Lesson 11 of 1292% complete

Basic Financial Terms

Market cap, PE ratio, EPS, volume, and essential terminology.

Essential Terms Every Investor Must Know

Understanding financial terms is like learning the language of investing. These metrics help you evaluate whether a stock is expensive, cheap, liquid, or risky.

Key Financial Terms

Term	Formula/Meaning	Example
Market Cap	Share Price x Total Shares	Reliance: ₹2900 x 676 Cr shares = ₹19.6 Lakh Cr
EPS	Net Profit / Total Shares	TCS: ₹126 EPS means ₹126 profit per share
PE Ratio	Share Price / EPS	Price ₹4000, EPS ₹126 → PE = 31.7x
Volume	Total shares traded in a day	High volume = high liquidity
52-Week High/Low	Highest/lowest price in 1 year	Shows price range
Book Value	Net Assets / Total Shares	Intrinsic value per share
Face Value	Nominal value of share	Usually ₹1, ₹2, or ₹10
Free Float	Shares available for public trading	Excludes promoter holding

Key Points

•Market Cap classifies companies as large/mid/small cap
•PE ratio shows how expensive a stock is relative to earnings
•EPS measures profitability per share
•Volume indicates liquidity and investor interest

Tips

💡 Compare PE ratios within the same sector, not across sectors
💡 Low PE does not always mean cheap - it could mean low growth

Common Mistakes to Avoid

⚠️ Buying just because PE is low (could be a value trap)
⚠️ Ignoring volume when entering/exiting positions

FAQ

Lesson Quiz

Test your understanding. Score 3/5 or higher to mark lesson complete.

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