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Glossary

All Ordinaries (All Ords)

Measures the level of share prices at any given time for a sample of major companies listed on ASX to determine the overall performance of the sharemarket.

Annual Report

The annual report is a financial report or statement issued by a publicly listed company to its shareholders. The annual report contains profit and loss statements, balance sheet and a statement of cash flow, as well as notice of the Annual General Meeting (AGM) and business resolutions to be discussed.

ASIC

Acronym for Australian Securities and Investments Commission, the government body responsible for regulating companies, the issue and sale of shares and trust units and company borrowings and investment advisers and dealers, in accordance with the Corporations Act.

ASX

Acronym for Australian Securities Exchange which operates a stock market in Australia.

At limit

An order that places a limit on either the highest price that may be paid for shares or the lowest price that may be accepted for sale.

At market

Type of order by an investor to buy or sell shares at the market price at the time the order is given. Similar to ‘at best’ which is an order to buy or sell at a price to be determined at the adviser’s discretion.

Bear Market

When share prices are falling quite sharply and experts expect further falls.

Bid

The price at which someone is prepared to buy shares.

Blue Chip

Shares, usually highly valued, in a major company known for its ability to make profits in good times or in bad, and with reduced risk or default.

Bonus Shares/Bonus Issue

Additional shares issued by the company to existing shareholders for free, usually in a predetermined ratio to the number of shares already held.

Brokerage

Fee paid to stockbroking firm for buying or selling shares.

Bull Market

When share prices generally are rising.

Business Cycle

Also known as the economic cycle. The rise and fall of the economy, from a peak, or boom, to a trough (sometimes called a depression) and back to peak.

Capital

Funding for investment in capital assets or to operate a business. Also refers to the value of an investment in a business, or in assets such as property or shares.

Capital gains tax

Tax on the profit from the sale of capital assets such as shares.

CHESS

ASX’s Clearing House Electronic Sub-register System which provides the central register for electronic transfer of share ownership.

Contract Note

A written document confirming a transaction between two dealers or a broker and a client which details the costs, type and quantity of shares traded.

Contributing Share

Shares that are not fully paid.

Cum Dividend

Cum means ‘with’. Shares quoted cum dividend entitle the buyer to the current dividend. The price of the shares will usually reflect the amount of the dividend.

Diversified Portfolio

A portfolio that holds a variety of assets over more than one asset class or one market. This may include shares, property, or fixed interest.

Dividend

Distribution of part of a company’s net profit to shareholders. Usually expressed as a number of cents per share.

Dividend imputation

The tax credits passed on to a shareholder who receives a franked dividend. Under provisions of the Income Tax Assessment Act, imputation credits entitle investors to a rebate for tax already paid by an Australian company.

Dividend Reinvestment Plan (DRP)

An alternative to cash dividends, allowing shareholders to receive new shares instead of cash. These shares are often issued at a discount and no brokerage or stamp duty is paid.

Dividend Rate

The dividend shown as cents per share. This figure may be followed by "f" which means fully franked or "p" which means it has been partly franked.

Dividend Yield

The dividend shown as a percentage of the last sale price for the shares.

Equities

In sharemarket terms, 'equities' is a synonym for shares and represents part-ownership of a company, as distinct from debt securities such as bonds and debentures.

Exchange Traded Options (ETOs)

Options which are bought and sold on the options market operated by ASX Derivatives. These options are based on selected underlying shares and come with either rights and or obligations to purchase or sell the number of shares specified by the options contract.

Ex Dividend

Shares are quoted ‘ex dividend’ four business days before the company’s Record Date. To be entitled to a dividend a shareholder must have purchased shares before the ex dividend date.

Face Value

The amount at which securities are issued.

Float

The initial raising of capital by public subscription to securities, such as shares offered on the sharemarket for the first time.

Franked Dividend

A dividend paid by a company out of profits on which the company has already paid tax. The investor is entitled to an imputation credit, or reduction in the amount of income tax that must be paid, up to the amount of tax already paid by the company.

GST

GST means the goods and services tax system under the A New Tax System (Goods and Services tax) Act 1999 (Cth) and related legislation passed by the Federal Government.

HIN

A Holder Identification Number is allocated by your stockbroking firm when you buy shares if you nominate them as your sponsor in CHESS.

IPO

Acronym for Initial Public Offer (see Float).

Liquidity

Being able to convert assets into cash easily, quickly and with little or no loss of capital. A liquid market is a market with enough participants to make buying and selling easy.

Listed Company

A company which has agreed to abide by ASX Listing Rules so that its shares can be bought and sold on ASX.

Market Capitalisation

The total number of shares on issue multiplied by their market price. This can be applied to work out the market value of one company or of the value of all companies listed on the exchange.

Market Price

The prevailing price of shares traded on ASX. May be the last price at which the shares traded, or the most recent price offered or bid for the shares.

Net Tangible Assets (NTA)

An indication of what each share in a company is worth if all the assets were liquidated, all the debts were paid and the residual was distributed to the ordinary shareholders on a per share basis.

Offer

The price at which someone is prepared to sell shares.

Off-market transfer

The transfer of shares between parties without using a stockbroking firm as the intermediary. Off-market transfers are executed through the use of an ‘Australian Standard Transfer Form’.

Options (Company)

The right, but not the obligation, to take up certain shares on specified terms at a specified time.

Preference Shares

Shares that rank before ordinary shares in the event of liquidation of the issuing company and that usually receive a fixed rate of return.

Price-earnings ratio

Shows the number of times the price covers the earnings per share.

Prospectus

The document issued by a company or fund setting out the terms of its public equity issue or debt raising provides the background, financial and management status of the company or fund, subject to the requirements of the ASX Listing Rules and the Corporations Law.

Relative Strength Indicator (RSI)

RSI is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The RSI is classified as a momentum oscillator, measuring the velocity and magnitude of the rate of the rise or fall in price.

Reweighting

This means changing the weight or percentage of the total portfolio which each investment represents. For example, an investor may invest their money equally in shares in four different companies and the price of one share rises significantly, the value of that share becomes much more than one quarter of the value of the whole portfolio. The investor may choose to ‘reweight’ their portfolio

Rights Issue

A privilege granted to shareholders to buy new shares in the same company, usually below the prevailing market price.

SEATS

This is the Security Exchange’s Automated Trading System provided for the trading of Securities on ASX.

Securities

A general term applied to all shares, debentures, notes, bills, government and semi-government bonds etc.

SRN

A Security-holder Reference Number is allocated to you when you buy shares in a company and nominate that company as your sponsor on a share subregister.

Stochastic Indicator

The term stochastic refers to the location of a current price in relation to its price range over a period of time. This indicator attempts to predict price turning points by comparing the closing price of a security to its price range.

Underwriter

An underwriter guarantees to the company that the funds sought will be raised and any shortfall will be taken up by the underwriter. The funds will be available at a specific time.

Warrants

A warrant is a financial instrument issued by a bank or other financial institutions, which is traded on the Australian Stock Exchange’s equity market. Warrants may be issued over securities such as shares in a company, a currency, an index or a commodity.

Yield

The total income earned from an investment normally expressed as a percentage.

Source: Australian Securities Exchange (ASX) and Morgans