Stocks & Shares Education Centre

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RadhikaSona

Member
#11
#11
What Is A Premium Issue ?

Generally, most shares have a face value (i.e. the value as in a balance sheet) of Rs.10 though not always offered to the public at this price. Companies can offer a share with a face value of Rs.10 to the public at a higher price.


The difference between the offer price and the face value is called the premium. As per the SEBI guidelines, new companies can offer shares to the public at a premium provided :


1.The promoter company has a 3 years consistent record of profitable working.

2.The promoter takes up at least 50 per cent of the shares in the issue.

3.All parties applying to the issue should be offered the same instrument at the same terms, especially regarding the premium.


4.The propectus should provide justification for the propose premium. On the other hand, exisiting companies can make a premium issue without the above restrictions.


A companys aim is to raise money and simultaneously serve the equity capital. As far as accounting is concerned, premium is credited to reserves and surplus and it does not increase the equity. Therefore, a company which raises Rs.100 crores by way of shares at say Rs.90 premium per share increases its equity by only Rs.10 crores, which is easier to service with an investment of Rs.100 crores.

Thus the companies seek to make premium issues. As well shall see later, a premium issue can increase the book value without decreasing the EPS. In a buoyant stock market when good shares trade at very high prices, companies realize that its easy to command a high premium.
 
R

RadhikaSona

Member
#13
#13
Primary & Secondary Market

There are two ways for investors to get shares from the primary and secondary markets. In primary markets, securities are bought by way of public issue directly from the company. In Secondary market share are traded between two investors.


PRIMARY MARKET
Market for new issues of securities, as distinguished from the Secondary Market, where previously issued securities are bought and sold.

A market is primary if the proceeds of sales go to the issuer of the securities sold.

This is part of the financial market where enterprises issue their new shares and bonds. It is characterised by being the only moment when the enterprise receives money in exchange for selling its financial assets.


SECONDARY MARKET
The market where securities are traded after they are initially offered in the primary market. Most trading is done in the secondary market.

To explain further, it is Trading in previously issued financial instruments. An organized market for used securities. Examples are the New York Stock Exchange (NYSE), Bombay Stock Exchange (BSE),National Stock Exchange NSE, bond markets, over-the-counter markets, residential mortgage loans, governmental guaranteed loans etc.
 
R

RadhikaSona

Member
#15
#15
Stock Options - What Are They ?

A stock option is a specific type of option with a stock as the underlying instrument (the security that the value of the option is based on). Thus it is a contract to buy (known as a "call" contract) or sell (known as a "put" contract) shares of stock, at a predetermined or calculable (from a formula in the contract) price.


It is Having the Rights to purchase a corporation's stock at a specified price.

Infact There are two definitions of stock options.

1. The right to purchase or sell a stock at a specified price within a stated period. Options are a popular investment medium, offering an opportunity to hedge positions in other securities, to speculate on stocks with relatively little investment, and to capitalize on changes in the market value of options contracts themselves through a variety of options strategies.

2. A widely used form of employee incentive and compensation.In some Companies, Stock options constitute part of remuneration.

Employee stock options are stock options for the company's own stock that are often offered to upper-level employees as part of the executive compensation package. An employee stock option is identical to a call option on the company's stock, with some extra restrictions.

Performance Stock Options are Options that vest if pre-determined performance measures are achieved. The performance goal (revenue growth, stock-price increases) must be reached for the options to be exercisable or for the vesting to be accelerated
 
R

RadhikaSona

Member
#18
#18
What Is A Stock Broker ?

Are you wondering what a stock broker is and what they do? Heres your answer.




A stock broker is a person or a firm that trades on its clients behalf, you tell them what you want to invest in and they will issue the buy or sell order. Some stock brokers also give out financial advice that you a charged for.

It wasnt too long ago and investing was very expensive because you had to go through a full service broker which would give you advice on what to do and would charge you a hefty fee for it. Now there are a plethora of discount stock brokers such as Scottrade http://www.scottrade.com now you can trade stocks for a low fee such as $7 total.

I can think of three different types of stock brokers.

1. Full Service Broker - A full-service broker can provide a bunch of services such as investment research advice, tax planning and retirement planning.

2. Discount Broker A discount broker lets you buy and sell stocks at a low rate but doesnt provide any investment advice.

3. Direct-Access Broker- A direct access broker lets you trade directly with the electronic communication networks (ECNs) so you can trade faster. Active traders such as day traders tend to use Direct Access Brokers

So as you can tell there a few options for a stock broker and you really need to pick which one suits you needs.
 
R

RadhikaSona

Member
#20
#20
Re: What Is A Stock Broker ?

What do u feel about ten topic above? please reply me encourage for more posting like this,

This is absolutly for newbies in Market.
 
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