Definitions [9]
Depreciation means a gradual decrease in the value of fixed assets like buildings, machinery, furniture, and equipment due to their use, passage of time, or technological changes.
Partnership: A partnership is an arrangement where parties, known as business, partners, agree to cooperate to advance their mutual interests.
Partnership deed: An agreement that contains the details of every aspect and terms that the partners agree upon before starting a partnership firm is termed as partnership deed.
Capital: When starting a business enterprise, money is required for an office, raw materials, etc. This amount is called the capital.
The value of a share printed on the share certificate is called its Nominal Value, or Face Value, or Par Value.
A share is the smallest unit of the capital of a company. The capital of a company is divided into small equal parts, each of which is called a share.
The total amount of money needed to run the company is called the capital.
The annual profit distributed among shareholders is called a dividend.
A shareholder is a person who owns one or more shares of a company. A shareholder is a part owner of the company in proportion to the number of shares held.
A stock exchange is a place where the buying and selling of shares takes place. It is also known as the share market or capital market.
The shares of different companies can be bought or sold in the market through the stock exchange.
Formulae [2]
Sum Invested = Number of shares × Market Value
\[\text{Rate of Return}=\frac{\mathrm{Dividend}}{\text{Market Value}}\times100\]
Key Points
| Term | Short Explanation |
|---|---|
| Share | The smallest unit of a company’s capital. |
| Dividend | Part of the company’s profit is distributed per share, calculated on Face Value. |
| Stock Exchange | Market where shares are bought and sold (e.g. BSE, NSE). |
| Market Index | Indicator of stock market performance (SENSEX – BSE, NIFTY – NSE). |
| Face Value (FV) | Value printed on the share certificate (also called par value). |
| Market Value (MV) | The price at which a share is bought/sold in the market. |
| MV > FV | Shares issued at a premium. |
| MV = FV | Share issued at Par. |
| MV < FV | Shares issued at a discount. |
| Sum Invested | Total amount spent to buy shares. Formula: Number of shares × MV |
| Rate of Return (RoR) | Percentage return on investment. Formula: (Dividend ÷ MV) × 100 |
