5 Share Market Terms with their importance

Welcome to abidblog, where we break down the stock market in easy-to-understand language! If you're new to all the market talk or just want things explained simply, you're in the right place.

Ever felt lost in a sea of financial terms? We're here to help you make sense of it all. From basic concepts to fancy market words, we'll make sure you get it without any confusion.

Let's make the stock market less intimidating and more accessible together. Welcome to a blog where understanding share market terms is as straightforward as it gets!

Five Terms of Share Market

1.Paid Up Value/Paid Up Capital:

The paid-up value of a company is the total money shareholders have paid for their shares. It's what they've invested in the company, contributing to its overall financial strength.

Importance of Paid up value:

paid-up value of a company is important because:

Financial Stability: It indicates how much capital the company has received from shareholders, contributing to its overall financial stability. 

Investor Confidence: A higher paid-up capital often instills confidence in investors, as it shows that shareholders are committed to the company.

Credibility: It enhances the company's credibility and may make it more attractive to potential investors and lenders.

Reserve for Operations: The paid-up capital can serve as a financial buffer for the company to fund operations, expansions, or other strategic initiatives.

Legal Requirement: Meeting a certain level of paid-up capital may be a legal requirement for companies to operate in certain industries or jurisdictions.

2.Market Capitalization/ Market Cap:

Market capitalization (market cap) is the total value of a company's outstanding shares of stock in the stock market. It is calculated by multiplying the current market price of one share by the total number of outstanding shares.  

Mathematically: (Total outstanding shares*current market price of one share)

In simpler terms, it represents the theoretical market value of a company if you were to buy all its outstanding shares at the current market price. Market capitalization is often used to categorize companies into different size classes, such as large-cap, mid-cap,small cap . It provides a quick way to assess the relative size and importance of a company in the stock market.

Importance of Market Cap:

Market capitalization is important for several reasons:

Company Size: It provides a quick measure of the overall size of a company in the stock market. Companies are often classified as large-cap, mid-cap, or small-cap based on their market capitalization.

Investment Decision: Investors often use market cap as a factor in investment decisions. Different investors may have preferences for investing in large, stable companies (large-cap) or smaller, potentially faster-growing ones (small-cap).

Risk Assessment: Market cap can be an indicator of risk. Generally, large-cap stocks are considered less risky than small-cap stocks, which can be more volatile but may offer higher growth potential.

Liquidity: Larger market-cap companies often have more liquidity, meaning there is a higher volume of shares traded. This can be important for investors who want to easily buy or sell shares without significantly impacting the stock price.

3.One years yield:

Yield interest earned or dividend received from holding a particular security. Higher yield indicate lower risk and it's not always positivite case so a investor should check cash-flow statement also.

Yield= Net realized return / principal amount

If too high yield but stock price is low and company paid high dividend then it may be risk for investor.

4.Earning Per Shares (EPS):

EPS is one the major term that a investor should Know about before investing. Earning per share indicates how much money a business make for each share of it's stock. High EPS then it indicates profitable company.

5. P/E RATIO:

The Price-to-Earnings (P/E) ratio is a financial metric calculated by dividing a company's stock price per share by its earnings per share. It is also important terms and it indicates whether a company is overvalued or a under-valued. Higher P/E ratio indicates higher future growth while lower P/E ratio indicates lower growth in future.

Here, we discuss some metrics of share market with their importance. Hope, It may helps investor.

From autohre:

https://abidblog6.wordpress.com/2024/01/30/share-market-quotes/

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