The Free Monthly Investment Newsletter
Last updated: March 2017

Young Investors

Dictionary

  • A
  • B
  • C
  • D
  • E
  • F
  • G
  • H
  • I
  • J
  • K
  • L
  • M
  • N
  • O
  • P
  • Q
  • R
  • S
  • T
  • U
  • V
  • W
  • X
  • Y
  • Z

A

Amortization

Amortization is a payment method where regular installments are used to pay off debt, or to calculate the deduction in Intangible Asset Value, such as Patents or Copyrights.

For example, when a company registers a Trademark (usually 20 years), the trademark cannot be used or reproduced by other competitors or companies for any purpose. The cost for registering this trademark will be deducted over this 20-year period as Amortization.

Assets
Something that is owned by an individual, organization, institution or any party, which creates value or benefit to the party who own it. Examples are properties, plants, equipments, cash, receivables, stationery etc.

B

Balance Sheet
Summarizes a company's financial position, namely assets, liabilities and shareholders' equities as of a specific date. It provides an overall picture of the financial condition of a company.
Bankruptcy
Refers to a legal action taken against individuals or businesses that are unable to pay back their debt obligations. Assets and Liabilities will be evaluated, and Assets will be disposed to pay off the Liabilities according to the priority or seniority of the Debts. When there are no Assets left to be claimed, the individual or business is declared a Bankrupt and hold no more debt obligations to any remaining Debt. A Bankrupt cannot own Assets until released from Bankruptcy status, which is achieved by paying off the remaining Debts.
Bear Market
It refers to a market that is in a Downtrend and is performing badly or entering recession or crisis.
Bull Market
It refers to a market that is in an Uptrend and is performing well or booming.
Board Lot

It is the Board Lot or minimum trading quantity set by the exchange. In Malaysia, 1 Board Lot is 100 Shares, meaning each trade has to be made in relevance to 100 Share Units of the stock. When keying in an order, no decimals are allowed, and all figures are keyed in as "Board Lots", meaning 100 Shares. Thus, if you key in 10, it means you are placing an order for 10 X 100 Shares = 1,000 Shares.

Also called Round Lot.

Bond
A borrowing instrument that usually consists of fixed periodic payments during the Loan Intervals, and Principal Repayment on the expiry date.
Borrower
The Borrower is the person or organization that takes a loan from the Lender. The Lender is the person or organization that provides the loan to the Borrower.

C

Closed-End Funds
Closed-End Funds are like shares/stocks, where the issuer issues a certain amount of shares. After the issuance of shares, the issuer does not trade directly with the shares, and the price of the Closed-End Funds is determined by the supply and demand of the market. The different is that shares/stocks are traded in a regular exchange, while Closed-End Funds normally trade in the market it is issued.
It is a law that protects the creator's original idea. It covers many products such as video, audio, software etc.
Cost Control

Refers to the minimizing of Production Cost , or costs indirectly related to production, like administrative costs, which are indirectly implied in production.

Cost Control is very important for a company's sustainability and maintaining an advantage against competition.

Also known as Expenses Control.

Coupon Rate

It is the yield or interest rate of a fixed income security. This payment pays periodically, i.e. annually or semi-annually.

For example, a bond with a PAR value of RM100 pay RM5 annually. Its coupon rate is thus 5%.

Credit From Account

Credit From Account means the transfer of an amount into your account. In other words, you receive an amount.

When you have sold your Shares, you will usually receive a letter or email stating that your account has been credited an amount for the sale.

Credit Risk

The risk of issuers or borrowers failing to meet the contractual obligation.

For example, borrowers needs to pay interest during intervals of the loan term. The risk that borrowers are unable to pay either the periodic payment or principal amount is called Credit Risk.

Also called Default Risk.

Crude Palm Oil (CPO)

The underlying asset for FCPO, a futures product that is listed on Bursa Malaysia derivatives market.

Sometimes simply abbreviated as CPO.

Current

Refers to a timeframe of within a year.

Also known as Short Term.

Current Ratio
Current Assets
Current Liabilities

Current Ratio measures the ability of companies to pay back its Short Term Debts, by comparing Total Current Assets to Total Current Liabilities. In other words, if all its Short Term Debts were called back, would it be able to generate enough cash quickly enough to pay them all off?

A Current Ratio of less than 1 shows that the company has more Current Liabilities than Current Assets, and could end up defaulting payments. This does not suggest that companies with Current Ratios below 1 will go Bankrupt, as there are many was to generate funds. However, it does shot the efficiency and Turnover of the company, and how quickly the company can generate sales and recover their investment.

For example, if sales are moving slowly, cash generation will be slow. This will cause Current Receivables to increase, but without much actual cash. When suppliers or creditors call for payments, funds might have to be sourced from Financing, which incurs Interest, an unnecessary cost that could have been avoided if the Current Ratio was managed more effectively.

Current Share Price
Refers to the current market price of the share.

D

Debit From Account

Debit From Account means the transfer of an amount from your account. In other words, you pay an amount.

When you purchase Shares, you will usually receive a letter or email stating that your account has been debited an amount for the shares that you have purchased.

Debt
The amount owed by one party to another. Usually incurs Interest Rate, and the total amount repaid in fixed amounts over a fixed period (called Fixed Periodic Payments), at fixed intervals (called Loan Intervals).
Debt Fund

In view of the company debt structure, is the fund of a company that borrows from other financial institution such as banks. It usually incurs a fixed periodic payment (interest payment) during the Loan Interval .

In view of Mutual Funds, also a type of Mutual Fund, where the Fund Manager usually invests the funds into Fixed Income Securities that generate fixed periodic payment to its holder.

Debt Structure
A source of funds for the company's operating activities. It is a mixture of Fixed Payment Debt such as Notes , Bonds etc.
Default
When an entity Defaults on its payments, it means that it is unable to meet its Debt Obligations. A company with high borrowing costs is more likely to default, due to the high Periodic Costs that have to be met. As the company is less liquid, unexpected occurrences that affect the company's operations put the company at risk of Defaulting on its payments.
Default Risk

The risk of issuers or borrowers failing to meet the contractual obligation.

For example, borrowers needs to pay interest during intervals of the loan term. The risk that borrowers are unable to pay either the periodic payment or principal amount is called Default Risk.

Also called Credit Risk.

Diversification
Diversification is a strategy to reduce your investment risk by constructing a portfolio of securities with low correlation. The profit and loss of each security will offset each other, thus providing a steady return.

E

Earnings Per Share (EPS)
Net Profit attributable to Shareholders
Total Outstanding Shares

Refers to how much net profit a company earns for each share that the company have issued.

Sometimes simply abbreviated as EPS.

Exercise Price

The price at which securities can be bought or sold at specific time periods is called Exercise Price.

For example, a warrant enables the holder to buy the mother share at RM1. The RM1 price offer is called Exercise Price.

Also called Strike Price

Expenses Control

Refers to the minimizing of Production Cost , or costs indirectly related to production, like administrative costs, which are indirectly implied in production.

Expenses Control is very important for a company's sustainability and maintaining an advantage against competition.

Also known as Cost Control.

F

Face Value

For bonds, it is the value that investors will get back at maturity date.

For stocks/shares, it is a value assigned to a security as a reference for investors. It can be from RM0.01 to RM1. Prices above this value are called Share Premium, while prices below this value are called Share Discount.

Also called PAR Value

Financial Assets
An Asset where its value is derived from an underlying Investment Instrument such as Stocks, Bonds, and others. It doesn’t appear as a Physical Asset.
Financing Cost

It is the periodic cost charged on loans during the loan term.
Banks charge a percentage on loans given. Any amount paid that is beyond the amount borrowed is called Financing Cost.

For example, you borrow RM500,000 for 35 years to buy a house, but for 35 years, you have paid the bank a total of RM900,000. The extra RM400,000 is the Financing Cost.

Also called Interest Cost.

G

There are currently no terms listed here.

H

Hedging

Hedging is the transfer of risk to another party willing to take the risk.

For example, you hold a portfolio of stocks, and you expect the stock market will soon enter a crisis, which could result in losses from your portfolio. You then go Short in the Futures market. The loss in your stock portfolio will then be offset by your profit from Futures. If the losses are equal the profit, it is a Perfect Hedge.

I

Inflation Risk

Inflation Risk comes from the uncertainty of the future value of your investment compared to the inflation rate.

For example, if your investment creates a return of 3%, but the inflation is 5%, it simply means that your Return On Investment (ROI) can’t even match the increase in the price of goods. The current value (after inflation) of your investment is worth less than before it was invested (before inflation).

Also called Purchasing Power Risk.

Initial Public Offering (IPO)
The first sale of company shares to the public. This is the market where shares are traded. The funds will go to the issuer. After this, the share will be traded in the secondary market, and the funds will move between investor buyers and sellers. The issuer or the company receives no new funds from the trade of shares.
Intangible Assets
Assets that are not physical in nature, such as patents, trademarks, copyrights etc. Intangible Assets don't have a physical value, and the value depends on the owner's success or failure.
Insider Trades
It is the transaction on the shares by the Company Directors or Substantial Shareholders themselves. Because the directors and substantial shareholders will have more interaction and more direct access to company information, their transactions in company shares are deemed to be an essential indicator of share price movement.
Institutional Investor
Institutional Investors are financial institutions such as Mutual Funds, Pension Funds, Insurance Companies, Investment Bank etc. They have large funds, and their movement in shares will generally affect the share price more than retail investors.
Interest Cost

It is the periodic cost charged on loans during the loan term.

Banks charge a percentage on loans given. Any amount paid that is beyond the amount borrowed is called Interest Cost.

For example, you borrow RM500,000 for 35 years to buy a house, but for 35 years, you have paid the bank a total of RM900,000. The extra RM400,000 is the Interest Cost.

Also called Financing Cost.

Investor
Investor buy and hold stocks/shares for long period of time. The method of selecting stocks is usually based on Fundamental Analysis.

J

There are currently no terms listed here.

K

There are currently no terms listed here.

L

Leveraged Buyouts
Acquiring a firm using mostly Debt Funds. Usually Senior Bank Debts and Unsecured Junior Debts.
Limit Orders

A Limit Order is an order to trade a share when it reaches a certain price.

For example, a stock is now trading at RM10, but David would like to buy it at RM9.80. He sets a Limit Order to buy the shares at RM9.80. When the stock starts trading at RM9.80, the system will insert the order and match it in the market. The same applies to Sell Trades.

Liquidity Risk

It is the risk of losses due to no volume (illiquidity) in the market.

For example, a Stock Quote shows RM10, but the Buy Queue starts at RM9.20 with 10 lots, and the Sell Queue starts at RM10.50 with 10 lots. The Stock Quote shows RM10, but if you hold 20 lots of the stock, you will have to sell the first 10 lots at RM9.20, and the remaining 10 lots at an even lower price. Same applies to Buy Trades.

M

Margin Facility

It is a kind of Leverage Trading, where you borrow cash to trade securities, and the securities act as collateral for the borrowing.

For example, if you have RM1,000 to buy shares, and the counter is now trading at RM10, which means you can buy 100 shares, or 1 Board Lot. The profit is limited since the volume you hold is small. But with Margin Facility, the investment bank can provide you with double or even higher trading limits for you to trade shares. Let’s say double, with RM1,000 in your Trading Account and a Margin Facility, you can trade up to RM2,000, which means you can now buy 200 shares, or 2 Board Lots.

However, as it is a form of financing, Margin Facility come with Interest (rates dependent on your Credit History and other factors), and your securities act as a Deposit or Margin.

The investment bank will also set a Floor/Maintenance Margin on your Deposit or Margin. This is the minimum cash you need to have in your Margin Account for Margin Facility. This is usually in terms of percentage. For example, if the Floor/Maintenance Margin is at 40% and you have purchased RM2,000 worth of shares, your Margin Account must have at least RM800 (RM2,000 X 40%). If your account has less than this amount, your Broker will call you up to top up the amount. This action is a Margin Call. If you fail to do so, your Broker will Force Sell your shares into the market to pay back the amount you have borrowed. If your shares do not sell in the market, the Broker will then sell your shares to buyers from outside the market. In the event that the sale of all your shares is not sufficient to cover the amount owed, you will need to pay the investment bank the balance.

Just bear in mind, while you stand to gain higher profits, you also risk making higher losses. Whether to utilize Margin Facility depends on yourself and the situation.

Also called Margin Transaction.

Margin Transaction

It is a kind of Leverage Trading, where you borrow cash to trade securities, and the securities act as collateral for the borrowing.

For example, if you have RM1,000 to buy shares, and the counter is now trading at RM10, which means you can buy 100 shares, or 1 Board Lot. The profit is limited since the volume you hold is small. But with Margin Transaction, the investment bank can provide you with double or even higher trading limits for you to trade shares. Let’s say double, with RM1,000 in your Trading Account and a Margin Transaction, you can trade up to RM2,000, which means you can now buy 200 shares, or 2 Board Lots.

However, as it is a form of financing, Margin Transactions come with Interest (rates dependent on your Credit History and other factors), and your securities act as a Deposit or Margin.

The investment bank will also set a Floor/Maintenance Margin on your Deposit or Margin. This is the minimum cash you need to have in your Margin Account for Margin Transactions. This is usually in terms of percentage. For example, if the Floor/Maintenance Margin is at 40% and you have purchased RM2,000 worth of shares, your Margin Account must have at least RM800 (RM2,000 X 40%). If your account has less than this amount, your Broker will call you up to top up the amount. This action is a Margin Call. If you fail to do so, your Broker will Force Sell your shares into the market to pay back the amount you have borrowed. If your shares do not sell in the market, the Broker will then sell your shares to buyers from outside the market. In the event that the sale of all your shares is not sufficient to cover the amount owed, you will need to pay the investment bank the balance.

Just bear in mind, while you stand to gain higher profits, you also risk making higher losses. Whether to utilize Margin Transaction depends on yourself and the situation.

Also called Margin Facility.

Market Orders

Market Orders are to trade stocks at the current market price.

For example, the Current Buy (Bid) Price is RM1, and the Current Sell (Ask) Price is RM1.10. The Seller can sell at RM1, which is the best price offered by Buyers. The Buyer can buy at RM1.10, which is the best selling price from Sellers.

Market Rumor

Hearsay from the Traders or Insiders. Might or might not be true.

Usually spread with the intention to draw interest to the counter, generating large volumes that cause huge fluctuations in the price of the counter. The starters of the Market Rumors will then be able to profit from the fluctuation.

Maturity Date

For Debt Instruments, Maturity Date is the date when the holder will get back the Principal, and will no longer receive any Interest or Coupon Payment in the future.

For some Securities, like Warrants and Options, that entitle the holder special rights, the rights will become void and no longer executable upon the Maturity Date.

Medium Term
Refers to a timeframe of 1 year to 5 years. However, in Financial Reporting, timeframes over a period of 1 year are usually classified as Long Term (Non-Current).
Mergers & Acquisitions (M&A)
M&A activities includes Leveraged Buyouts (LBOs), Restructuring and Recapitalization of companies, and Reorganization of bankrupt and troubled companies.
Mutual Fund

An investment vehicle where a Fund Manager pools the entire invested funds from investors, and invests in specific financial instruments to meet the objective of the fund. Managers who manage the fund charge a certain amount as management fees. Licensed agents who sell this fund to investors usually also receive a small portion from the invested funds as commission.

For more info, please refer to the article “Dissecting Investment Vehicles”

N

It is the value of each share, equal to

Total Asset - Total Liabilities - Minority Interest
Total Outstanding Shares

Investors generally use this as a benchmark to determine whether a stock is Overvalued or Undervalued.

Also known as "Net Book Value (NBV)."

Net Profit Margin
Net Profit or Net Income
Revenue or Sales

It measures the Profitability and a company's Cost Control abilities, and also acts as a benchmark for comparison between companies and industries.

For example, Revenue is RM100 million and Net Profit is RM10 million. The Net Profit Margin is thus 10%. This mean 90% of Revenue is spent on costs. Now assume Revenue stays at 10% for the next 3 years, but Net Profit Margin increases to 15%, 20%, and 30%. This shows the company is improving its Cost Control measures, thus increasing its Net Profit.

This Ratio can also be used to compare 2 companies in the same industry, showing the 2 companies' Cost Control ability (assuming the 2 companies have reasonably similar Business Models and Operations). It can also be used to compare companies from different industries, to compare the Profitability of different industries.

Sometimes simply called Profit Margin

Non-Current

Refers to a timeframe of more than 5 years.

Also known as Long Term.

O

Odd Lot
It is a quantity that is smaller than a Board Lot (100 shares). In Malaysia, the minimum trading quantity of shares is 100 shares. If an Investor wishes to trade 50 shares or 131 shares, it is called an Odd Lot.
Open-End Funds

Mostly refers to Mutual Funds, where the purchase and sale of shares is directly with the issuer.

At the end of every trading day, the Open-End Fund will calculate the NAV (Net Asset Value). Investors can buy or sell their shares based on this value. The NAV will change due to the increase and decrease of shares everyday as investors will increase or decrease their investments in the units.

Operation Structure
A structure that describes how a company operates and its business activities. It shows the connection of operating activities on how a company delivers its service(s) or product(s) with its resources.
Options

Securities that entitle the holder the right but not obligation to purchase or sell specific shares, at a specific price, quantity, at a specific time period.

Also known as Warrants.

Over-The-Counter (OTC)

A market other than the official or centralized exchange where securities are traded. It is specifically for penny stock or bad record companies that do not meet the exchange's listing requirements. Bonds are also traded mostly in this market.

For example, Bursa Malaysia is Malaysia's official exchange. Any stock that is not listed and traded in Bursa (or other countries' stock exchanges) is considered as part of the OTC market.

P

PAR Value

For bonds, it is the value that investors will get back at maturity date.

For stocks/shares, it is a value assigned to a security as a reference for investors. It can be from RM0.01 to RM1. Prices above this value are called Share Premium, while prices below this value are called Share Discount.

Also called Face Value.

Patent
Exclusive rights given by government(s) to companies or individuals for their product, to protect them from other copying their products and then selling it to the market. This is to encourage businesses to continue developing new products.
Payables

Refers to amount owed by the company and will be remitted in the future.

In business, sales are normally transacted with a Credit Term. Take for example the company makes a purchase from a supplier that offers a Credit Term of 60 days. The company does not have to make the payment immediately, but will have to remit payment within 60 days. This money that has to be paid in future is Payables.

Penny Stock

These are stocks priced below RM1, usually traded with relatively low price and volume. The company disclosure also makes it more risky and highly speculative.

Take for example Stock A, traded at RM0.10, and Stock B, traded at RM10. A move of RM0.01 will cause a movement of 10% for Stock A but only 0.1% movement for Stock B. Stock A is highly preferred by Speculator as the profits are greater compared to more highly priced stocks.

PE Ratio
Current Share Price
Earnings Per Shares

It measures how much investors are willing to pay for every dollar the company earns. If the company has a PE Ratio of 10, it means that investors are willing to pay RM10 for every RM1 the company earns. It can be used as a benchmark to compare different companies in the same industry.

PE Ratio also measures the amount of time it takes for investors to recover their investment. For example, if a company has a steady Earnings Per Share (EPS) of RM1/year and the Current Share Price is at RM10 (thus a PE Ratio of 10), the investor will need to hold the investment for 10 years to recover their initial investment of RM10. This is provided that the company issues Dividends accordingly every year.

Also known as Price-Earnings Ratio.

Perfect Hedge
A Hedging strategy where the gains from a position is exactly or almost equal the amount lost in another position.
Periodic Cost
Refers to the cost that a party needs to pay on a regular, specified period. Affects Liquidity and Turnover as cash needs to be reserved to meet this obligation.
Price-Earnings Ratio
Current Share Price
Earnings Per Shares

It measures how much investors are willing to pay for every dollar the company earns. If the company has a Price-Earnings Ratio of 10, it means that investors are willing to pay RM10 for every RM1 the company earns. It can be used as a benchmark to compare different companies in the same industry.

Price-Earnings Ratio also measures the amount of time it takes for investors to recover their investment. For example, if a company has a steady Earnings Per Share (EPS) of RM1/year and the Current Share Price is at RM10 (thus a Price-Earnings Ratio of 10), the investor will need to hold the investment for 10 years to recover their initial investment of RM10. This is provided that the company issues Dividends accordingly every year.

Abbreviated as PE Ratio.

Primary Market
Primary Market is the market where the stock is sold by the Issuer to the public for the first time. It is the place for (IPOs).
Principal
Principal refers to the amount the Lender transfers to the Borrower. In other words, the sum you invested initially.
Privatization

Offering Government-Owned Company Securities to Private Entities. After the process, the company is then a Private Company.

The transition of a Public Listed Company to a Private Company.

According to the Malaysia Companies Act 1965, a Private Company is a company where its owner or shareholder is not more than 50 people.

Profitability
The ability of a company to make profit as compared to its Costs, Expenses, other expenses and factors that affect the revenue of the company. Examples of Ratios that measure Profitability are Profit Margin, ROI etc. It is used to compare the profit performance between companies and industries.
Profit Margin
Net Profit or Net Income
Revenue or Sales

It measures the Profitability and a company's Cost Control abilities, and also acts as a benchmark for comparison between companies and industries.

For example, Revenue is RM100 million and Net Profit is RM10 million. The Profit Margin is thus 10%. This mean 90% of Revenue is spent on costs. Now assume Revenue stays at 10% for the next 3 years, but Profit Margin increases to 15%, 20%, and 30%. This shows the company is improving its Cost Control measures, thus increasing its Net Profit.

This Ratio can also be used to compare 2 companies in the same industry, showing the 2 companies' Cost Control ability (assuming the 2 companies have reasonably similar Business Models and Operations). It can also be used to compare companies from different industries, to compare the Profitability of different industries.

Also called Net Profit Margin.

Purchasing Power Risk

Purchasing Power Risk comes from the uncertainty of the future value of your investment compared to the inflation rate.

For example, if your investment creates a return of 3%, but the inflation is 5%, it simply means that your Return On Investment (ROI) can’t even match the increase in the price of goods. The current value (after inflation) of your investment is worth less than before it was invested (before inflation).

Also called Inflation Risk.

Q

There are currently no terms listed here.

R

Ratio
Mathematical formulas that use 2 or more variables to discover the relationship between them. Makes it easier to quickly see financial strengths and weaknesses.
Real Rate of Return

It measures the Real Returns of Investment after deducting the Inflation Rate.

For example, your investment provides a return of 5%, and the inflation is 3%. The Real Rate of Return on your investment is thus 2%.

Recapitalization

A restructuring of debt and equity mixture for business purposes.

For example, a company issues more stocks to buy back their debt. This can make the company's cash flow more manageable. As debt requires fixed periodic payments, the reduction in this fixed cost allows the company more flexibility in controlling their cash.

Receivables

Refers to amount that others owe the company and will be remitted in the future.

In business, sales are normally transacted with a Credit Term. Take for example a company that offers a Credit Term of 60 days. The company will not receive payment (cash) immediately for a sale, as the customer has up to 60 days to remit payment. This money that will be received in future is Receivables.

Reorganization
Ways to save a financially troubled company through communicating with the creditor or lender, to adjust, change and/or restructure the capital and liabilities structure, in order to revive the company while maintaining repayments to creditor at the same time.
Retail Investor
This is the individual investor. Their funds are smaller than those of Institutional Investors, since Institutional Investors pool the funds from Retail Investors to invest.
Restructuring

Refers to the changes in company Debt Structure or Operation Structure when the company is in significant problem. This is to reduce financial harm like default in payment, and also to improve business.

For example, a company defaults in Bond interest payment, and through restructuring, the bond might be an Interest Free Bond, meaning the bond holder will no longer be able to receive periodic interest payments during the time interval, but only the principle amount upon the maturity date.

Return On Investment
Return You Gain From Your Investment or Net Profit
Total Amount Invested

A formula to measure the percentage of returns from the amount you have invested. 100% Return On Investment means breaking even.

Sometimes simply abbreviated as ROI.

ROI
Return You Gain From Your Investment or Net Profit
Total Amount Invested

A formula to measure the percentage of returns from the amount you have invested. 100% ROI means breaking even.

Also known as Return On Investment.

Round Lot

It is the Round Lot or minimum trading quantity set by the exchange. In Malaysia, 1 Round Lot is 100 Shares, meaning each trade has to be made in relevance to 100 Share Units of the stock. When keying in an order, no decimals are allowed, and all figures are keyed in as "Round Lots", meaning 100 Shares. Thus, if you key in 10, it means you are placing an order for 10 X 100 Shares = 1,000 Shares.

Also called Round Lot.

S

Secondary Market
After the IPO, the stock will be traded in a Secondary Market, where Investors trade the shares among themselves. The Issuer receives no new funds from this market.`
Securities
A Financial Instrument or certificate that certifies you as the owner or holder of the debt of a company. The company that issues the Securities is called the Issuer, while the investor is called the Holder.
Securitization

The process where the issuer combines one or more Financial Assets, repackages and divides it into smaller pieces and sells them to investors, thus transferring the potential returns and risk to investors. This allows the issuer to minimize its risks that come with Financial Assets by receiving payment in one lump sum at an earlier date, at a discount.

For example, a bank has 100 customers, each with a Mortgage Loan of RM1,000,000, to be paid over a period of 40 years. Inclusive of Interest, each customer will have paid RM2,000,000 after 40 years, so the total the bank should receive after 40 years would be a total of RM200,000,000. The bank discounts it to RM150,000,000 and converts this into 150,000,000 shares at RM1/share and sells the shares to investors. Upon completion of the sale, the bank would have received RM150,000,000 with RM50,000,000 earnings, way before the 40 years it had to wait earlier on, and transferred the risk of non-paying customers to the investors. The investors now own shares that have a healthy potential return after 40 years, but now bear the risk of non-paying customers.

Senior Bank Debts

A type of Debt that has priority of repayment in the event the company goes into financial difficulties. After Senior Bank Debts are paid, repayment then goes to Junior Debts.

Also known as Senior Debts.

Senior Debt

A type of Debt that has priority of repayment in the event the company goes into financial difficulties. After Senior Debts are paid, repayment then goes to Junior Debts.

Also known as Senior Bank Debts.

Settlement Date
The date that the transaction will be done and cleared, which refers to the delivery of the goods and cash to each party accordingly. For example, when you buy shares, it will take T+3 days to process your transaction, after which the shares or cash will be Debited or Credited to your account.
Shareholder Equity
Refers to the funds contributed by the company shareholders or owners.
Short Sell

It is a trading strategy by selling shares you borrow from others. At a later date, you buy back the shares and return them to the person whom you borrow the shares from.

It is generally performed when you expect the price of the stock to drop in the near future. So you short now at a higher price, buy it back later at a lower price for a profit from the price difference, and return the shares to the holder.

In Malaysia, short selling is illegal. But there is “Regulated Short Selling” available in Bursa, with terms and conditions.

Short Term

Refers to a timeframe of within a year.

Also known as Current.

Speculator

Speculators generally trade stocks based on Technical Analysis and Market Rumors. They hold stocks for a shorter time or shorter to benefit from the short term fluctuation of the stocks' prices.

Also called Trader.

Spot Price
Spot Price is the current price of Securities.
Stop Orders

A Stop Order is either a Profit Preserved Order or Stop Loss Order. For example, a stock is now trading at RM10. David wants to buy it at RM9.80, but there is a risk that the price won’t reach RM9.80, and David wants to ensure that he will get the stock at a maximum price of RM10.50. So he will place a Stop Order to buy at RM10.50.

Another situation is that the stock is now trading at RM10. But Peter would like to sell it at RM10.50. The risk is that the price might not reach RM10.50, but drop below RM10. So Peter will probably set a Stop Loss Order at RM9.50, which is the minimum price that he is willing to sell it at.

Strike Price

The price at which securities can be bought or sold at specific time periods is called Strike Price.

For example, a warrant enables the holder to buy the mother share at RM1. The RM1 price offer is called Strike Price.

Also called Exercise Price.

Substantial Shareholders
According to the Securities Industry Act 1983, a person is considered a Substantial Shareholder of a company if he has not less than 5 percent of the company shares. Any purchase or sale of a Substantial Shareholder's shares will have to be reported to the Stock Exchange.

T

Tangible Assets
“Physical” assets like buildings, land, machine, etc.
Time Value of Money

It is the difference in the value of money value due to “time” factor and the ability of that money to generate more returns.

For example, if you win a lottery of RM1,000,000, would you choose to receive this money now or one year later?

Considering that you can invest your money and have an annual return of 10%, the RM1,000,000 today will be worth RM1,100,000 one year later. However, if you choose to receive the RM1,000,000 one year later, the money you receive then is only RM1,000,000.

Total Debt Ratio
Total Liabilities
Total Asset

It shows how a company operates their business, and measures the Financial Leverage of a company, which shows how much of its Assets are funded through Liabilities. If the company uses too much Debt for its operations, it might increase the company's costs as Liabilities do incur Periodic Costs, and increase the risk of Defaulting.

Total Debt to Equity Ratio
Total Liabilities
Total Shareholders Equities

It shows how a company Finances its Assets. If the Total Debt to Equity Ratio is high, it means the company uses more Liabilities to fund its operations, which increases the company's cost and decreases its Liquidity. As Liabilities incur fixed Interest costs, funds will have to be allocated to meet these obligations, thus affecting the business's funds available for expansion.

Trademark
A law to protect the logo, special word, and symbols of a company that distinguish it from other companies.
Trader

Traders generally trade stocks based on Technical Analysis and Market Rumors. They hold stocks for a shorter time or shorter to benefit from the short term fluctuation of the stocks' prices.

Also called Speculator.

Turnover

In Stock Trading, Turnover refers to the “total transaction done on a particular day x price transacted”.

It shows the total value, in the Exchange's currency, traded of a particular Stock on a particular trading day.

In Accounting terms, though, Turnover refers to the speed of converting cash into goods and back into cash. It reflects the speed of a company in using their cash to buy materials, produce goods, then sell the goods. The higher the Turnover, the faster the company is able to generate Revenue.

U

Unsecured Junior Debts
A debt where priority given is below that of Senior Debts (Senior Bank Debts), and have lower possibility of repayment in the event the company goes into financial difficulties. This debt will only be paid off when there are funds remaining after paying off all Senior Debts.

V

There are currently no terms listed here.

W

Warrants

Securities that entitle the holder the right but not obligation to purchase or sell specific shares, at a specific price, quantity, at a specific time period.

Also known as Options.

X

There are currently no terms listed here.

Y

There are currently no terms listed here.

Z

There are currently no terms listed here.