A beginner’s glossary of meanings and definitions of stock market. This glossary will provide a quick meaning of important stock market terminology that is used and expand your overall stock market vocabulary and language. Read and familiarize yourself with these terms and understand stock market terminology better.
Meanings and Definitions – ‘R’ Terms
Rally: A rally is a period of sustained increases in the prices of stocks, bonds or indexes. It is a brisk rise in the general price level of the market or price of a stock.
Short-term rallies can result from news stories or events that create a short-term imbalance in supply and demand. Long term rallies are typically the outcome of events with a longer-term impact such as changes in government tax or fiscal policy, business regulation or interest rates.
Range (Price): Range refers to the difference between the low and high prices for a security or index over a specific time period. Range defines the price spread for a defined period, such as a day, month or year, and indicates the security’s price volatility. The more volatile the security or index, the wider the range.
Rate of Return: A rate of return is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s cost.
Reaction: Reaction is most often associated with a downward movement in the price of a security after a period of upward movement, as investors sell off shares or decrease the volume of buy orders for fear of the security being overvalued.
Recovery: Recovery means a rebound from prior negative activity. Economic recessions and market declines are an inevitable part of the business cycles. Economic recessions occur periodically when business expands too quickly. Stock market declines occur when stocks become overvalued in relation to the pace of economic expansion. The bounce back from these periods of decline is called recovery. Recovery is the fuel for a bull market which usually presents a multitude of moneymaking opportunities for investors becauseprices are generally rising.
Red Herring Prospectus: This is another name for the preliminary prospectus. This is the offering document printed by the issuer containing a description of the business, discussion of strategy, presentation of historical financial statements, explanation of recent financial results, management and their backgrounds and ownership. It includes key details of the issue, such as its price and the number of shares offered. The purpose of the red herring prospectus is to solicit expressions of interest in the prospective issue.
Redeemable Security: A redeemable security is a security that can be redeemed by the issuer at the investor’s request. These securities are purchased directly from the issuer at the time the investor make the investment and are redeemed to the issuer when the investor is seeking to sell the securities.
Redemption: The return of an investor’s principal in a fixed-income security, such as a preference share or bond. Fixed-income securities are generally redeemed at par value on the maturity date. The redemption of an investment may generate a capital gain or loss, and taxation laws are applicable on the same.
Registered Company: A company which has been officially set up and registered with the Registrar of Companies. The most common type of registered company is Public Limited Company and Private Limited Company.
Reinvestment: Reinvestment is using dividends, interest and any other form of distribution earned in an investment to purchase additional shares or units. Reinvestment is a great way to increase the value of a stock, mutual fund or exchange-traded fund (ETF). This happens when an investor uses proceeds distributed from the ownership of an investment to buy more shares or units of the same investment. If not reinvested these funds would be received by the investor as cash.
Repo: Repo is short for Repurchase Agreement. It is a type of short-term loan much used in the money markets, whereby the seller of a security agrees to buy it back at a specified price and time. The seller pays an interest rate, called the repo rate, when buying back the securities.
A repo or repurchase agreement functions in effect as a short-term, collateral-backed, interest-bearing loan. The buyer acts as a short-term lender, the seller acts as a short-term borrower, and the securities being sold are the collateral. Thus the goals of both parties, secured funding and liquidity, are met.
Retained Earnings: Retained earnings is that sum of a company’s profits, after dividend payments, which are not distributed as dividends. Retained earnings do not represent surplus cash or cash left over after the payment of dividends. Rather, retained earnings demonstrate what a company did with its profits; they are the amount of profit the company has reinvested in the business. They are also called retained accumulated profits, undivided profits, and earned surplus.
Return on assets: Return on assets (RoA) is a percentage indicator of how profitable a company is in relation to its total assets. RoA gives a manager, investor, or analyst an idea as to how efficient a company’s management is at using its assets to generate earnings. In basic terms, RoA tells one what earnings were generated from assets.
Return on Equity: Return on Equity (RoE) indicates profitability of a company by measuring how much the shareholders earned for their investment in the company. The higher the percentage, the more efficiently equity base has been utilized, indicating better return to investors. RoE is also known as Return on Net worth or Return on Shareholders Funds.
Return on Investment: Return on investment (RoI) measures the profit or loss generated on anto the amount of invested. is usually expressed as a percentage and is usually used by investors to calculate profits earned on their stock.
Revenue: The total sales or turnover is known as revenue. It is the income generated from sale of goods or services, before any costs or expenses are deducted. Revenue and earnings are displayed on a company’s financial statements. When looking at a company’s income statement, revenue is the top line number on the entire statement. From this all charges, costs, and expenses are subtracted to arrive at the net income.
Rights Issue: A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. The price is usually less than the market price of the shares on the day the rights are issued. The rights are only valid within a given time period.
Risk: includes the possibility of losing some or all of the original investment. It is the future chance or probability of loss. Various risks originate due to the uncertainty arising out of various factors that influence an investment or a situation. Risks are of different types and originate from different situations.
Rolling Futures: Rolling a futures position simply means closing the existing position and reestablishing it in a deferred month. Traders roll over futures contract to switch from the near month contract that is close to expiration to another contract in a far month. They are rolled over to a different month to avoid obligations associated with settlement of the contracts.
Rolling Settlement: Rolling Settlement is a mechanism of settling trades done on a stock exchange on T+3 basis. Internationally, the Rolling Settlements have been accepted as the best method of settling trades. In the Rolling Settlements, trades done on each single day are settled separately from the trades done on earlier or subsequent trading days. the settlement risk is considerably reduced. Moreover, the sellers and buyers get the monies and securities for their sale and purchase transactions respectively earlier than in Account Period settlements.