Glossary of Financial Terms starting with Alphabet ‘N’

Glossary of ‘Financial Terms’ starting with Alphabet ‘N’, i.e. ‘Meaning’ or ‘Definition’ of Common and Unusual terms relating to Accounting, Auditing, Company Law, GST, Income Tax, Investments, etc., along with the ‘Context’ in which they are used.

NASDAQ (U.S.)

Acronym for the National Association of Security Dealers Automated Quotations. This is an organization that does exactly what its name stands for. The system provides a computerized information network through which brokers, banks and other investment professionals can obtain upto the minute price quotations on securities traded over the counter.

Naked Option

An option that is written without corresponding security or option position as protection in seller’s account.

Narrowing the Spread

The action taken by broker/ dealer to narrow the spread between bids and offers by bidding higher or offering lower than the previous bid or offer. Also called closing the market.

National best bid and offer

A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.

Negotiated Dealing System (NDS)

Electronic platform for facilitating dealing in Government Securities and Money Market Instruments, introduced by RBI.

Net Dividend

Dividend after deduction of tax payable from gross dividend.

Net Liquid Assets

Cash and readily marketable securities minus current liabilities of a company. This is the strictest test of a company’s ability to meet current debt obligations.

Netting

A system whereby outstanding financial contracts can be settled at a net figure, i.e. receivables are offset against payables to reduce the credit exposure to a counterparty and to minimize settlement risk.

Net Working Capital

The excess of current assets over current liabilities.

Net worth

The aggregate value of the paid up equity capital and free reserves (excluding reserves created out of revaluation), reduced by the aggregate value of accumulated losses and deferred expenditure not written off, including miscellaneous expenses not written of.

New Issue

Shares of a company offered to the public, through a public issue, for the first time to be listed on the Stock Exchange.

Net Asset Value (NAV)

The current market worth of a mutual fund’s share. A fund’s net asset value is calculated by taking the fund’s total assets, securities, cash and any accrued earnings, deducting liabilities, and dividing the remainder by the number of units outstanding.

Net Option Value

The difference between long option value (LOV) and short option value (SOV).

Net Realizable Value

The current market price of an asset after deducting the costs of selling it.

Noise trading

People who trade on noise are willing to trade even though from an objective point of view they would be better off by not trading. Perhaps they think the noise they are trading on is information or perhaps they just like to trade.

No-action Letter

A form of written advice given by the staff of the SEC to lawyers. It is given in response to a request letter and is limited to the facts of a particular proposed undertaking. Generally, the advice concerns an ambiguity or apparently illogical result under the SEC laws or rules. If the request is granted, the staff says that, based upon the facts described, it (the staff) would not recommend that the Commission take any action against the conduct described. In theory, grant of a no-action letter does not foreclose private lawsuits or even prevent some action by the Commission itself. However, in practice the letter generally would be given great weight by a court.

Non deliverable swap

Similar to a non deliverable forward, the only difference being that settlement for both parties is done through a major currency.

Non Discriminatory Poison Pill

Anti-takeover defense plans which do not penalize acquirers exceeding a given shareholding limit. Include flip-over plans, preferred stock plans and ownership flip-in plans which permit cash offers for all shares.

No load fund

A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/ scheme at net asset value (NAV) and no additional charges are payable on purchase or sale of units.

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