Some Stock Market Terms

Above Par

The par value of a share is its face value. When the share price is above its face value, it is above par.

Accumulation Area

A term used by technical analysts when the price of a share moves within a narrow range of ups and downs over a period.


Big fish eating little fish; one company taking over controlling interest in another company

Active shares

Shares in which there are frequent and day-to-day dealings, as distinguished from partly active shares in which dealings are not so frequent.

A-D Index or Advance-Decline Index

A useful tool for detecting a bullish or bearish trend in the stock market in which one divides the number of traded shares which have risen in price by those which have fallen. For example, if 200 shares have advanced and 100 declined on a particular day the A-D index is 2. Numbers more than 1 indicate a bullish trend and less than 1 a bearish trend.

Allotment of Shares

After a company has issued a prospectus and application forms for shares, it receives applications from the investing public for varying numbers of shares. If the total number of shares applied for equals, or less than the number offered, full allotment is made. If, however, more shares are applied for than is offered, a basis of allotment is finalized in consultation with the stock exchange where the company is primarily listed.

Annual Report

Report made by the Directors of a company to its shareholders at the end of each accounting year, containing (a) Director’s report outlining a review of the company’s operations during the year, a summary of its financial results, and future projections, if any, (b) Auditors’ report, (c) Balance sheet, (d) Profit and loss account, and (e) Schedules explaining items on the balance sheet and profit and loss account.

Application Money

The amount an investor is asked to pay with the application for new issues. Cost of this is included in the premium. For example, in the case of insuring an engineering unit, a major part of the premium related to the provision of insurance services to help the client comply with the Factories Act and other statutory safety regulations which help in risk reduction.

Insurance companies, and even more so, insurance brokers are often prepared to offer advice on insurance related matters. As part of the services offered to clients, insurance brokers will review their needs and advice on the most appropriate ways of financing different risks. Insurance surveyors are also an important independent source of advice for clients. Sometimes, the provision or continuance of insurance is conditional upon surveyor’s recommendations being implemented.

Claims Handling Services

When a loss occurs, insurers provide a variety of services and advice to the insured, according to the class of insurance concerned. Loss adjusters engaged by insurance companies to settle large properly damage claims can often offer expert advice on the salvaging of damaged property , names of specialist repairers, possible sources of replacement equipment and suppliers etc. In the case of liability claims, the insurer will take over negotiations with the injured party, third parties or their legal representatives on behalf of the insured.

In view of the above facts, the grounds on which a decision to buy insurance will be taken can be summarized as follows:

1) The potential size and frequency of losses – insurance is best suited to risks with low frequency and high loss severity.
2) The size of the premium loading – the larger the premium, the greater the incentive to retain risk i.e. the lesser the incentive to transfer risks through insurance.
3) The value placed upon financial certainty.