7 TERMS TO KNOW FOR MAKING MONEY IN STOCK MARKET

1. 7 Financial Terms worth knowing before investing in Shares!

2. TERM 01 Business Cost Example- Vada Pav King Ltd. is into the business of making Vada Pav. The expense of Vada Pav making company incurs in its regular operations are its Business Cost ✓ ✓ ✓ ✓ ✓ Expenses on potatoes, onion, oil, spices, gram flour and pav Raw Material cost Expenses on kerosene or cooking gas to make vada and electricity to light the shop Power & Fuel cost Salaries to employees involved in making & distribution of vada pav Employee Cost Rent paid for the shop Rent Cost Expense of advertisement & Sales management Sales Cost

3. Profit & Loss Account shows the financial performance company during a specific period of time usually a quarter or year. It summarizes the revenue, costs and expenses incurred to calculate net profit or loss. It also shows the ability of a company to generate profit by increasing revenue and/or reducing costs of the TERM 02 Profit and Loss For example Annual Result (period of 12 months) – for the year ending 31stMar 2014 Quarter Result (period of 3 months) – for the quarter ending 30thJun 2014

4. Balance Sheet TERM 03 Balance sheet Time Shows the financial position of the company at a specific point in time. It summarizes a company's assets, liabilities and shareholders' equity which give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. Most of Financial Companies follow Financial year from 1st April to 31st March

5. TERM 04 Net Profit Margin Calculate Formula Net Profit Margin = Profit After Tax/Net Sales*100 Net Profit Margin is an indicator of overall profitability of the business i.e. how efficiently it is converting its sales into profits based on its pricing power and control over its costs. ProStock Example (%) Particulars Vada Pav King Net Profit Rs 30 Net Sales Rs 150 Net Profit Margin 30/150*100 20 In this case Net Profit Margin is 20%

6. TERM 05 Earning Per Share Calculate Formula Earning Per Share = Net Profit / Number of Company’s Shares Earnings Per Share is that portion of company’s profit for one Share, out of total number of shares of company. It’s tells the return earned by company on one share value. The Earnings Per Share is a useful measure of profitability as investors usually look for companies with steadily increasing earnings per share. Growth in EPS is an important measure of management performance because it shows how much money the company is making for its shareholders. ProStock Example (Rs ) Particulars Vada Pav King Net Profit Rs 300 Number of Shares Outstanding 10 Earning Per Share 300/10 30 In this case Earning Per Shareis Rs 30

7. TERM 06 Price Earning Ratio Calculate Formula Price to Earning Ratio = Current Share Price/Earning Per Share Price to Earning Ratio tells how much are investors willing to pay for a stock based on its current earnings. It tells, how many years it will take to get back the investment profits. ProStock Example by company Particulars Vada Pav King Current Share Price Rs 450 Earning Per Share Rs 30 Price to Earning Ratio 450/30 15 In this case it will take 15 years to recover the investmentof Rs 450 from the earning of Rs 30

8. TERM 07 Book Value Per share Calculate Formula Book Value Per Share = (Shareholder’s Equity – Preference Stock)/Weighted Average Number of Shares Outstanding Book Value Per Share indicates the level of safety associated with each common share after removing liabilities. Tells ,how much an investor can realize in the event of closing down the company. This can also be compared with current stock price to decide about under/over valuation of the stock. ProStock Example effects of (Rs ) Particulars Vada Pav King Shareholder’s Equity 60 Number of Shares Outstanding 1 Book Value Per Share 60/1 60

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