Bonds – A bond is a debt security issued by a government or organization. In return for purchasing the bond, the receiver expects repayment of the principal and coupon(interest) at a later date (maturity). They are seen as a safe way of investing.

CSCS – CSCS stands for The Central Securities Clearing System is a subsidiary of the Nigerian Stock Exchange. It operates a computerized depository, clearing settlement and delivery system for transactions in shares listed on The Nigerian Stock Exchange. Amongst it’s key responsibilities is acting as the central depository for share certificates. You will find full details of CSCS here.

Declaration Date (Dividend) - The declaration date is the day the Board of Directors announces its intention to pay a dividend. On this day, a liability is created and the company records that liability on its books; it now owes the money to the stockholders. On the declaration date, the Board will also announce a date of record and a payment date.

Dividend - Dividends are the share of a company's profits that it decides to pay to its shareholders.  They are an important part of the return from investing in shares, in addition to any increase in the share price.  Companies are under no obligation to pay dividends, but they usually choose to do so because dividends provide an incentive to invest in their shares. 

Earnings Per Share (EPS) – In its’ simplest form, this represents the net earnings from an organization in relation to the outstanding shares (Net Earnings/Outstanding shares.). EPS can be calculated for the previous year ("trailing EPS"), for the current year ("current EPS"), or for the coming year ("forward EPS").

Why do you need to know this value? If two companies X and Y both earn =N=100, but company X has 10 shares outstanding, while company Y has 50 shares outstanding. Which company’s stock do you want to own?  Calculating the EPS shows that company X has an EPS of 100/10= =N=10 while company Y has an EPS of 100/50 = =N=2. This clearly shows that company X may have been more efficient in obtaining their earnings.

Another use of EPS is to clarify how well a company is actually doing. If company X declares earnings growth of 50%, but that growth was achieved by issuing more shares over the year and doubling the number of its’ outstanding shares, the EPS would make it clear that the company had not really made great strides.
It makes more sense to look at earnings per share (EPS) for use as a comparison tool and in conjunction with other tools when analyzing a company’s performance.

Earnings Growth – The rate of growth of annual earnings for a company. Used in conjunction with other ratios such as the P/E, this value can help decide whether a companies’ share price is valid based on its’ immediate past performance.

Ex-dividend date – This is the date after which any shares bought or sold come without the right to receiving a dividend payout. It is an important date to note as share prices of organization with a set date tend to reduce after this date.

IPO – Initial Public Offering refers to the offering of common shares by a company for the first time. Subsequent offerings are referred to as just public offerings. Companies engage in the offerings to raise capital which will enable them carry out their activities. In return, shareholders hope to receive dividend returns or capital appreciation of their shares which can then be sold.

A company wanting to carry out a public offering will usually enlist the help of banks as underwriters, whose role is to act as the middle man between the company and the general public with the underwriter charging a fee, usually a percentage of the amount realized from the offering.

Outstanding Shares - Stock currently held by investors, including restricted shares owned by the company's officers and insiders, as well as those held by the public. Shares that have been repurchased by the company are not considered outstanding stock. 

P/E – Price Earnings ratio is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share (Share Price/Earnings Per Share).  It is the value you are paying for each unit of profit earned from a company.

For example, if OANDO PLC is trading at =N=215 per share and has an earnings per share figure of =N=5.62, the P/E would be 38.62. In simple terms, this means one is paying =N=38.62 for every =N=1 of profit from OANDO. In reality, the implications of that figure are more complex than described above. Various factors affect the P/E ratio such as sentiment about future earnings from OANDO and recent earnings growth.

It is a useful tool as part of an investor’s arsenal for assessing whether or not to invest in a company. By comparing the P/E ratio to that of similar companies (size and market) and looking at the growth rate the investor can gauge what the market thinks about the companies’ future performance. In the example given above, 38.62 would be said to be high for a bank but seen as acceptable when compared to other companies within the Oil and Gas sector.

P/B Ratio – The price to book ratio is a tool regularly used by value investors to assess whether a company has been undervalued or overvalued. The formula used to calculate P/B is P/B = Market Capitalization/Book Value.
Generally speaking, the higher the price to book ratio higher is the higher the premium is that investors are willing to pay for the stock. Lower price to book ratios tend to indicate that a stock is undervalued or there are some inherent problems with the company.

Primary Market - This is a market where new securities are issued. The mode of offer for the securities traded in this market includes offer for subscription, right issues, offers for sales, private placement. 

Private Placement – This is offering of shares to a select group of investors rather than to the public at large as is the case with public offerings. Companies offering private placements are attracted by this method of raising funds due to its flexibility in structuring the placements. They can decide minimum and maximum levels of investment usually do not have to provide a prospectus for their intentions and can define a time line for the investments meaning they do not have to worry about investors selling their stock before the agreed date. Usually, investors in private placements are high net-worth individual, co-operations such as investment banks and hedge funds and pension houses.

The advantages of private placements for the issuing company can also be disadvantages for the investors. Most investors (especially in the Nigerian market), hope that the company will eventually go public and that some capital appreciation can be achieved. If not stated in the private placement agreements, the issuing company does not however, have to go public and the investor could be left without a return for a long period of time, especially in situations where dividend payout has not been agreed.

Secondary Market – A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. In any secondary market trade, the cash proceeds go to an investor rather than to the underlying company/entity directly.

Stock/Share – Stocks represent shared ownership in an organization. In its’ most typical form, they represent common shares which give the holder voting rights in the organizations activities. Preferred shares (preference shares) are another type of stock holding which while they do not give the holder voting right, possess the advantage of being first in line for any dividend and liquidation pay out.

Stock Broker – is a qualified and regulated professional who buys and sells (trades) shares (in other words, stocks) and other securities through market makers or Agency Only Firms on behalf of investors. Click here for a comprehensive list of registered stock brokers for the Nigerian Stock Exchange. Choosing a stock broker is very important and a key part of investing, especially for the Nigerian Capital market. The following are some key points to consider, before selecting a stock broker.

1. Assess their knowledge of the markets and investing. Ask as many questions as possible, no matter how stupid they may sound. Gauge their responses and check their answers for accuracy from different sources.
2. They should be able to explain why to invest in particular shares, not just what shares to invest in. Any decent stock broker should be able to explain to you as a client, what his/her strategy for investing is. Ask for a track record (proof if possible). If a stock broker who has been consistently losing money on the Nigerian Stock Exchange for several years, there is no reason to believe they will suddenly start making money.
3. Remember who the customer is. At the end of the day, the stock broker is investing YOUR money. If you don’t feel comfortable with their strategy or service, let them know and pull out.
4. Establish good lines of communication. Ensure that you are able to reach your broker whenever it is necessary. Make sure you are in regular communication with your broker about your account and investments. It is notoriously difficult to obtain share certificates from stocks bought on the Nigerian Stock Exchange. It is necessary to constantly be in touch with your Broker to keep abreast of your position.
5. Establish commission rates and charges from the onset. Make sure no hidden charges are thrown your way after the fact.

Volume – this simply refers the amount of a particular share being traded, whether bought or sold. High volume activity indicates a lot of interest in particular companies’ shares. Of course, this could be negative or positive, depending on whether the shares are being largely bought or sold.