FAQ

Many investors in the stock market have come to hear of the term 'yield curve'. This term actually is used to denote the relationship between the cost of borrowing or the interest rate and the time or term of maturity of a certain debt instrument in a particular currency.

Traders in the different markets closely watches the US dollar interest rates paid on US Treasury securities in varying maturities by plotting them on a graph known as the yield curve. Any movements in rates and maturities of US Treasury securities as plotted by the yield curve will impact on stock markets worldwide.

The S&P (Standard & Poor) Australian Indices group companies according to company market capitalisation and provides a market benchmark for investors. Each S&P index aims to address the need for investor and investment managers to benchmark against a portfolio characterised by sufficient size and quantity.

Australian S&P Index

• S&P/ASX 200 Index - ASX code: XJO: The S&P/ASX 200 is comprised of the S&P/ASX 100 plus an additional 100 stocks.

GICS is an abbreviation for "Global Industry Classification Standard". It is a Standard and Poor’s/Morgan Stanley Capital International product created to standardise industry definitions. The Australian Securities Exchange (ASX) which oversees the Australian stockmarket contains 24 industry sectors unique to this country. GICS consists of 10 Sectors aggregated from 24 Industry Groups, 67 Industries, and 147 Sub-Industries currently covering over 27,000 companies globally.

I've long wondered why some companies that are listed on the Australian sharemarket have the NL suffix to their company name. What does N.L. mean? A company name must indicate the company's legal status. A proprietary company must include the word 'Proprietary' or the abbreviation 'Pty' in its name. A company must also indicate the liability of its members in its name:

• if the liability is limited, the company name must end with the word 'Limited' or the abbreviation 'Ltd'

Stock trading beginners often wonder if they should be using technical analysis or fundamental analysis. The first question you should be asking is whether you are going to be an investor or a trader of stocks. There is a fine line between an investor and a trader.

So what is the difference between a stockmarket, sharemarket and a bourse?

A friendly takeover is the opposite of a hostile takeover. A friendly takeover occurs when the offer by the bidder is accepted by the board of directors of the target company and recommended to their shareholders. The board would usually accept an offer from the bidder if the offer is beneficial to and serves the interest of the target company's shareholders.

A reverse takeover is business jargon for a private company taking over a public company. This action is usually seen as the back door strategy or technique for a private company to be floated on the stock market, bypassing the cost of time and money of a conventional IPO (Intial Public Offering - i.e. float).

A takeover is business jargon meaning the purchase of a company (the takeover target) by another company (the bidder or acquirer). Usually, as larger companies are usually public companies listed on a trading stock exchange, takeover also means the acquisition of these types of companies. You can have hostile takeovers, friendly takeovers and reverse takeovers.

A hostile takeover is a takeover which is against the wishes of the target company's board of directors - where the board had rejected the initial offer. A takeover is also considered hostile if the acquirer or the bidder makes an offer without informing the board about their intentions. A hostile takeover is the opposite to a friendly takeover where the joining is seen as beneficial and both companies work together in merging two companies together.