Appendixes

Glossary

Acceptance date: Time limit given to a prospective shareholder to accept an offer of shares in a “rights” issue.

Account: A trading period whose dates are fixed by the stock exchange authorities.

Accounts payable: Bills that have to be paid as part of the normal course of business.

Accounts receivable: Debt owed to your company from credit sales.

Accumulated depreciation: Total accumulated depreciation reduces the book value (formal accounting value) of assets. The value of an asset is reduced each month by a predetermined amount and timeframe. An asset worth 100 dollars, depreciated by 10 dollars per month, would be written off over 10 months.

Acid test: A ratio used to determine how liquid a company is. It is determined by subtracting short-term assets from accounts receivable and inventory, which is then divided by short-term liabilities.

Aftermarket performance: A term typically referring to the difference between a stock’s offering price and its current market price.

Agent: Where a member acts on behalf of a client and has no personal interest in the order.

AIM: The United Kingdom-based AltX version, called the Alternative Investment Market.

All or nothing: Means the full order must be executed immediately or, if it is not possible to do so, the order must be routed to the special terms order book.

Allotment letter: Formal letter sent by a company to investors to confirm that it will allocate them shares in a new issue.

AltX: The Alternative Exchange launched in South Africa in October 2003.

American depositary receipts (ADRs): Non-U.S. companies that want to list on the U.S. exchange offer these. Rather than constituting an actual share, ADRs represent a certain number of a company’s regular shares.

Annuity: A contract sold to an individual by an insurance company that is designed to provide payments to the holder at specified intervals, generally after retirement.

Arbitrage: A purchase or sale by a member on his or her own account of securities on one stock exchange, with the intent to sell or buy those securities on another stock exchange, in order to profit from the difference between the prices of those securities on such stock exchanges.

Arbitrageur: Someone who practices arbitrage.

Asset allocation: The process of dividing investments into different categories, such as stocks, bonds, cash, and real estate.

Asset swap: A transaction that complies with all the requirements of the South African Reserve Bank in respect of an asset swap.

Asset turnover: Sales divided by total assets. Important for comparison over time and to other companies of the same industry.

At best: An order to be transacted in a manner that will, in the discretion of the member executing the order, achieve the best price for the client.

At market: An order to be transacted immediately against the best opposite order in the order book at the time of making such entry.

At the close order: An order that is to be executed as close to the end of the trading day as possible.

At the money option: An option with an exercise price equal to that of the underlying security.

At the opening order: An order to buy or sell at a limited price on the initial transaction of the day.

Authorized or issued share capital: While the authorized share capital is the maximum number of shares a company
is permitted to issue over time, the issued share capital is the actual number of shares in issue. These figures are specified in pre-incorporation agreements (memorandum and articles of association). Investors can find these figures in a company’s annual report.

Average: A select sampling of stocks used to reflect the basic trends of the market or a specific portion of the market, for example, the All-Share Index. The average is derived by taking the sum of the market value of the selected stocks and dividing that number by the number of issues or by a divisor that allows for stock splits or other changes in capitalization.

Bad debts: An amount payable by debtors, which the firm determines is irrecoverable.

Balance order: The pairing off of buy and sell orders of the same security to determine the net balance of securities to receive or deliver. This information allows the market to be opened appropriately.

Balance sheet: A statement that shows a company’s financial position on a particular date.

Bar chart: A chart used to plot stock movements using vertical bars to indicate prices.

Bear sales: The sale of listed securities of which the seller is not the owner at the date of sale.

Bear trend: When supply of shares outstrips demand and prices start to fall. If this trend continues for a number of weeks, the general sentiment becomes bearish and prices continue to fall.

Bearish: Used to voice an opinion in the belief that the stock market or some aspect of it is going to decline in price.

Best efforts: This term is used to describe a deal in which underwriters only agree to do their best in selling shares to the public. An IPO is more commonly done on a bought or firm commitment basis in which the underwriters are obligated to sell the allotted shares.

Bid, not offered: When shares are sought, but none are available. The opposite would be offered, not bid.

Big blue: Nickname for the IBM Corporation. Derived from the color of their logo.

Big board: Nickname for the New York Stock Exchange.

Black Monday: A name given to October 19, 1987, when the Dow Jones industrial average dropped a record 508 points, which represented a decline of almost 23 percent.

Blank cheque: A company that indicates no specific industry, business, or venture when its securities are publicly offered
for sale and the proceeds of the offering are not specifically allocated.

Block: A large amount of securities bought or sold.

Blue-chip stock: A stock that is from a well-known, stable, prestigious company with a long and successful track record of profit growth and dividend sharing.

Book value: The net amount of an asset shown in the books of a company, that is, the cost of purchasing a fixed asset less the depreciation on that asset.

Bottom fishing: Investing in stocks whose prices have dropped dramatically based on the belief that the stock has reached bottom and will now rebound.

Break-even point: The unit sales volumes or actual sales amounts that a company needs to equal its running expenses rate and not lose or make money in a given month. Break-even can either be based on regular running expenses, which is different from the standard accounting formula based on technical fixed expenses.

Breakout: Used to describe when a security rises above or falls below a particular level, generally its previous high or low point.

Broker: The name given to a natural person recognized by
the official stock exchange. Institutions have, since 1995, been able to become corporate members.

Brokerage: Commission charged by a member for the purchase or sale of securities.

Broker’s note: A note that a member is required to send to a client, recording the details of a purchase or sale of securities.

Bull market: A market where the dominating trend is one of rising prices.

Bull trend: When demand for shares outstrips supply and prices start to rise. If this trend continues for a number of weeks, the general sentiment becomes bullish and prices continue to rise.

Bullish: Used to voice an opinion in the belief that the stock market or some aspect of it is going to rise in price.

Burden rate: Refers to personnel burden, the sum of employer costs over and above salaries, including employer taxes and benefits.

Buy stop order: A buy order that is not to be executed until the market price reaches the customer’s defined price, known as the stop price. When this occurs, it becomes a market order.

Buying power: The amount of additional securities that a customer may purchase using the existing equity in his or her account.

Call option: A call option establishes the right to buy a specified quantity of the underlying security at a specified price any time during the duration of the option. You would buy a call option if you expect prices to rise. In South Africa, these are called warrants.

Called away: Describes a stock option that was sold, because the stock was at or above the strike price.

Capital assets: Long-term assets, also known as fixed assets (plant and equipment).

Capital expenditure: Spending on capital asset (also called plant and equipment, or fixed asset).

Capital input: New money being invested in the business. New capital will increase your cash, as well as the total amount of paid-in capital.

Capital structure: Usually refers to the structure of ordinary and preference shares and long-term liabilities.

Capital: This is also known as total shares in issue, owner’s equity, or shareholders’ funds.

Cash flow: A statement that shows the net difference between cash received and paid during the company’s operating cycle.

Churning: When a broker processes excessive trades, regardless of the clients’ best interest, in an attempt to maximize commissions.

Circuit breaker: When a halt to trading is implemented for one hour by a major stock or commodity exchange when an index falls a predetermined amount in a session. This is done to prevent further losses.

Closing period: The last hour or two of trading before the stock market closes at the end of the day.

Closing price: The last sale price or a higher bid or lower offer price for a particular security.

Collection days: See collection period.

Collection period (days): The average number of days that pass between delivering an invoice and receiving the money.

Commission: The brokers charge a fee for buying and selling shares, which is brokerage or commission earned on a deal.

Commissions percent: An assumed percentage used to calculate commissions expense as the product of this percentage multiplied by gross margin.

Commodity futures: A contract to buy or sell a commodity at a specific price and on a specific delivery date.

Common stock: A securities holding that affords the possessor to have ownership in the company that provides benefits such as voting rights and dividend sharing.

Consumer price index: An inflationary indicator that measures the change in the cost of goods and service that the average consumer purchases.

Convertible and redeemable—preference shares: An alternative mechanism to ordinary shares. It enables companies to issue other shares, which can either be bought back from investors or converted into ordinary shares at a later date.

Corporate finance transaction: A transaction that is entered into writing and requires public notification in the press in terms of the listing requirements of the JSE.

Cost of sales: The costs associated with producing the sales. In a standard manufacturing or distribution company, this is about the same as the costs for people delivering the service, or subcontracting costs.

CPI: Abbreviation for consumer price index.

Creditors: People or companies that you owe money to. This is the old name for accounts payable.

Crossed market: Where a bid price is higher than the offer price for a security.

Cum or ex-dividend: After a company has declared a dividend, it would close its books to start paying dividends. The share will be marked ex-div, which means that any new shareholder will be omitted from the past year’s dividend payout. Before the company declares a dividend payout, the share will be assumed to include possible dividends, or to be cum-div.

Current assets: Those assets that can be quickly converted into cash and include accounts receivable, stock, and debtors book. These are often called liquid assets.

Current debt: Short-term debt, short-term liabilities.

Current liabilities: A company’s short-term debt, which must be paid within the firm’s operating cycle, that is, in less than one year.

Day order: A transaction order that is valid only for the day on which it was entered.

Day trading: The practice of buying and selling a security on the same day.

Dead cat bounce: A quick, moderate rise in the price of a stock following a major decline.

Debentures: A bond that is not secured by fixed assets.

Debt and equity: The sum of liabilities and capital. This should always be equal to total asset.

Debtors: People or companies that owe your company money. It is the old name for accounts receivable.

Deep in the money option: A call option with a strike price that is significantly below the market price or a put option with a strike price that is significantly above the market price.

Delayed opening: An intentional delay in the start of trading in a stock until a large imbalance in buy and sell orders is eliminated.

Deleted or delisted: A security that has been removed from public trading.

Delta: The change in price of a call option in relation to the change in price of the underlying security.

Depreciation: An accounting and tax concept used to estimate the loss of value of assets over time. For example, cars depreciate with use.

Descending tops: A chart pattern where each new high price for a security is lower than the previous high.

Dip: A small temporary drop in price during an overall upward trend.

Divergence in charting: When two charting lines are heading in opposite directions, generally after a cross-over point.

Diversification: Investing in a wide variety of investments so as to reduce overall risk.

Dividend yield: Ratio of the latest dividend to the cost or market price of a security expressed as a percentage.

Dividends: Money distributed to the owners of a business as profits.

Double bottom: When a security has twice declined to its support level.

Double top: This technical assessment is formed when a stock advances to a certain price level only to retreat from that level, and then rallies again back to that level. The up moves are accompanied by high volume, and the recession from the top comes on receding volume.

Dow Jones averages: The most widely used averages to track overall market conditions. There are four Dow Jones averages: industrial, transportation, utilities, and composite. The composite is simply the previous three combined.

Dow theory: A theory that is based on the belief that the fluctuations in the stock market are both a reflection of current business trends, as well as a predictor of future business trends.

Downtick: A transaction where the stock price is lower than the previous transaction.

Due diligence: A reasonable investigation conducted by the parties involved in preparing a disclosure document to form a basis for believing that the statements contained therein are true, and that no material facts are omitted.

Earnings per share: Total earnings divided by the number of shares outstanding.

Earnings yield: Ratio of net earnings per security to the market price expressed as a percentage.

Earnings: Also called income or profits, earnings are the famous bottom line: sales less costs of sales and expenses.

EBIT: Earnings before interest and taxes.

ECN: Electronic communication networks used by day traders and institutions to post bids in the Nasdaq market.

Elliott wave: A theory of price movement cycles identified by Ralph Elliott. This theory claims that the stock markets follow a pattern of five waves up and three waves down.

EPS: Abbreviation for earnings per share.

Equity: Business ownership; capital. Equity can be calculated as the difference between assets and liabilities.

Ex-dividend date: The date at which the ex-dividend period begins.

Exercise date: The date when the sale or purchase of an option occurs as agreed upon in the contract.

Exercise or expiration date: The date when the sale or purchase of an option occurs as agreed upon in the contract.

Expiration date: The date on which an option becomes worthless if not exercised.

Fair market value: A price that both the seller and buyer agree represents a valid price based on current market conditions.

Fill: A command to instantly process an entire order.

Fill or kill: The full order must be executed immediately or otherwise canceled.

Financial notes: Information explaining financial figures (balance sheet, income statement, and cash flow).

Fiscal costs: Running costs that take time to wind down: usually rent, overhead, some salaries. Technically, fixed costs are those that the business would continue to pay even if it went bankrupt. In practice, fixed costs are usually considered the running costs.

Fiscal year: Standard accounting practice allows the accounting year to begin in any month. Fiscal years are numbered according to the year in which they end. For example, a fiscal year ending in February of 1992 is Fiscal year 1992, even though most of the year takes place in 1991.

Fixed assets: Includes all fixed (immovable) assets, namely property, vehicles, machinery, and equipment. It cannot usually be converted into cash within the firm’s operating cycle.

Flipping: This is when an investor has acquired an IPO at its offering price and sells it immediately for a quick gain soon after it starts trading on the open market. A practice discouraged by underwriters, it can lead such investors to unfavorable relationships with their underwriters with future IPOs.

Float: The number of shares of a common stock that are outstanding, and therefore available for trading by the public.

FOK order: Abbreviation for fill or kill order.

Fundamental analysis: A method of determining a securities value based on the analysis of several factors, such as a company’s earnings, sales, assets, and growth potential.

Futures: A contract that requires the delivery of a commodity at a specific price on a particular date in the future.

Gap and trap: The price of stock gaps, buyers purchase the stock. Market makers bring the stock price down, thus trapping the buyers who bought at the higher gap price.

Gap: When the range of a stock price on two successive days does not overlap.

Going concern: A company that is operating, that is, has not stopped producing goods or providing a service and one that has not been placed under liquidation or curatorship.

Going public: When a private company first offers shares to the public.

Good till canceled order (GTC): An order that remains valid until executed or canceled by the customer.

Goodwill: An intangible asset reflected in balance sheets, which indicates an excess over market value for assets paid by the firm.

Gross geographic product: A statistic that shows the remuneration received by the production factors (land, labor, capital, and entrepreneurship) for their participation in production of goods and services in a defined area.

Gross margin percent: Gross margin divided by sales, displayed as a percentage. Acceptable levels depend on the nature of the business.

Gross margin: Sales less cost of sales.

GTC order: Abbreviation for good till canceled order.

Hammering the market: Excessive sale of stocks, which drives the market down.

Head and shoulders: This technical pattern is typically characterized by one intermediate top, followed by a second top higher than the previous top, and a third rally that fails to exceed the head.

Hedge: Taking an investment position in which some investments are designed to offset the risk of others.

Hit the bid: Immediate sell to the current bid price.

Hit the offer: Immediate buy from the current ask price.

Immediate deal: A transaction in a listed security where settlement is to take place the next business day.

In the money option: A call option where the strike price
is less than the market price or a put option where the strike price is greater than the market price.

Income statement: A statement showing net income or loss for a specified period.

Index fund: A mutual fund that tries to mirror the performance of a specific index.

Indicator: Statistics that provide an indication of the trends of the financial world or the economy in general.

Initial public offering: The first issue and sale of stock by a company to the public.

Inside ask or inside offer (best ask or best offer): The best current selling prices.

Inside market: The range between the highest bid price and the lowest offer prices among all competing market makers, or ECNs in a Nasdaq security.

Insider: A person who is privy to corporate information that is not available to the general public.

Instinet system (INCA): An ECN originally designed to allow commercial investors to post anonymous bids to other investors.

Institutional investors: An entity with a considerable amount of money to invest.

Interest expense: Interest is paid on debts, and interest expense is deducted from profit as expenses.

Intra-day activity: All trading transactions between the opening and closing of the day, that is, within a single day.

Intrinsic value: The amount of money that an option is worth if it was exercised.

Inventory turnover: Sales divided by inventory. Usually calculated using the average inventory over an accounting period, not an ending inventory value.

Inventory turns: Inventory turnover (see inventory turnover).

Inventory: This is another name for stock. Goods in stock, either finished goods or materials to be used to manufacture goods.

Investment banker: An individual or institution that provides services, such as underwriting and counseling, but does not accept deposits or make loans.

IPO: Abbreviation for initial public offering.

Jobbers: These are the market’s share merchants. They deal only with brokers and other jobbers (i.e., not with dealers), and their main function is to maintain a market by quoting a price.

Labor: In business plans, the word labor often refers to the labor costs associated with making goods to be sold. This labor is part of the cost of sales, part of the manufacturing and assembly. In economic terms, labor often denotes the sale of a skill to produce a good or service.

Last sale: The most recent stock trade.

Letter of acceptance: The investor may receive such a letter if the company accepts his or her application for shares.

Leveraged buyout: Taking over a controlling interest in a company, using primarily borrowed money.

Liabilities: Debts; money that must be paid. Usually debt on terms of less than five years is called short-term liabilities, and debt for longer than five years is long-term liabilities.

Limit order: An order that may only be carried out at prices equal to or better than the price on the order.

Limit price: The price specified in a limit order.

Liquidity: A company’s ability to pay short-term debt with short-term assets.

Listed stocks: Stocks that are listed and traded on an exchange and represented by a symbol character.

Listing: Official granting of a listing of a company’s shares on an exchange.

Local counterparty transaction: A transaction where a member trades as a principal with a person in South Africa other than a member.

Locked limit down: The point at which all trading is halted to prevent further panic during a rapid selloff. Only high-priced trades are allowed to resume.

Locked market: A highly competitive market in which the bids and prices are the same.

Long position: When the stock owner is waiting for a price move in order to sell at a higher price.

Long-term assets: Assets such as plant and equipment that are depreciated over terms of more than five years and are also likely to last that long.

Long-term interest rate: The interest rate charged on long-term debt. This is usually higher than the rate on short-term debt.

Long-term liabilities: This is the same as long-term loans. Most companies call a debt long term when it is on terms of five years or more.

MA: Moving average.

Management of investments: The management of investments on behalf of a client, by a member, or an approved person.

Margin call: A call from the brokerage to the customer requesting that the customer deposits additional funds into their account in order to return the balance to its required level.

Margin: The amount of money that a customer must deposit with a broker to secure a loan from that broker. In the case
of futures, the amount of money that must be deposited to protect the buyer and seller from default.

Mark-to-market: A position’s value at the most recent closing price.

Market capitalization: Used to denote a company’s size and is calculated by multiplying a company’s issued share capital by its current share price.

Market indicators: Statistics that give an overall picture of how the market is performing.

Market maker spread: The difference between prices of the market maker closest to the inside bid and the market maker closest to the inside ask, excluding ECNs.

Market makers: A brokerage or bank that maintains a bid and ask price in a given common stock by always being available to buy or sell at publicly quoted prices.

Market on close order: An order to buy or sell that is to be executed during the closing period of the market at the best price available.

Market on the open order: An order to buy or sell that is to be executed during the opening period of the market at the best price available.

Market order: An order to buy or sell stock at the market’s current price.

Market value: The latest trading price.

Market value weighted index: An index made up of securities with values that heavily influence the market.

Marketable securities tax (MST): The tax imposed in terms of the Marketable Securities Act of 1948 in respect of every purchase of marketable securities through the agency of or from a member at the rate of 0.25 percent of the consideration for which the securities are purchased.

Marketable securities: All instruments legally permitted to trade on an exchange. These include shares (ordinary and preference), gilts, futures, and options.

Materials: Included in the cost of sales. These are not just any materials, but materials involved in the assembly or manufacturing of goods for sale.

Mid-day period: The hours between 11:30 a.m. and 1:30 p.m. for any trading day. Trade during this time generally slows down as people break for lunch.

Momentum trading: Short to moderate length investments that are made to capitalize on the sudden rise or drop in a stock price that follows certain technical indicators.

Monopoly: When one company controls and dominates a particular market sector or product.

Most active: Stocks with the day’s highest trading volume.

NASD: National Association of Securities Dealers, an organization responsible for regulating the Nasdaq stock market.

Nasdaq: Abbreviation for National Association of Securities Dealers Automated Quotations.

Net cash flow: This is the projected change in cash position, an increase or decrease in cash balance.

Net profit: The operating income less taxes and interest. The same as earnings, or net income.

Net worth: This is the same as assets minus liabilities, and the same as total equity.

NYSE composite index: An index that measures the market value of all NYSE-traded stocks.

NYSE: The New York Stock Exchange where stocks are traded in an open-floor market.

Odd lot: Any quantity of securities that is less than a round lot (Krugerrands do not have odd lots).

Offer (seller’s price): Price at which a dealer is prepared to sell securities on the market.

Offering price: This is the price set by the sponsor, at which the company’s stock is sold to the first round of investors.

Offering range: This is the price range in which the company expects to sell its stock. This can be found on the front page of the prospectus. As with everything traded, market conditions and demand dictate the final offering price.

Oligopoly: When a few companies control and dominate a particular market.

Open: A market’s first traded price for the day.

Open interest: The number of contracts outstanding at the end of the trading day.

Open order: An order that remains valid until executed or canceled by the customer.

Opening period: The first hour or two of the trading day.

Opening price: This is the initial trading price of the company’s stock on its first day of trading.

Order: An instruction to buy or sell a specified quantity of a security.

Ordinary shares: Commercial paper issued to investors to raise capital. Investors hold these shares as part owners in the firm.

OTC: Abbreviation for over the counter.

Other short-term assets: These are securities and business equipment.

Other ST liabilities: These are short-term debts that do not cause interest expenses. For example, they might be loans from founders or accrued taxes (taxes owed, already incurred, but not yet paid).

Out of the money: A call option where the strike price is greater than the market price or a put option where the strike price is less than the market price.

Overheads: Running expenses not directly associated with specific goods or services sold, but with the general running of the business.

Over-the-counter market (OTC): A market made up of dealers who make a market for those securities not listed on an exchange. The OTC market is made between buyers and sellers over the telephone, rather than electronic markets.

Paid-in capital: Real money paid into the company as investments. This is not to be confused with par value of stock or market value of stock. This is actual money paid into the company as equity investments by owners.

Paper profit: A surplus income over expense, which has not yet been released, that is, share prices that have increased above the price at which they were bought, but have not yet been sold.

Paper trade: Trading stocks for pretend with no real money, to practice or test theories.

Par value: The nominal value of a share. It is an arbitrary amount placed on the share by the company.

Partial fill: An order that has been implemented for only part of the requested share size.

Payment days: The average number of days that passes between receiving an invoice and paying it.

Payroll burden: Payroll burden includes payroll taxes and benefits. It is calculated using a percentage assumption that is applied to payroll.

PE ratio: Abbreviation for price-earnings ratio.

Penny stocks: Low-priced, high-risk stocks, usually with a price of less than a dollar per share.

Plant and equipment: This is the same as long-term assets, or fixed assets, or capital assets.

Point and figure chart: A chart that shows price movements of a security, without measuring the passage of time.

Poison pill: Any action taken by a company designed to avoid a hostile takeover. For example, issuing preferred stock that can be redeemed at a premium if a takeover does occur.

Portfolio: A schedule, normally computer-generated, listing the relevant details in respect of the securities held by an investor.

Preferred stock: A stock holding that provides a specific dividend that is paid before any dividends are paid to common stock holders. In the event of liquidation, their rights come before common stock holders, but after other holders, such as bond and debt.

Previous close: The last reported price from the previous trading day. Prints: A price and size report of actual trades in real time.

Price:earnings (P/E) ratio: The market price of securities divided by its earnings. It expresses the number of years’ earnings (at the current rate) that a buyer is prepared to pay for a security.

Primary market: Where shares are distributed at the offering price to investors.

Principal transaction: A member trades with a counterparty or another member.

Principals: The major investors in a corporation. They, generally, have equity interest, voting privileges, access to management records, as well as receiving dividends.

Private placement: An offering of a limited amount of shares or units in which the recipients receive restricted stock from the issuer.

Product development: Expenses incurred in development of new products; salaries, laboratory equipment, test equipment, prototypes, research and development, and so on.

Profit before interest and taxes: This is also called EBIT, for earnings before interest and taxes. It is gross margin minus operating expenses.

Profit-taking: Action by short-term securities traders to cash in on gains created by a sharp market rise. This results in a temporary drop in market prices.

Program trading: A computerized trading system that allows for large volume securities trading.

Prospectus: This document is an integral part of a documentation that must be filed with the exchange. It defines, among many things, the company’s type of business, use of proceeds, competitive landscape, financial information, risk factors, strategy for future growth, and lists its directors and executive officers.

Proxy: A person who is authorized to represent another person. For example, a person who is authorized to vote on behalf of another stockholder at a stockholder’s meeting.

Quarterly report: A report that the SEC requires companies that trade in public markets to submit on a quarterly basis, publicizing overall performance and financial stability.

Rally: A substantial rise in the price level of the overall market, following a decline.

Range: The difference between the highest and lowest prices that are traded during a specific given time frame.

Real-time trade reporting: When all transactions are instantly requested.

Receivable turnover: Sales on credit for an accounting period divided by the average accounts receivable balance.

Refresh: When a market maker or ECN places a post to buy or sell more shares after fulfilling an order.

Registration: A new shareholder is registered when his or her name is placed on the role of shareholders for that specific company.

Renunciation date: The company sets a date by which the shareholder has to decide whether he or she will take up the rights issue.

Resistance or ceiling: The price where enough sellers prevent the price from rising any further.

Resistance: Inability of a stock to rise above a certain price. This is generally due to an abundance of stock being available at that price.

Retained earnings: A figure that shows the sum of a company’s net profit less dividends paid to shareholders.

Return on assets: Net profit divided by total assets. A measure of profitability.

Return on investment: Net profits divided by net worth or total equity, yet another measure of profitability. Also called ROI.

Return on sales: Net profits divided by sales, another measure of profitability.

Reversal: When the overall market changes directions after a trend in the other direction has occurred.

Reverse head and shoulders: This is the same pattern as a head and shoulders, except that it has turned upside down and indicates a trend change from down to up. A buy signal is given when prices carry up through the neckline.

Rights issues: There are a number of methods that a company can use to increase the size of its share capital. If it decides to offer its existing shareholders first option on the issue, it is called a “rights” issue. The dealers would note that such an issue is in progress, as it would be quoted as cumcapitalization, and after completion of the issue, it would be noted as ex-capitalization.

ROI: Return on investment; net profits dividend by net worth or total equity, yet another measure of profitability.

Rolling option: Buying options on a stock that shows a consistent pattern of traveling up and down between two levels.

Round lot: The standard unit of trade in all equities: 100 shares.

Round trip: The completion of a transaction, which includes both entry into the market and exit.

Rounding bottom: A chart pattern in the shape of a saucer. Suggesting a new trend upward.

Rounding top: A chart pattern in the shape of an inverted saucer. Suggesting a new trend downward.

S&P 500: The Standard & Poor index that represents the top 500 value-measured companies.

Sales on credit: Sales on credit are sales made on account, shipments against invoices to be paid later.

Scrap value: An amount left after an asset has been fully depreciated, that is, if an asset of R115 is depreciated by R10 per month over 11 months, the scrap value would be R5.

SEC: Abbreviation for Securities and Exchange Commission (The U.S. official stock exchange body).

Secondary market: Better known as the stock market, where shares are openly traded.

Securities: Includes stocks, shares, debentures (issued by a company having a share capital), notes, units of stock issued in place of shares, options on stocks or shares or on such debentures, notes or units, and rights thereto, and options on indices of information as issued by a stock exchange on prices of any of the aforementioned instruments.

Sell stop order: A sell order that is not to be executed until the market price reaches the customer’s defined price, known as the stop price. When this occurs, it becomes a market order.

Selling off: Selling securities to prevent losses from continued price declines.

Selling on the good news: Selling a stock right after good news has driven the price very high.

Settlement: Procedure for brokers to close off their books on a particular transaction. The client is expected to pay for his or her new shares on or before the settlement date and he or she, in turn, can expect to be paid (on selling shares) within the same period (also called the settlement period).

Short interest: The total number of shortened shares in one specific stock.

Short position: The position that results from short selling that has not yet been covered. Often defined in terms of the number of stocks that are sold short.

Short sale: Borrowing a security from a broker and selling it, with the understanding that it must later be bought back and returned to the broker.

Short-term notes: This is the same as short-term loans. These are debts on terms of five years or less.

Short term: Normally used to distinguish between short term and long term when referring to assets or liabilities. Definitions vary because different companies and accountants handle this in different ways. Accounts payable is always short-term assets. Most companies call any debt of less than five-year terms, short-term debt. Assets that depreciate over more than five years (e.g., plant and equipment) are usually long-term assets.

Short-term assets: Cash, securities, bank accounts, accounts receivable, inventory, business equipment, assets that last less than five years or are depreciated over terms of less than five years.

Short-term gain: A capital gain on an investment that was held for less than six months.

Slippage: The difference in price from when an order is placed to when it is actually carried out.

SOES: The small order execution system.

Specialist: A stock exchange member who specializes in particular securities. The specialist must maintain an inventory
of those securities and be available to buy and sell shares as necessary to equalize trends and provide an orderly market for those securities.

Splitting of shares: Sometimes, a share could become too expensive for the private investor, at which time the company may decide to split or subdivide the shares into smaller denominations. The aim is often to make the shares more tradable, and at times, this increases the share price on positive sentiment.

Spread: The differential between a bid and an offer price.

Stag: An investor who buys shares in a pre-listing or rights offer with the intention of selling those shares at a profit as soon as trading starts.

Standard deviation: A statistical measure of the volatility of a mutual fund or portfolio.

Starting year: A term to denote the year that a company started operations.

Stock Exchanges Control Act Of 1985 (as amended): An act of Parliament in terms of which stock exchanges in South Africa are governed. The act is administered by the Financial Services Board.

Stocks: A certificate that signifies an ownership position in a company.

Stop limit order: An order to buy or sell, which is not to be executed until the market price reaches the customer’s defined price, known as the stop price. When this occurs, it becomes a limit order.

Stop order: A buy or sell order that is not to be executed until the market price reaches the customer’s defined price, known as the stop price. When this occurs, it becomes a market order.

Straddle: The simultaneous purchase of an equal number of puts and calls, with the same strike price and expiration dates.

Strike price: The specified price at which a call option buyer can buy the underlying security or a put option buyer can sell the underlying security.

Subsidiary: A company in which a majority of the voting shares are owned by another company.

SuperDOT (super designated order turnaround): A NYSE electronic system for placing stock orders directly to the specialist.

Support: Over time, a stock tends to become attractive to investors at specific prices. When a stock starts to decline
to one of these prices, investors tend to come in and purchase the stock, thereby stopping its decline. When buyers outnumber sellers, the price of the stock tends to go up. This point at which buyers enter the market is called support.

Surprise: The price difference between what a trader expects to earn and what they actually earn.

Switch order: An order to sell one security and buy another. Generally, the proceeds from the sale of the first security are used to finance the purchase of the second.

Tax rate percent: As assumed, percentage applied against pre-tax income to determine taxes.

Taxes incurred: Taxes owed, but not yet paid.

Technical analysis: Analyzing previous market trends and stock prices in the belief that, if done properly, it can be an indicator of future trends.

Teenie: 0.125 of a point on the stock market.

Tender offer: A public invitation to stockholders to sell their stock, generally, at a price above the market price. This is done primarily in relation to a takeover.

Tick size: The specified parameter or its multiple by which the price of a security may vary when trading at a different price from the last price, whether the movement is up or down from the last price.

Ticker symbol: A system of letters used to uniquely identify a stock.

Time of sales: The actual time and price of transactions as they occur. This information is present on a Level II screen.

Time value: The difference between an option’s intrinsic value and the current market price. The hope being that the intrinsic value over time will go above the market value.

Trading halt: An interim stop on the trading of a particular stock because of news that might affect either the price of stock, the flow of orders, or even regulatory rule violations.

Trailing stops: A stop loss order that is to be executed when a stock being followed-up, dips down below a specified amount, or when a stock being followed down, goes up above a specified amount.

Triple bottom: A chart pattern that shows that a stock has attempted to penetrate a lower price level on three different occasions.

Two-sided market: The NASD and Nasdaq requirement that appropriate bids and offers are made on each security.

Underwriter: An individual or institution that acts as a middle man between corporations issuing securities and the investing public.

Unit variable cost: The specific labor and materials associated with single unit of goods sold. Does not include general overhead.

Units break-even: The unit sales volume at which the fixed and variable costs are exactly equal to sales.

Uptick: A transaction where the stock price is higher than the previous transaction.

Volume: The number of shares traded during a defined period.

White knight: An investor who prevents a hostile takeover, by taking over the target company himself or herself.

Withdrawn or postponed: From time to time, a company will decide that market conditions are out of favor and not conducive to a successful IPO. There are many reasons why a company will decide to withdraw its IPO. Among these reasons are: a simple lack of willing investors at that time, market volatility, or the emergence of a bear market.

Write-off: Debt that cannot be collected and finally written-off as bad. The debt is a loss to the company, and the greater the level of bad debts, the less likely an entrepreneur will be able to obtain bank financing. Maintaining bad debts to a minimum is seen as the ability of a company to run efficiently and to have efficient systems in place.

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