Sunday, January 23, 2011

EQUITY - Definitions

...36.....24....36....   WAOooooo  nice figure 
well  this  is a understood description which almost all the guys  longs for..... to WATCH  and  to  OWN...
I would have not meant any thing,  if  the other  guys do not have the inkling of these figures.....
In the similar fashion there are some Pointers or call fundamentals of Equity also,  according to which they can be analysed for their value and worthiness, to buy, to own  or  Sell...
Just a brief  note on these  fundamentals are put together as below;
1) SHARE /EQUITY  - The smallest value unit of the  Company's valuation.
2) EQUITY MARKET -  Two types - 
                      a)  Primary Market   
                      b)  Secondary Market .   ( detail  discussion in subsequent posts)
3) FACE VALUE  -  The Nominal value allocated  to a company Equity at which it is valued in the Company's Ownership valuation accounts. Also termed as PAR VALUE.  It is fixed for a company, until company board decide to revaluate it, compensating shareholders accordingly.
4) MARKET VALUE - The value of the equity at which it is traded in the secondary market that is stock exchanges.  
5) BOOK VALUE  - It is the value of an Equity as it appears in the company's balance sheet, Also called as Carrying value. For a profitable company, The book Value would increase with time.
6) EPS  - (Earning per share) - The portion of a company's profit allocated to each outstanding share of common stock. EPS  is an indicator of a company's profitability.
7) P/E   - (price to earning ratio)- It is the ratio of Prevailing Market Value of Equity to the Earnings per share.  Smaller is the ratio, more preferable it is for investment.  
8) RONW - (Return on Net worth) - It is a ratio of net income after taxes to total end of the financial year NET WORTH. It indicates the return on shareholder's total equity.
9) NET WORTH  -  Net worth of a company, is the amount by which  its assets value  exceeds its total liabilities. 

1 comment:

  1. Very useful info Kuldeep. Hope people read this and get to know about these basics...