shares are bought and sold, which includes all the different stock exchanges. - Stock portfolio
A stock portfolio (which is also called a share portfolio) is basically all the stocks and shares that a person/investor owns. Normally, investors would only say that they have a stock portfolio if they own stocks and shares in two or more companies and want to sound professional.Go to the online exercise for this term
Investors often decide to mix what stocks and shares they own in their stock portfolio to minimise risk/loss. Sometimes, investors pay stockbrokers to manage their stock portfolios (the stockbroker decides which shares to buy and sell). - Stock split
A stock spilt is a planned reduction in the cost of a share in a company. This is done when a company believes that the price of its share is too high/expensive for normal investors to buy. With a stock split, the company decides to reduce/decrease the price of their shares to encourage more people to buy them. They do this by increasing the number of their shares in the stock market. Both before and after a stock split, the total value of all the shares a company has in the stock market stays the same, it's just the number of their shares have increased.Go to the online exercise for this term
Any current/existing owner of their shares will receive additional shares when the 'stock split' happens, so they don't lose any money. For example, if a company has a share price of $90 and it decides to do a stock split where they reduce their share price by two thirds (to $30 a share), an existing owner of its shares who has 100 shares, will receive 200 additional shares after the stock split takes place. - Stockbroker
A stockbroker or broker is a person who is licenced/registered to trade (buy and sell) stocks and shares, derivatives etc... on stock exchanges. Unless you are licensed as stockbroker, you can not buy or sell stocks and shares directly. A stockbroker buys and sells shares for their clients and charges a fee/commission each time they trade stocks and shares for them.Go to the online exercise for this term
Some stockbrokers offer their clients advice on which stocks and shares they should buy and sell (these stockbrokers are often called 'full-service brokers'). Other stockbrokers only trade stocks and shares for their clients and don't offer any advice. These are often called 'discount brokers' and charge less fees/commissions to their clients. - Stocks/Shares
Stocks and shares basically mean the same thing, to have an investment in a company where you own a part of the company. For example, 'I own a lot of stock in the company' has the same meaning as 'I own a lot of shares in the company'. With this meaning, the term stock is commonly used in North America, while shares is commonly used everywhere else. But the word share as a different, more specific use as well.Go to the online exercise for this term
When a company sells the ownership of the company on the stock market, it sells a large number of small individual units or pieces of it. Each unit or piece of ownership in a company is called a share (in both North America and the rest of the world). So if you want to tell somebody how many actual units/pieces of a company you own. you would say 'I have 500 shares in Apple', but you can't use 'I have 500 stocks in Apple'. - Suspend trading
This basically means that no shares of a company can be bought or sold on a stock exchange. There are several reasons why the trading of shares is suspended. A company can ask for trading of its shares to be suspended because its about to announce some important news to the stock market (e.g. a merger or takeover) or because the price of its shares has fallen dramatically and they fear they will fall a lot more (e.g. when there are rumours of big problems at the company).Go to the online exercise for this term
The stock exchange can also suspend the trading of a company's shares. This normally happens when the company has broken stock exchange rules/regulations or is being investigated for doing serious illegal activities (e.g. fraud). - Takeover
A takeover or acquisition is where one company buys another company (which is normally smaller or experiencing financial problems) and they become one company. An example, is when the bank Lloyds bought another bank called HBOS (who had financial problems).Go to the online exercise for this term
A takeover is different to a merger. With a merger, two companies of a similar/equal size combine to become one. But what is similar in both is what happens to the share price. In both mergers and acquisitions, one of the companies tries to buy the other company's stock/shares (by making an 'offering price', the price they will pay for the shares or what value/number of shares the shareholders in the company being bought will receive in the new or in the buying company).
Normally before the merger or takeover has been completed, the share price of the company who is trying buy, goes down, while the share price of the other company goes up. After the merger or takeover has been completed and both companies are now one, the stock market (investors in the market) will decide what the appropriate share price of the one company should be. - Trade
It basically means the process of 'buying' and 'selling' of financial securities (e.g. shares/stock on stock exchanges, bonds, futures etc...). However, it is used in other ways as well. You can also use trade (like list) to say in which stock exchange shares are bought and sold at, e.g. 'shares in Apple are traded at the Nasdaq Stock Exchange'. In addition, you can also use it to say at what price shares/stock in a company is being bought and sold at (the market value of the share/stock). For example, 'shares in Apple are trading at $120.50, down $2.45 from their price this morning'.Go to the online exercise for this term
- Yield
This basically means the profit you make/earn (e.g. interest or dividend) from investing your money. This can be from buying and selling stocks and shares, bonds, investing in a company, putting your money in a bank etc... Normally, a yield is measured as a percentage. It has a very similar meaning to return, but there is a difference in what is included when they are calculated.Go to the online exercise for this term
With stocks and shares, the return combines the dividend (the extra payment you receive for owning a share) and the increase in the share's value on the stock market. With yield, only the dividend is used to calculate it and not the increase in share value. For example, with shares in Apple, if you bought its shares in January 2009 when they had a price of $82.33 and then sold them in January 2011 when they had a price of $348.48, the return on your investment would be be nearly 350%. But because Apple didn't pay its shareholders any dividends on the shares they owned at this time, the yield would have been 0%. Yields are normally used when people are comparing different types of investments to see which one offers the highest profit.
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