Shares and Mutual Funds

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Company: Sec.3 (1) of the Companys act, 1956 defines a ‘company’.  Company means a company formed and registered under this Act or existing company”.

Public Company: A corporate body other than a private company. In the public company, there is no upperlimit on the number of share holders and no restriction on transfer of shares.

Private Company: A corporate entity in which limits the number of its members to 50. Does not invite public to subscribe to its capital and restricts the member’s right to transfer shares.

Liquidity:  A firm’s liquidity refers to its ability to meet its obligations in the short run.  An asset’s liquidity refers to how quickly it can he sold at a reasonable price.

Cost of Capital: The minimum rate of the firm must earn on its investments in order to satisfy the expectations of investors who provide the funds to the firm.

Capital Structure: The composition of a firm’s financing consisting of equity, preference, and debt.

Annual Report: The report issued annually by a company to its shareholders. It primarily contains financial statements. In addition, it represents the management’s view of the operations of the previous year and the prospects for future.

Proxy: The authorization given by one person to another to vote on his behalf in the shareholders meeting.

Joint Venture: It is a temporary partenership and comes to an end after the compleation of a particular venture. No limit in its.

Insolvency: In case a debtor is not in a position to pay his debts in full, a petition can be filled by the debtor himself or by any creditors to get the debtor declared as an insolvent.

Long Term Debt: The debt which is payable after one year is known as long term debt.

Short Term Debt: The debt which is payable with in one year is known as short term debt.

Amortisation: This term is used in two senses 1. Repayment of loan over a period of time 2.Write-off of an expenditure (like issue cost of shares) over a period of time.

Arbitrage: A simultaneous purchase and sale of security or currency in different markets to derive benefit from price differential.

Stock: The Stock of a company when fully paid they may be converted into stock.

Share Premium: Excess of issue price over the face value is called as share premium.

Equity Capital: It represents ownership capital, as equity shareholders collectively own the company. They enjoy the rewards and bear the risks of ownership. They will have the voting rights.