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Finance GlossarySettlement Cycle
Settlement Cycle
Definition of Settlement Cycle
The settlement cycle refers to the time taken to complete a trade once it is executed. Equities in India have T+1 days for settlement. This indicates the shares and funds are exchanged only one business day after the trade is executed. A shorter settlement cycle reduces counterparty risk. It also ensures that investors get faster access to their money or securities.
Related Terms
Odd Lot
An odd lot is a trade involving a number of shares that does not match the standard trading lot set by the exchange. For instance, if the regular lot size is 100 shares, a transaction of 30 or 50 shares would be classified as an odd lot.
Dividend Yield
A dividend yield is a ratio of dividends paid per share by the latest share price, expressed as a percentage. It is used to understand how much dividends a company pays per share outstanding. The formula to calculate dividend yields is:
Dividend Yield: Dividend Per Share / Current Shar Price
A high dividend yield indicates a company’s willingness to redistribute more profits to shareholders, while a low dividend yield signals the opposite.
Dividend Yield: Dividend Per Share / Current Shar Price
A high dividend yield indicates a company’s willingness to redistribute more profits to shareholders, while a low dividend yield signals the opposite.
Identifiable Asset
An identifiable asset is a tangible or intangible asset that be assigned a fair value at any point in time. This concept is important during acquisitions and mergers as not all assets on a company’s balance sheet can easily be valued.
Simple examlpeps of identifiable assets include machinery. You can easily identify machinery as a separate entity and assign it a value based on various factors.
Simple examlpeps of identifiable assets include machinery. You can easily identify machinery as a separate entity and assign it a value based on various factors.
Averaging Down
Averaging down means buying more shares when the price drops, thereby bringing down your overall average cost of investing. For example:
Day 1 (Normal price)
Day 1 (Normal price)
- Shares bought of XYZ: 10
- Price of each share: Rs. 1000
- Total cost of investing: Rs. 10,000
- Average investment cost: Rs. 1000
Day 2 (Lower price)
- Shares bought of XYZ: 10
- Price of each share: Rs. 900
- Total cost of investing: Rs. 9,000
- Average investment cost: Rs. 900
Averaging Down
- Initial average cost of investing (Day 1): Rs. 1000
- New average cost of investing (Day 1 & Day 2): Rs. 950
Penny Stocks
Penny Stocks are those shares of small companies trading at low prices, often below the price of a Rs. 10 or Rs. 20 share in the Indian stock market, and have low market capitalisation. These stocks are characterised by high volatility, low liquidity, and a high degree of speculation, which makes investments in these stocks extremely risky. While they have the potential to provide attractive returns, they are also subject to manipulation and can lead to the total loss of capital.
Differential Pricing
Differential pricing is a strategy that involves setting different prices for the same product or service based on the type of customer or tming.
For example, a zoo ticket may cost Rs. 10 for domestic visitors and Rs. 100 for international visitors. Or, when buying a product gets costlier as and when the last date for the sale approaches.
That’s why differential pricing is also known as discriminatory pricing and variable pricing.
For example, a zoo ticket may cost Rs. 10 for domestic visitors and Rs. 100 for international visitors. Or, when buying a product gets costlier as and when the last date for the sale approaches.
That’s why differential pricing is also known as discriminatory pricing and variable pricing.
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