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Convertible Debentures

Definition of Convertible Debentures

A convertible debenture is a long term debt instrument that can be converted into equity on maturity. Convertible debentures are generally unsecured loans that small to mid-size companies take on in exchange for an interest rate.

Related Terms

After Hours Trading

After hours trading means buying and selling securities after the end of regular market hours. In India, the stock market is open for regular trade from 9.15 AM to 3.30 PM.

After hours trading is allowed from 3.40 PM to 4 PM. Around the world, stocks are known to suffer from a lack of liquidity during after hours trading.

52 Week Low

A 52 week low is the lowest closing price of a stock or ETF in the last 365 days. Let’s say you check a stock’s history on 01-01-2022. Then the 52 week low will be the stock’s lowest closing price between 01-01-2021 and 01-01-2022. 52 week lows are used as technical indicators by traders.

Balance Sheet

A balance sheet is a financial statement that reveals a company’s assets, liabilities, and shareholders’ equity. It can help current and potential investors understand the financial health of a company.

These are some of the key components of a balance sheet:

  • Current assets : Cash & cash equivalents, marketable securities, accounts receivable, inventories, prepaid expenses, and other liquid assets

  • Fixed assets : Property, equipment, furniture, machinery, software, and other intangible assets

  • Current liabilities : Short-term debt, unearned revenue, accounts payable, other accrued expenses & liabilities

  • Long Term liabilities : Long-term loans, bonds, and others

  • Shareholders’ equity : Paid-in capital and retained earnings

Cash Conversion Cycle

A Cash Conversion Cycle (CCC) tells you how many days it will take to convert a company’s inventory or resources into cash. The formula for Cash Conversion Cycle is:

Cash Conversion Cycle = (DIO + DSO) – DPO

  • DIO: Days Inventory Outstanding is the average number of days it takes for a company to turn inventory into cash through sales
  • DSO: Days Sales Outstanding is the average number of days it takes for a company to collect its receivables
  • DPO: Days Payable Outstanding is the average number of days it takes fo a company to fulfil its obligations or payables

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.

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



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