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Finance GlossaryDifferential Voting Rights
Differential Voting Rights
Definition of Differential Voting Rights
Differential Voting Rights or DVRs are special types of shares that carry more or less voting rights, depending on the issuing company. For example, a DVR share that carries less than usual voting rights may generate relatively high dividends.
A publicly traded company that wants to issue DVR shares must go through a postal ballot. There are other caveats as well. But broadly speaking, a company must have a healthy finanical track record if they want to issue DVR shares.
A publicly traded company that wants to issue DVR shares must go through a postal ballot. There are other caveats as well. But broadly speaking, a company must have a healthy finanical track record if they want to issue DVR shares.
Related Terms
Bonds
Bonds are fixed income securities issued in exchange for a loan, generally by governments and corporations. A bond will generate a fixed interest rate on top of the principal across a fixed time period.
A bond market is a place where bonds are issued, bought, and sold. Bonds are issued in exchange for a loan generally by governments and corporations.
The quality of a bond can be understood by its credit rating, which is nothing but the creditworthiness of the company issuing it. The best bonds in India are known to have the following credit rating:
The quality of a bond can be understood by its credit rating, which is nothing but the creditworthiness of the company issuing it. The best bonds in India are known to have the following credit rating:
- SOV: Only for government bonds
- AAA: Highest
- AA+: High-medium
- A+: Upper-medium
- BBB+: Lower-medium
- BB+: Speculative
- B+: Highlight speculative
- CCC+: Risky
- CC: Extremely risky
Free Cash Flow
Free float market capitalization is the market cap of a company based on the total freely available publicly traded outstanding shares. The formula to calculate free float market capitalization is:
Free float market capitalization = Share Price x (Number of Shares Available for Trading – Private and Locked-In Shares)
When calculating the free float market cap of a company, the number of shares held privately or the shares that are locked-in are not taken into account. Typically, these shares are held by promoters and the government.
Free float market capitalization = Share Price x (Number of Shares Available for Trading – Private and Locked-In Shares)
When calculating the free float market cap of a company, the number of shares held privately or the shares that are locked-in are not taken into account. Typically, these shares are held by promoters and the government.
Margin of Safety
Margin of Safety refers to the difference between a company’s intrinsic value and its market price. For example, if a stock’s intrinsic value is ₹100 and it trades at ₹70, then the ₹30 difference is the margin of safety.
Cost Inflation Index
A Cost Inflation Index or CII is used to calculate a financial security’s price after adjusting for inflation.
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Plowback Ratio
The Plowback Ratio (or Retention Ratio) is the ratio of the net income of a company that is retained by the company to be reinvested in the company's business operations and growth (rather than paid out as dividends). The formula is: Plowback Ratio = (Net Income - Dividends Paid) / Net Income. High-growth companies in the IT or manufacturing sector often have a high plowback ratio as they see higher benefit in re-investing their profits to fuel expansion. A low plowback ratio indicates that a company is mature and returns a larger portion of its earnings to its shareholders.
Beta Stocks
Beta of stocks measures the risk that the shares carry compared to the broader market. Theoretically, the market is said to have a default Beta of 1. As a result, Beta stocks can be of four types:
- High Beta Stocks : typically having a Beta value of more than 1, these stocks are known to be high-risk, high-reward investments
- Low Beta Stocks : typically having a Beta value of less than 1, these stocks are known to be low-risk, low-reward investments
- Negative Beta Stocks : typically having a Beta value of less than zero, these stocks are known to have an inverse correlation with the market
- Same as the market : typically having a Beta that’s equal to 1, these stocks are known to share characteristics with the market
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