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Finance GlossaryPar Value
Par Value
Definition of Par Value
Par value, also known as face value or nominal value, is the stated, fixed amount on a financial instrument (such as a stock or bond) fixed at the time of issuance, the minimum amount for accounting and legal purposes. For bonds, it's the amount repaid at maturity, and used to calculate interest; for stocks, it's the minimum price the company can sell shares for initially. Market price is different from par value.
Related Terms
Capital Gains
A capital gain is a profit an investor or trader earns by selling shares, commodities, futures, options, currencies, and other assets. More literally, a profit is a gain on the capital that’s invested - hence the term capital gains.
Say someone buys a share for Rs. 1000 and sells it for Rs. 1100. The capital gains will be Rs. 100 in this case. The taxation of capital gains varies based on the asset type and the duration after which it was sold.
Say someone buys a share for Rs. 1000 and sells it for Rs. 1100. The capital gains will be Rs. 100 in this case. The taxation of capital gains varies based on the asset type and the duration after which it was sold.
Advance Payment Guarantee/Bond
An Advance Payment Guarantee or Advance Payment Guarantee Bond is a contract issued by a third party willing to take responsibility for fulling the terms of an agreement or payments owed by one party to another.
The guarantee could be:
The guarantee could be:
- Primary: Indemnity (fulling payments)
- Secondary: Guarantee (assuring that the outcome will be met)
Free Cash Flow
In accounting and earnings reports, free cash flow refers to the amount of money a company has after paying its maintenance expenses, salaries, utility expenses, and other operating expenses as well as capital expenditures.
The formula to calculate free cash flow: Operating Cash Flow − Capital Expenditures
Free cash flow is an important metric, especially for investors because it is a direct indicator of the financial competence of a company. For example, the amount of FCF a company has can decide whether it has enough cash to offer dividends, expand business, buy back shares, etc.
The formula to calculate free cash flow: Operating Cash Flow − Capital Expenditures
Free cash flow is an important metric, especially for investors because it is a direct indicator of the financial competence of a company. For example, the amount of FCF a company has can decide whether it has enough cash to offer dividends, expand business, buy back shares, etc.
Holdings
Holdings are the financial assets in the portfolio of an investor or company. They can include stocks, bonds, derivatives, commodities, currencies, and more.
New York Stock Exchange (NYSE)
The New York Stock Exchange (NYSE) is one of the world’s largest and oldest stock exchanges, located in New York City, USA. It provides a platform for buying and selling shares of publicly listed companies and is known for hosting many large, well-established global corporations.
Basis Trading
Basis trading means futures trading strategies that use the difference between the spot price and the futures contract price of a stock or commodity.
The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:
The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:
- Short the basis : Done if the price difference or basis is expected to reduce
- Long the basis :Done if the price difference or basis is expected to increase
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