An audited document as prescribed under the Companies Act and sent to the shareholders of a public company or a mutual fund at the end of each fiscal year is called an annual report. The report provides information on the company's financial results for the year along with comments on its future outlook.
Financial results issued by the company at the end of each financial year indicating its increase/decrease in profits/losses and sales are called annual results.
Financial results issued by the company every three months indicating its increase in profits/losses and sales are called quarterly results.
Assets like bills receivables, cash, debtors, etc, which can be converted into cash within a short span of time are called current assets.
Liabilities like bills payable, creditors, short-term bank loan, etc, which have to be repaid within a short span of time are called current liabilities.
Any expense likely to be incurred in future and having a bearing on the firm's profitability provided for earlier is called a provision.
Any income earned by a company other than from its normal course of operations is called 'Other Income'. For example, an iron and steel producing company may earn dividend or bonus from its share investments in a telecom company. Since the income is not earned from its normal course of business, i.e., manufacture and sale of steel pipes, the income is categorized as Other Income.
The profit earned after deducting interest, dividend and income-tax expenses from the gross profit is called the net profit.
The original value of a stock, as mentioned in the company's books of accounts without adjusting for expenses, like depreciation, is called the book value.
Market Capitalization of a company is the current market price of a share multiplied by the total number of outstanding shares.
Dividend is be defined as a part of the company's profit which is paid to equity and preference shareholders.
Return on Capital Employed
Return on Capital Employed is defined as a measure of return that a company realizes from its capital. It is calculated as profit before interest and tax, divided by the difference between the total assets and current liabilities. The resulting ratio represents the efficiency with which capital is being utilized to generate revenue.
Return on Net Worth or Return on Equity
Return on Net Worth or Return on Equity.
The debt/equity ratio is calculated by dividing the total debts (borrowed funds) by the sum of share capital, development reserve, investment property revaluation reserve, investment revaluation reserve and the retained profits.
Any asset hypothecated or any charge made on a firm's assets by a bank or any other financial institution as a collateral security against a loan taken is a secured loan.
When a loan is taken without any charge on the firm's assets, it is called an unsecured loan.
When goods/services are sold on credit, the suppliers/buyers are called debtors as they owe money to the firm.
When goods/services are purchased on credit, the suppliers are sundry creditors as the firm owes money to them.
Profit earning ratio
Profit earning ratio is calculated by dividing the current stock price divided by earnings per share (EPS). If the ratio is higher than other stocks in its industry, it means the investors are expecting a higher rate of earnings for the stock.
Earnings per share (EPS)
The portion of a company's profit allocated to each outstanding share of common stock is called the earnings per share (EPS). It is calculated as the net profit - dividend on the preferred stock/outstanding shares.
The allocation of the cost of an asset over a period of time for accounting and tax purposes is called depreciation. It is also referred to as the decline in the value of a property due to the general wear and tear or obsolescence.