Stock market fundamentals

September 14, 2017
  

Shares : Certificates or book entries representing ownership in a corporation or similar entity.

Par/Face Value :

  • Usually important for debt/bonds, because interest is calculated on based of this face value
  • Decided when releasing the stocks
  • Par value is usually very low in stocks, because company doesn’t want to have liability if stock prices go down below the par value
  • It has no connection to the market value of the share of stock

Outstanding stocks :

  • Stocks held by shareholders
  • Publicly traded companies are obligated to report the number of issued and outstanding shares,

Treasury stock :

  • Treasury stock (treasury shares) are the portion of shares that a company keeps in its own treasury
  • Treasury stock may have come from a repurchase or buyback from shareholders, or it may have never been issued to the public in the first place
  • Treasury stock not considered when calculating dividends or earnings per share.
  • These are kept in the company’s treasury to be used to create extra cash if it is needed. Another reason may be to keep a controlling interest within the treasury to help ward off hostile takeovers.

Share capital : It consists of all funds raised by a company in exchange for shares of their stocks.

Outstanding share capital : Share capital less the par value of shares that are held as the company’s treasury stock.

Earnings per share(EPS) :

  • A company’s profit divided by its number of common outstanding shares. If a company earning ₹200 in one year had 200 common shares of stock outstanding, its EPS would be ₹1 per share.
  • The one-year (historical or trailing) EPS growth rate is calculated as the percentage change in earnings per share(EPS).

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