Sunday, September 20, 2009

Common teminologies: Part2

Share price: The market price of a unit of a company's equity capital is called share price. In a competitive market it is equal to the net present value of the expected future dividend. If annual dividend is devoted by 'D' and the rate of discount by 'i', the share price is equal to 'D' divided by 'i'.

i.e Share price = annual dividend D / rate of discount i.

Resource Crunch: When resources fall short of the estimated expenditure and the gap between the two keeps on widening, the government faces a resources crunch or crush.

Wealth effect: It signifies an increase in the aggregate expenditure due to a fall in the price level and the interest rates. When the prices or the interest rates fall, they induce a fall in demand which can be reversed by wealth affect.

Estate Duty: It is chargeable from the estate of a deceased person if such estate is valued over a certain amount and is payable before the estat passes on to the successors.

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