If you are planning to buy shares of stock in the Philippines and want to be informed with significant information to become a successful stockholder or stock investor, it is wise that you always expand your knowledge, such as by being familiar with the terminologies used in the stock exchange. The following is a list of definition of terms and terminology about stock investing and trading in the stock market. If you think we have missed an important term below, please share and suggest it to us so that we can include it in the list. We will be updating this list to better serve you.
Annual Report – An annual publication that public corporations must provide to shareholders to describe their operations and financial conditions. This includes the company’s annual audited financial statements.
Bid and Ask Price – Bid price is the highest price that a buyer is willing and able to purchase for a share of stock. Ask price is the lowest price that a seller is wiling and able to offer for sale for a share of stock. It is also called “offer price.”
Blue Chip – A nationally recognized, well-established and financially sound company.
Board Lot – the minimum number of shares one can purchase or sell a stock at a specific price range.
Capital Appreciation – is an increase in the market price of your stock. It is the difference between the amount you paid at the time you buy shares and the current market price of the stock.
Cash Dividend – is the earnings for every share of stock declared by the company. For example, if the company declares a dividend of 50 centavos per share, a stockholder with 20,000 shares will receive a cash dividend of Php 10,000, gross of tax (Php.50 x 20,000) in cash.
Closing Price – the last traded price of the stock at 12:00 NN of the trading day.
Cyclical Stock – a stock that rises quickly when economic growth is strong and falls rapidly when growth is slowing down.
Dividends – are paid out to shareholders, representing earnings of the company that is not going to be reinvested in their business. Please see cash dividend and stock dividend for types of dividends.
High and Low Price – High price is the highest price the stock traded for the trading day. Low price is the lowest price the stock traded for the trading day.
Initial Public Offering (IPO) – is a process whereby a privately held corporation offers for sale its shares of stock for the first time to the public in order to raise capital to fund investments and business expansion.
Market Capitalization – the currency value of a company’s outstanding shares based on its current stock price. It is calculated by multiplying the company’s outstanding shares by the current stock market price.
Market Value – the price at which buyers and sellers are willing to purchase or sell the stock based on the information perceived value.
Mergers and Acquisitions – A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another with no new company being formed.
Opening Price – the first price the stock traded for the trading day.
Preferred Stock – A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock.
Price-Earnings Ratio – a valuation ratio of a company’s current share price compared to its per-share earnings.
Publicly Listed Companies – A company becomes publicly listed when its shares are traded in the Philippine Stock Exchange. To become a publicly listed company, a company must meet the stringent listing and reportorial requirement of the PSE to safeguard the investor’s interest and secure transparency.
PSE Composite Index (PSEi) – is the benchmark index measuring the performance of the Philippine stock market. It is a fixed basket comprised of 30 listed companies representing the general movement of stock prices. The selection of these companies is based on a specific set of criteria.
Securities and Exchange Commission (SEC) – a government agency whose primary mission is to protect investors and maintain the integrity of the capital markets, among which is the stock market.
Stocks – are shares of ownership in a corporation. When you buy stocks of a publicly listed company, you become a stockholder or shareholder of that company. In other words, you become a part-owner of the company. As an owner, you participate in that company’s growth and future profits. On the contrary, you may also lose if the company suffers a loss or performs below market expectations.
Stockbroker or Trading Participant – is the one who acts as an agent/broker between buyer and seller of stocks in the stock market. A Trading Participant is licensed by the Securities and Exchange Commission (SEC) and is a member of the PSE, authorized to execute orders for purchases or sales of stocks.
Stock Certificate – a piece of paper that certifies a person’s share ownership in a corporation.
Stock Dividends – are additional shares given to shareholders at no cost. For example, if the company declares a 25 percent stock dividend, a stockholder with 20,000 shares will be entitled to an additional 5,000 shares of stock. These shares can also be sold anytime after the shares have been issued.
Stockholders or Shareholders – are those who own shares of stock of a corporation or a publicly listed company, at least until the time that they decide to sell and transfer them to new owners. Stockholders or shareholders are given stock certificate corresponding to the shares they owned.
Stock Market – a place where stocks are bought and sold. The Philippine stock market is the place where people can invest in “publicly listed” companies in the Philippines Stock Exchange (PSE).
Stock Price – the currency value of a listed company per share in the stock market. It is derived by dividing the market capitalization by the total number of shares outstanding.
Ticker – a computerized listing of information showing stock market activity and stock price movements. Information includes the stock symbol, last traded price, and the volume of shares traded.
Limit Order – a type of transaction order placed with your stockbroker to buy or sell shares of stock at a specified buying or selling price.
Market Order – a type of transaction order placed with your stockbroker to buy or sell shares of stock at the current market price.
Good-til-cancelled Order – a type of transaction order placed with a stockbrokerage firm to buy or sell shares of stock which remains outstanding for seven calendar days until cancelled by the investor or trader.
Day Order – a type of transaction order placed with a stockbrokerage firm to buy or sell shares of stock that is only valid for one trading day.
Value Turnover – the amount of transactions in peso terms traded on a particular period.
Volume – the number of shares traded in the stock market during a given period of time.
Reference: Philippine Stock Exchange (PSE) Publications