Stock market trading goes back about 200 years. In the US, the colonial government used to sell bonds in order to finance the war. The government promised to pay the buyers of bonds at a later date. It was during this time that private banks started issuing stocks of companies to raise money. This was also a time when the rich had tremendous opportunities to scale up their wealth.

History has shown that the issuing of stocks helped companies to expand exponentially. The economy where the stock market is on the rise can be considered an upcoming economy. Rising share prices tend to be associated with the increased business investments. Share prices also actively influence the wealth of households and their consumption. Exchanges act as the clearinghouse for every transaction which means that they collect and deliver the shares, guaranteeing payment to the sellers.

NSE: Nairobi Securities Exchange.

CMA: Capital Markets Authority

Annual Report: An audit report to shareholders produced yearly. This report is produced by all publicly quoted companies.

Balance Sheet: The financial statement which shows the liabilities and assets of a company.

Bargain: Regarding sale or purchase in the stock market, bargain is a common word.

Bid Price: This term indicates the sale price of stocks or shares.

Blue Chip: These are shares of big and reputed companies.

Bull: A person who considers the share price of the stock exchange to be on the rise.

Capital: The amount of money used for setting up a new business.

Contract Note: This is a printed confirmation letter from any broker indicating a bargain which is carried out.

Coupon: Refers to interest amount payable only for fixed interest stock.

Cum Dividend: These are shares that are sold, allowing the buyer to receive the following dividend.

Dawn Raid: Refers to the buying of a huge amount of shares in the morning at the opening of stock market.

Dealing: This means the purchase and sale of shares.

Debenture: The stock that a company issues which are backed by assets.

Depreciation: The amount of money set aside for replacement of the assets.

Dividend: The part of the company’s profits which is usually distributed to company’s shareholders, normally on regular basis.

Equities: These are the ordinary shares. They are different from debenture and also from loan stock.

Final Dividend: This is the dividend which is declared according to the company’s annual results.

Futures: Contracts that allow any holder the legal right to buy or sell Indexes and Commodities in the future at a price set today.

Gross: The interest paid without deducting of tax.

Hedge: This means to insure the risk.

Initial Public Offering: The issue of new shares by a previously private company as it becomes a public company.

Limit Order: This is an order to any stockbroker specifying any fixed price limit.

Liquidation: Converting the prevailing assets to cash.

Loan Stock: The stock that bears a fixed interest rate. It’s different from debenture stock because it’s not required to be secured by any asset.

Nominee: The term refers to a person acting on the behalf of another in the stock market in documentary as well as financial affairs.

Offer Price: Refers to the specific price at which one can buy stocks and shares.

Options: The term means the right to purchase (call option) and sell (put option) a particular share at a particular price within a particular period.

Ordinary Share: This is a share where the dividends usually vary in the amount.

Over the Counter Market (OTC): Refers to a marketplace outside the main stock market.

PLC: This means Public Limited Company (formerly Ltd). In the stock market, some public limited companies are not always quoted.

Portfolio: A selection of shares usually held by a person or fund.

Proxy: Anybody who votes on another person’s behalf if the person is unable to attend a shareholders’ meeting.

Yield: The gross dividend presented as the percentage of the share price.