Top 10 Fundamental Stock Market Terms Every Investor Should Know

Treasury Stock, also known as Canceled Stock, represents shares that a company has issued and then repurchased, holding them in its treasury. Importantly, these repurchased shares are excluded from the total outstanding shares of the company.

For instance, Company A, after issuing a certain amount of stock to the public, may buy back its own shares for various reasons, such as the stock price falling significantly below its intrinsic value. The shares repurchased by the company are termed treasury stock. In essence, treasury stock is considered worthless as the company uses its funds to repurchase shares, effectively shrinking its scale.

Short Selling is the art of reaping profits as stock prices plummet. Traders engage in short selling primarily for speculative purposes, anticipating a decline in the value of a financial instrument due to various reasons.

We often hear about the VN-INDEX being 540 points on December 31, 2021, but many of us don't understand the significance of this number. Here, I'll briefly explain what the INDEX number means.

It is conventionally set that the INDEX of the first year of a stock market in a country is 100 points. The index for subsequent periods is calculated as follows: take the total market capitalization (including the total value of all businesses listed on the stock exchange) at the time of calculation, divide it by the market capitalization of the first year, and then multiply by 100 to get the index points for the time of calculation.

Every year, companies set aside a portion of their profits from business operations to distribute to shareholders, known as dividends. Typically, dividends are paid in cash, but some companies may choose to retain earnings to expand business operations and may also distribute dividends to shareholders in the form of stocks.

The ratio between the market stock price and the book value per share, meaning if P/E<1, it indicates that the stock is undervalued compared to its book value, and conversely, P/E>1 means the stock is being highly valued by the market. The P/B Ratio does not heavily influence stock prices and is rarely used for stock valuation; it serves more as a reference metric.

Preferred Stocks (also known as Preferred Stock) are securities with characteristics similar to common stocks. Holders of these stocks become official shareholders of the company. More specifically, those holding this type of stock will be preferred shareholders of the company. In this case, dividends and voting rights will also be given priority.

Currently, preferred stocks are classified into 4 main types:

• Dividend Preferred Stocks: Owners receive dividends at a higher percentage than common stocks. The dividend percentage is fixed and not affected by the company's changes in revenue or profit. The payment amount is specified directly on the preferred stock.
• Redeemable Preferred Stocks: These stocks can be redeemed by the company according to specified conditions on the stock or at the request of the holder. Notably, holders of these stocks have no voting rights, participation in shareholder meetings, or nominations to the board of directors.
• Voting Preferred Stocks: Holders of these stocks have priority voting rights and a higher number of votes than common stocks. The number of votes per share is determined by the company's regulations.
• Other types of preferred stocks as determined by the enterprise through its articles of incorporation.

ROA (Return on Assets) is the income-to-assets ratio. It signifies the correlation between a company's profitability and its assets. ROA provides insights into how efficiently a company utilizes its assets to generate profits.

ROA = net income after tax*100%/total assets

OTC Market is a stock trading platform for companies not listed on the official exchange. It operates through negotiated price agreements between investors and securities companies or between securities companies themselves. This market includes market-making securities firms that buy and sell stocks, earning the price difference, known as market makers. Additionally, there are brokerage securities firms serving clients and earning commission fees.

Liquidity is a widely used term in financial investment. Liquidity refers to the ability of securities or obligations, receivables, payables... to be easily converted into cash, convenient for payment or expenditure.