Glossary of ‘Financial Terms’ starting with Alphabet ‘P’, 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.
Paid in Capital
The difference between par or book-keeping, value of a security and the amount realized from the sale or distribution of those shares by the company.
Paid up Capital
The amount of capital, both equity and preference, paid up by the shareholders against the capital subscribed to by them.
Paper Profits/ Paper Loss
Unrealized profit/loss that exist only on paper because the investor has not finalized the transaction by actually selling the securities.
Means the face value of securities.
A term used to describe new issue of securities which have same rights as similar issues already in existence.
Partial Tender Offer
A tender offer for less than all target shares; specifies a maximum number of shares to be accepted, but does not announce bidder’s plans with respect to the remaining shares.
Participating Preference Shares
The right of certain preference shareholders to participate in profits after a specified fixed dividend contracted for is paid. Participation right is linked with the quantum of dividend paid on the equity shares over and above a particular specified level.
Shares on which full nominal value has not been called up.
Pay In/ Pay Out
The days on which the members of a Stock Exchange pay or receive the amounts due to them are called pay in or pay out days respectively.
Settling payments due on the same date and in the same currency on a net basis.
Penny Stocks (U.S.)
Generic term for very low priced stocks- sometimes selling at a few pennies per share sometimes for a dollar or two, in speculative companies.
Persons acting in concert (PAC)
Individual(s)/ company(ies)/ any other legal entity(ies) who are acting together for a common objective or for a purpose of substantial acquisition of shares or voting rights or gaining control over the target company pursuant to an agreement or understanding whether formal or informal.
Operators who get killed by the speculators.
Listing of Over the Counter Stocks, the dealers who trade them and the prices at which these dealers are willing to buy and sell. Printed daily on loud pink newsprint and found in brokerage house and many banks.
The ability of the financial institutions to place securities with the investor.
Plain vanilla transactions
The most common and generally the simplest types of derivatives transaction. Plain vanilla is a relative concept, and no precise list of plain vanilla transactions exists. Transactions that have unusual or less common features are often called exotic or structured.
A diverse range of intermediaries and institutional investors active in the capital market. This includes securities firms, broker dealers, commercial banks, merchant banks, unit trust/ mutual fund etc.
Poison Pill (U.S.)
A defence technique when a company issues to its shareholders a special preferred dividend stock which is convertible, after a takeover, into the acquirer’s shares. The successful bidder thus faces the prospect of heavy dilution.
A provision in some new bond issues designed to protect bondholders against takeover-related credit deterioration of the issuer. Following a triggering event, bond holders may put their bonds to the corporation at an exercise price of 100-101 percent of the bond’s face amount.
A classic contrick that has been repeated many times both before and since Charles( Carlo) Ponzi gave it its name in the 1920s. The scheme begins with a crook setting up as a deposit taking institution. The crook invites the public to place deposits with the institution, and offers them a generous rate of interest. The interest is then paid out of new depositors’ money, and the crook lives well off the old deposits. The whole scheme collapses when there are not enough new deposits coming in to cover the interest payment due on the old ones. By that time the modern day Ponzi hopes to be living under an alias in a hot country with few extradition laws.
The basic concept behind mutual funds in which a fund aggregates the assets of investors who share common financial goals. A fund uses the investment pool to buy a diversified portfolio of investments and each mutual fund share purchased represents ownership in all the funds underlying securities.
A pool is essentially the same type of practice as a matched order, but involves more than one person colluding to generate artificial market activity.
Poop and scoop
A highly illegal practice occurring mainly on the Internet A small group of informed people attempt to push down a stock by spreading false information and rumors. If they are successful, they can purchase the stock at bargain prices.
A collection of securities owned by an individual or an institution (such as a mutual fund) that may include stocks, bonds and money market securities.
Investment which goes into the financial sector in the form of treasury bonds and notes, stocks, money market placements, and bank deposits. Portfolio investment involves neither control of operations nor ownership of physical assets.
Any person who pursuant to a contract or agreement with a client ,advises or directs or undertakes on behalf of the client (whether as discretionary portfolio manager or otherwise) the management or administration of a portfolio of securities or the funds of the client as the case may be.
A measure of the trading activity in a funds investment portfolio – how often securities are bought and sold by a fund.
The maximum number of listed option contracts on a single security which can be held by an investor or group of investors acting jointly.
The netting of payment instructions in respect of obligations between two or more parties, but which neither satisfies nor discharges those original obligations.
Type of trading involving the holding of open positions for an extended period of time.
Preferred Stock / Preference Shares
Owners of this kind of stock are entitled to a fixed dividend to be paid regularly before dividend can be paid on common stock .They also exercise claims to assets, in the event of liquidation, senior to holders of common stock but junior to bondholders. Holders of preferred stock normally do not have a voice management.
Further issue of shares / securities convertible into equity shares at a later date, to a select group of persons in preference to all the existing shareholders of the company.
If an investor buys a security for a price above its eventual value at maturity he has paid a premium for it.
Previous year is a period of upto 12 months (i.e. sometimes may be smaller than 12 months), which starts from 1st April or any subsequent date and ends on 31st March of the following year. The concept of ‘previous year’ is specially used in Income Tax. New business or source of income which comes into existence after 1st April may have different previous year than the financial year. For example, if a business is started on 01/11/2021 then its previous year will be the period from 01/11/2021 to 31/03/2022. In other words financial year is always a period of 12 months whereas previous year may be smaller in some cases. Also refer the terms ‘Financial Year‘ and ‘Assessment Year‘. Read More
The range within which the price of a security or the index of a currency is permitted to move within a given period.
A general term for the process by which financial markets attain an equilibrium price, especially in the primary market. Usually refers to the incorporation of information into the price.
Price Earning Ratio
The ratio of the market price of the share to earnings per share. This measure is used by investment experts to compare the relative merits of a number of securities.
When persons acting in concert with each other collude to artificially increase or decrease the prices of a security, the process is called price rigging.
Price sensitive information
Any information which relates directly or indirectly to a company and which if published is likely to materially affect the price of securities of the company.
The interest rate on loans, which a bank is charging its best, most credit-worthy business customers. This interest rate affects all borrowers – not merely those who actually pay the prime rate because the level of the prime rate and the direction in which it is moving tend to determine other interest rates.
Realizing profits by closing out an existing position.
A technique, which uses decision rules, usually programmed on a computer, to generate trading decisions automatically.
Proprietary Fund (sub account)
A fund where in the ownership of the funds is that of the Foreign Institutional Investor.
Any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate.
One who votes for and on behalf of a shareholder at a company meeting.
A battle between a company and some of its own shareholders. It starts with a group of dissident shareholders soliciting proxies in order to force through a shareholder resolution.
A public announcement is an announcement made in the newspapers by the acquirer primarily disclosing his intention to acquire shares of the target company from existing shareholders by means of an open offer.
An invitation by a company to public to subscribe to the securities offered through a prospectus.
Public Securities Trust
Pooled unit trust which invest unit holders money in government and semi government securities.
Advertising or planting some news in the newspaper or in any media in respect of a proposed corporate action and later taking the stand that the Board of directors did not approve the proposed corporate action or news about financial results, given in misleading or distorted manner intended to generate or induce trading in the scrip.
Pump and dump
A highly illegal practice occurring mainly on the internet. A small group of informed people buy a stock before they recommend it to thousands of investors. The result is a quick spike in the price followed by an equally quick downfall. The people who have bought the stock early sell off when the price peaks.
Put-Call Parity Relationship
The relationship between the price of a put and price of a call on the same underlying with the same expiration date, which prevents arbitrage opportunities.
An option that gives the right to sell a fixed number of securities at a specified price (the strike price) within a specified period of time.