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Finance GlossaryBook Entry Securities
Book Entry Securities
Definition of Book Entry Securities
Book entry securities are financial instruments like stocks, bonds, ETFs, and others whose ownership is recorded and tracked electronically. Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.
For context, there was a time when physical ownership certificates were issued. If someone wanted to sell their shares, they’d have to present the ownership certificate and get it transferred to the buyer.
Book entries have made ownership certificates obsolete as they track who owns what electronically.
The trades are settled by the depository like NSDL or CSDL which sends the buyer a statement confirming ownership.
For context, there was a time when physical ownership certificates were issued. If someone wanted to sell their shares, they’d have to present the ownership certificate and get it transferred to the buyer.
Book entries have made ownership certificates obsolete as they track who owns what electronically.
The trades are settled by the depository like NSDL or CSDL which sends the buyer a statement confirming ownership.
Related Terms
CANSLIM
CANSLIM is an acronym for a seven-step strategy to pick growth stocks by combining fundamental and technical analysis. Here’s the full form of CANSLIM:
- Current quarterly Earnings Per Share (EPS): compare this fundamental indicator with the same figure from the previous quarter. If the figure grows (by 20% or more as a rule of thumb), the company is fundamentally strong.
- Annual earnings: Compare this fundamental indicator from the previous years. If there’s year-on-year growth, the company is fundamentally strong. If the year-on-year growth is by 20-25%, even better.
- New product or service: strong companies continue to innovate. That’s what this letter is about - checking if the company is continuously launching new products, services, or holding events.
- Supply: a fundamentally strong business should have a good supply and demand when it comes to its goods, services, and stock. Executive supply of shares may reduce the value of the company - that’s why it should always be scarce in supply.
- Leader: the company should be a leader in its own right, either in or across industries.
- Institutional holding: a valuable company will have higher institutional ownership, the percentage of which should always be tracked.
- Market trend: an investor must check whether the company or stock is going or against the trend by comparing it to broader indices.
EBITDA MARGIN
EBITDA margin is the ratio of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by revenue, represented as a percentage. It is used to understand whether a company is profitable and as a valuation technique.
The formula to calculate EBITDA margin is: EBITDA Margin = (EBITDA/Revenue)*100
Just like EBITDA, the EBITDA margin also excludes non-cash expenses. That’s why a positive EBITDA margin doesn’t necessarily mean that a company is profitable.
The formula to calculate EBITDA margin is: EBITDA Margin = (EBITDA/Revenue)*100
Just like EBITDA, the EBITDA margin also excludes non-cash expenses. That’s why a positive EBITDA margin doesn’t necessarily mean that a company is profitable.
Exponential Moving Average
Exponential Moving Average (EMA) is a technical indicator used to follow price trends over a specific period of time. EMA assigns more weight to recent prices than older prices. The formula to calculate EMA is:
Exponential Moving Average = (K x (CP - PP)) + PP
C: Current Price of stock, currency, commodity, etc. P: The EMA of preceding periods K: Exponential smoothing constant
A Simple Moving Average (SMA) is used to calculate the value of the first period. Furthermore, the EMA can be used to identify support and resistance areas. However, it may not be optimal for identifying precise entry and exit points.
Exponential Moving Average = (K x (CP - PP)) + PP
C: Current Price of stock, currency, commodity, etc. P: The EMA of preceding periods K: Exponential smoothing constant
A Simple Moving Average (SMA) is used to calculate the value of the first period. Furthermore, the EMA can be used to identify support and resistance areas. However, it may not be optimal for identifying precise entry and exit points.
Floating Interest Rate
The rate of interest that changes across the tenure of a loan, generally every quarter, due to the government’s interest rate, market conditions, and other factors is known as a floating interest rate.
Personal loans and home loans are typical examples of borrowing that carry a floating interest rate. A point to note here: the floating interest rate is added on top of a base interest rate that is charged by lenders.
Personal loans and home loans are typical examples of borrowing that carry a floating interest rate. A point to note here: the floating interest rate is added on top of a base interest rate that is charged by lenders.
Draft Offer Document
A draft offer document is the preliminary version of the IPO document that a company must file with SEBI 21 days before submitting the actual IPO document. The draft offer document is open to the public for comments during the 21 -day period. SEBI may suggest changes to the draft offer document in this period.
High Dividend Yield Stocks
High Dividend Yield Stocks are shares of companies that generate above average dividends on top of regular market-based returns. These shares are known to be valued highly because they generate passive income as well as capital gains.
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