Frequently Asked Question:
1. What is ‘Share’?
Ans: Each share represents a small stake in the total paid up capital of a company. In fact a public limited company is one that is formed to accumulate capital from a large pool of investors. Therefore total capital of such companies is divided into smaller equal denomination units represented by a share/ capital. One may buy large or small lots to match the amount of money that one wants to invest.
2. What is ‘Circuit Filter’?
Ans: Circuit Filter is the maximum permissible deviation of the price (specified as percentage), of an aggressor order from the last trade price.
3. What is Breaker’?
Ans: Circuit Breaker is the maximum permissible deviation of the price (specified as percentage) of the incoming order from the Circuit Breaker Base Price for that instrument. Orders violating circuit breaker will result rejection of the order.
4. What is Market Capitalization’?
Ans: Market Capitalization is the total market value, at the current stock exchange list price of the total number of equity shares issued by a company.
Market Capitalization = ∑ (No. of Issued Share * Close Price)
5. What are the groups of instruments in DSE?
Ans: The groups of instruments in DSE are: A, B, G, N and Z
6. Can any outside force manipulate the market?
Ans: Stock market moves either on the basis of fundamentals which take care of long term valuations where as the technical governs the short term movements of it. The short term movements are influenced more by short term sentiments which can be quite volatile at times. The short term movements seems to a lay investors sometimes as if they are manipulated but actually it is a play of fear and believe in the short term and hence it becomes very volatile.
7. What is a difference between a stock market and a new issue market? Does any opening in new issue market effects stock market?
Ans: A stock market is a place where people buy and sell shares where as a new issue market is just a part of the stock market, in the sense that any company which has to raise its money from public has to come out with a public issue only after which that stock can be listed on the stock exchange. Sometimes an issue of an existing listed company comes which increases the floating stock of that company as a result that when more stock is available, there is a pressure on the stock and at times till the new stock is not absorbed by the market and the stock remains depressed.
8. Returns from stock market are tax free or taxable?
Ans: Returns from stock market fall under Short Term Capital Gain /Long Term Capital Gain and the rules for them vary from country to country.
9. What is the difference between the Intrinsic Value and Market Price?
Ans: Theoretically speaking the stock price of a given company reflects everything which is basically the Intrinsic Value of the company. But practically the analyst tries to find the difference between the market price of the company and its actual value. When he finds a company’s intrinsic value more than the market price he tries to buy stock and vice-versa.
10. What is Earnings per Share EPS?
Ans: EPS is the post tax profits of the company divided by the number of shares issued by the company.
11. What is P/E ratio?
Ans: P/E is the issue price divided by the most recent Earning per Share EPS. This ratio tells you if the issue is under-priced or over-priced vis-à-vis the industry P/E. All other things being equal, if the P/E of the company is less than the industry P/E then the issue is under-priced. If the P/E of the company is higher, then the issue is over-priced.
12. Who is a Merchant Bank?