Stock Market Terms By Letter: A

A

Adjusted Price/Earnings/Dividend: Whenever a company makes a capital issue of some sort be it bonus, rights or stock split, the number of shares in the hands of the pre-existing shareholders increases. Due to the Increase in the number of shares, the price/earnings, dividend per share after the capital issue would no longer be comparable with the price/earnings/dividend before. In order to make them comparable, all the previously recorded data concerning a share prior to the capitalization issue have to be adjusted to reflect the change in the number of shares. This has to be done each time a new capital issue is made.
Adjustment Factor: This is the factor used to multiply the historical per share data to adjust them for new capital issue. With each new capital issue, the adjustment factor at the beginning of the record would get smaller.
Allotment Letter: When a company makes a Rights issue or a Spin-off, its existing shareholders would get a letter informing them of their entitlement. This letter is known as the Allotment Letter. Normally, the rights or additional shares allocated can be transferred to another party or can be split (see Split) by completing the relevant part of the allotment letter.

Arbitrage: A term used to describe trading transactions made to take advantage of differences in prices of a share which is quoted in two different markets. An arbitrage operation would consist of the buying of the share in the ‘cheaper’ market and selling it in the ‘dearer’ market. As a result of such activity, the difference in the price of the share in the two markets would narrow or disappear. Arbitrage occurs not only in the securities markets but also in the foreign exchange and commodity markets.Asset: A thing of value which is in the possession of a person or a company such as cash, buildings and machinery. Some things of value such as goodwill, though Intangible, are also classified as assets.

Associate Company: A company whose shares are partially owned by another company (the Holding Company) to the extent of between 20-50 per cent.

At Limit: An order setting a limit on the lowest or highest price at which one is prepared to sell/buy respectively in dealing with shares or commodities.

At Best: An order to buy/sell at the best prevailing price. This order obviously depends on the broker to judge what is the ‘best’ price obtainable at the time and is not really meaningful.

At Market: An order to buy/sell at whatever price that may be ruling at the time of the execution of the order.

Authorised Capital: This is the maximum amount of Paid=up Capital a company is permitted to have. The amount of Authorised Capital is determined at the time the company is first registered. However, the Authorised Capital may be changed at will.

Averaging: An investment method which requires a further purchase of shares at a lower price after having previously bought at a higher price so as to reduce the average cost per share.