Nifty 50
Sensex
US Tech 100
Dow Jones
FTSE
Dax
CAC
Nikkei 225
Hang Seng
SSE Composite
TAIEX
KOSPI
Gift Nifty
Strategy Indices
Broad Market Indices
Sectoral Indices
Thematic Indices
Home
Finance GlossaryReverse Stock Split
Reverse Stock Split
Definition of Reverse Stock Split
A reverse stock split is a corporate action that involves a company reducing the number of outstanding shares it has, while the stock price increases proportionately. For instance, if there is a 1:5 reverse split, five shares are combined into one. A reverse stock split does not change the value of a company. However, it is often used to meet the requirements of listing on an exchange or improve the perception in the market.
Related Terms
Institutional Investor
Institutional Investor refers to the often illegal act of trading shares based on information that is not publicly available, typically obtained through dubious sources.
This privileged access to confidential information is termed “Institutional Investor” because information is generally sourced through insiders or employees working at a publicly traded firm.
This privileged access to confidential information is termed “Institutional Investor” because information is generally sourced through insiders or employees working at a publicly traded firm.
Basis Trading
Basis trading means futures trading strategies that use the difference between the spot price and the futures contract price of a stock or commodity.
The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:
The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:
- Short the basis : Done if the price difference or basis is expected to reduce
- Long the basis :Done if the price difference or basis is expected to increase
Intrinsic Value Of Share
Intrinsinc value of a share is the actual value of a stock, not the value at which it is trading in the secondary market. There are multiple ways to calculate the intrinsic value of a share. The most common method include discounted cash flow while adjusting the time value of money to calculate the present value of the stock is also a popular method.
Price Band
A price band is a regulatory mechanism or a voluntary limit set by an exchange or company that restricts the maximum and minimum price at which a security is allowed to trade for a given day. These bands, which are often expressed as a percentage above and below the previous day's closing price, are mainly implemented to prevent excessive volatility and market manipulation. Trading in the security is stopped or suspended if the price moves outside the set price band.
Cash Ratio
A cash ratio measures a company’s ability to fulfill short-term debt obligations using only its cash and cash equivalents, which are known to have high liquidity. The formula for calculating cash ratio is:
Cash Ratio: Cash + Cash Equivalents / Current Liabilities
Cash Ratio: Cash + Cash Equivalents / Current Liabilities
Net Profit Margin
Net Profit Margin shows the portion of revenue that remains as profit once all operating costs, interest, and taxes have been deducted. It is expressed as a percentage and helps investors understand a company’s overall profitability and cost efficiency.
Invest & Trade with a Trading
Platform That's #MadeForTrade
Open your Dhan Account in minutes!
