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Finance GlossaryAdjusted Closing Price
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Adjusted Closing Price

Definition of Adjusted Closing Price

The adjusted closing price of stock accounts for any changes that happen due to corporate actions like dividends, stock splits, and others after trading hours.

Related Terms

Defensive Stock

A defensive stock refers to the shares of iconic companies that generate stable and consistent returns and dividends, regardless of the market conditions.

Defensive stocks are rare because companies that have defense against every market condition are rare.

While defensive stocks may not generate high returns, they are known to add stability and defense against declining economic conditions. In India, stock of ITC Limited is an example of a defensive stock.

Bonds

Bonds are fixed income securities issued in exchange for a loan, generally by governments and corporations. A bond will generate a fixed interest rate on top of the principal across a fixed time period. A bond market is a place where bonds are issued, bought, and sold. Bonds are issued in exchange for a loan generally by governments and corporations.

The quality of a bond can be understood by its credit rating, which is nothing but the creditworthiness of the company issuing it. The best bonds in India are known to have the following credit rating:

  • SOV: Only for government bonds
  • AAA: Highest
  • AA+: High-medium
  • A+: Upper-medium
  • BBB+: Lower-medium
  • BB+: Speculative
  • B+: Highlight speculative
  • CCC+: Risky
  • CC: Extremely risky

Fair Value

The fair value of a stock, product, or service is the price at which the buyer and seller willingly agree on without being on the losing end of the deal. Think of fair value as a win-win situation for both parties, assuming that all conditions are normal.

Say Mr. Apple is offered to buy shares of Mr. Orange’s company at Rs. 1000 per share. Mr. Apple evaluates the business and figures out that he can sell the same shares for Rs. 1200, even though Mr. Orange is content to sell the shares at Rs. 200 lower. Both parties agree on the deal at Rs. 1000 because both view it as a good deal.

The formula for the fair value of a stock or index is:

Fair Value = Cash * { 1 + r (X / 360)} - D

Where,

Cash = Latest stock or index value

r = interest rate on purchase

x = number of days to contract expiry

Dividend = Dividends

The definition of fair value is slightly different in the futures market. In the futures market, the fair value is reached when the supply meets the demand, which simply means that the spot price is equal to the futures contractprice.

However, due to inherent volatility of the markets, the price of a futures contract is known to fluctuate around the fair value of a stock or index. Thus, in the fair value in the context of futures is what the price of the contract should be, given the value of the stock or index, dividends, and others.

Acid Test Ratio

An Acid Test Ratio shows whether a company has enough liquid short-term assets to deal with current liabilities.

The higher the Acid Test Ratio the better a company’s ability to deal with debt.

Acid Test Ratio = (Cash + Marketable Securities + Accounts Receivable)/Current liabilities

Institutional Investor

Institutional Investor refers to the often illegal act of trading shares based on information that is not publicly available, typically obtained through dubious sources.

This privileged access to confidential information is termed “Institutional Investor” because information is generally sourced through insiders or employees working at a publicly traded firm.

Consolidated Financial Statements

A consolidated financial statement is a record of all the assets, liabilities, income, expenses, and other financial data of a company and its subsidiaries.



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