What is Profit&Loss (P&L) Statement ?

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Definition : Also known as Income statement, is a financial statement which shows expenses and revenue of a company during a particular period, usually a fiscal quarter or year.
Read : What Is Balance Sheet ?
Income Statement helps to convey the status of a company i.e. Company is making profit or suffering losses. It is very important to read Income Statement of a company before investing, both of recent and past years.
Note : Revenue : Total amount received from sales of goods and services. Expenses : Total amount spend in producing final product or service.
Structure of P&L Statement  Income Statement is divided into Five main section - Net sales, Cost of Goods Sold, Gross Margin, Operating Expenses and Net Profit Before & After Income Tax (Or Net Loss in case of Loss).
Net Sales : It is the sum of Gross sales excluding its returns, allowances and discounts.Cost Of Goods Sold : Amount of money used to produce the final product. For example cost of inventory, merchandise purchased…

Stock Market Basics - Terminology To Read Stock Quotes


If you are an investor or want to be a investor you need to know some basic terms and definitions which will help you in various ways and these terms  will always come across when you trade.

Stock quote defined as the price at which investors are willing to buy or sell certain shares of a stock. In common words, cost of purchasing a share.

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1. Market Capitalization (mkt cap)

Definition :  Market Capitalization defines the size of a company, how big or small a company is based on its value in market capitalization.

Formula

Mkt cap = Price of a share x Total no. of outstanding share

From equation, we can see market cap is directly proportional to price of a share, so if the share price changes market cap also changes.


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Note:  Don’t judge a company with its share price. It is not necessary that company with high share price is a big company or with small share price is a small company. Size of a company can only be declared on the basis of its market cap. 
For e.g. Share price of Tata Motors is ₹257.35 with Market Capitalization of ₹74,564.78 Crore where as Share price of NTPC is ₹157.95 with market cap of &130,278.34 Crore. Here we can see share price of Tata Motors is higher than NTPC but NTPC is a bigger company than Tata Motors.

Based on mkt cap stocks are divided into thee categories : 


  • Small cap : mkt cap below 5000 crore
  • Mid-cap : mkt cap between 5000 - 1 Lakh crore
  • Large cap : mkt cap above 1lakh crore

2. Market Lot 

 When company issues IPO, they always issue in lots which means investors can not buy shares in numbers they have to buy shares in lots. A lot contains specific no. Of shares, the no. Of shares a lot will hold is decided by the company itself. For e.g If a lot size of a stock is 25 shares then you have to buy minimum 25 shares or multiples of it.
Companies ususally have lot value of 1.00 so that investors will able to buy even one share also.

3. Industry P/E 

 It is the average P/E value of whole Industry. In common words, consolidated P/E .

4. Deliverables (%) 

There are two ways of Trading in Stock market - Intraday and Delivery based. Intraday trading is buying/selling shares throughout a day, whereas, Delivery based is buying and holding shares for more than one day. 
Deliverables is defined as the percentage of stock purchased for delivery based trading.

Deliverables(%) = Delivery Shares x 100 / Total Volume

5. Bid Price

It is the maximum value investors willing to pay for a specific stock.

Example : lets assume shares of a company A is trading between ₹100 and ₹150 throughout a day.  Again lets assume you want to buy share of that company A but you don’t want to buy it for more than ₹130. So you tell your broker to set limit order of ₹130 for 50 shares. So, here you set a bid price of ₹130 and broker will only purchase your order on that price only.

6. Offer price

It is the minimum value at which investors are willing to sell a specific Stock. In common words, the minimum value a seller will accept for the security. Also known as ask price.
The ask price is usually higher than bid price. If you are buying a stock you will pay ask price, alternatively, if you sell a stock, you will receive bid price. The difference between ask price and bid price is called the spread.

7. Volume Weighted Average Price (VWAP)

It is the average price of a share in one day.

VWAP = Total traded value / Volume

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8. Today’s High/Low

As per name, it is the Highest and Lowest value at which a stock is traded throughout the day.

9. 52 week Low/High

The Maximum and Minimum value that a stock reached throughout a year. This is Widely used in analysis, and a crucial term you always need to consider before choosing a stock to invest.

10. L/U Price Band

It helps to control the extreme volatility of stock price. It keeps stock price in a specific limit and different stocks have varied price band.
Price band decides the upper amd lower limit for a stock and if the stock price touches its upper or lower limit price, trading of that stock stops for that day. Stock proe can only move between its upper and lower limit. 
Stocks trading in derivative market are not restricted by any Price Band.

Other Related Terms

Return On Equity - ROE
Price To Earning Ratio - P/E ratio
Earning Per Share - EPS
Dividend And Dividend Yield
Upper And Lower Circuit

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