Debentures or debenture stock:
These are fixed-interest securities issued by limited companies in return for long-term loans. Debentures are dated for redemption (i.e. repayment of their nominal value by the borrower to the holder) between a given numbers of years ahead. Quite often, debentures may be irredeemable. There are two main kinds of debentures: (a) mortgage debentures which are secured by a mortgage on specific assets of the company; and (b) floating- charge debentures, where its assets are not suitable for a fixed charge.
Debenture interest must be paid whether the company makes a profit or not. In the event of non-payment, debenture holders can force liquidation and rank ahead of all shareholders in their claims on the company’s assets. The interest which debentures bear depends partly on long-term rates of interest prevailing at the time and partly on the type of debenture, but will in any case, because of the lower risk involved is less than borne by preference shares. Debenture shares are most suitable for financing companies whose profits are stable and which have substantial fixed assets, such as property companies.
Share:
A share is one of a number of equal portions in the nominal capital ( where the face value of share, which may be more or less than its market price) of a company entitling the owner to a proportion of distributed profits and residual value if the company goes into liquidation, a form of security. Shares may be fully paid up or partly paid, voting or non-voting (sometimes called “A” shares). A share certificate is a document showing ownership of shares in a company.
Ordinary shares are shares in the equity capital [the residual value of a company’s assets after all the outside liabilities (other than to shareholders) have been allowed for] of a business entitling the holders to all the distributed profits after the holders of debentures and preference shares (that take precedence over the ordinary shares after debentures in terms of the payment of dividends, and the return of capital if the issuing company is liquidated) have been paid.
Bond:
Bond has two connotations: (1) it is a form of fixed-interest security mainly issues by central, state or local government, e.g. Konkan Railway Corporation Ltd. (KRCL) Bonds or Reserve Bank of India (RBI) Bonds. Bonds are usually a form of long-term security, but they may be irredeemable and may be secured or unsecured. (2) It is a term used to describe goods in a warehouse on which customs duty has not yet been paid.
Dividend:
It is the amount of a company’s profits the board of directors decides to distribute to ordinary shareholders. It is usually expressed either as a percentage of the nominal value of the ordinary share capital, or as an absolute amount per share.
Share Indices:
These are index numbers indicating changes in the average price of shares on the Stock Exchange (which is a market in which securities are bought and sold). The indices are constructed by taking a selection of shares and weighting the percentage changes in prices together as an indication of aggregate movements in share prices. Roughly speaking, a share index shows percentage changes in the market value of a portfolio (the collection of securities held by an investor) compared with its value in the base year of the index. Index numbers are published by several daily papers and weekly journals.
In the context of India, Stock Market performance is quantified by calculating an index using the benchmark scrip’s and we all know that SENSEX is associated with Bombay Stock Exchange and NIFTY is associated with National Stock Exchange, but what many do not know is how those indices are calculated along with EPS and PE values.
SENSEX has been calculated since 1986 and initially it was calculated based on the Total Market Capitalization methodology and the methodology was changed in 2003 to Free Float Market Capitalization. Hence, these days, the SENSEX is based on the Free Floating Market cap of 30 SENSEX Stocks traded on the BSE relative to the base value which is 100(1978-79) and it is calculated for every 15 seconds
NIFTY:
The National Stock Exchange (NSE) is associated with NIFTY and it is also calculated by the same methodology but with two key differences
1. Base year is 1995 and base value is 1000.
2. NIFTY is calculated based on 50 stocks.
2. Everything else remains the same in NIFTY Index calculation as well.
