📚 NSE Academy Resources

NSE Glossary

Master the language of the Nairobi Securities Exchange. Browse 66 terms from A-Z.

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#A B C D E F G I L M N O P R S T V

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(IPO): a stock exchange. KPC's IPO in 2026 raised KSh 106 billion.
(M&A): (acquisition).; Example: NCBA Group was formed by the merger of NIC Group and CBA in 2019.
(Market Cap): as: Share Price × Number of Shares Outstanding. A KSh 50 stock with 1 billion shares has a market cap of KSh 50 billion.
(NASI): measure of market performance than the NSE 20.
(NPL): days. NPL ratio = NPLs / Total Loans. Critical metric for evaluating banks. Higher NPL ratios indicate poorer loan quality.
(P/E): paying KSh 10 for every KSh 1 of annual earnings. Lower P/E may indicate undervaluation; higher P/E indicates growth expectations.

A

Ask Price (Offer Price): The lowest price a seller is currently willing to accept for a share.

B

Bear Market: A sustained period of falling share prices, typically a 20%+ decline from a recent high. Investor sentiment is pessimistic.
Bid Price: The highest price a buyer is currently willing to pay for a share.
Bid-Ask Spread: The difference between the bid and ask price. A narrow spread indicates high liquidity. A wide spread indicates low liquidity.
Blue-Chip Index: The NSE 20-Share Index — comprising the 20 most liquid, well- capitalised stocks.
Blue-Chip Stock: Shares of a large, well-established, financially stable company with a long history of reliable performance. On the NSE: Safaricom, KCB Group, Equity Group, BAT Kenya.
Bonus Issue (Scrip Issue): When a company distributes additional shares to existing shareholders at no cost, in proportion to their current holdings. A 1:1 bonus issue means you receive one free share for every share you already own.; Example: Kapchorua Tea's 1:1 bonus issue in 2025.
Book Closure Date: The date when a company's share register is 'frozen' to determine who receives a dividend or participates in a corporate action.
Bull Market: A sustained period of rising share prices, typically defined as a 20%+ rise from a recent low. Investor sentiment is optimistic. The NSE experienced a major bull market in 2025.
basics to the intermediate concep: ts that separate informed investors from guesswork investors.

C

Circuit Breaker: A mechanism that temporarily halts trading in a share if its price moves too far in a single session — protecting against extreme volatility.
Cyclical Stocks: Stocks whose performance closely follows the economic cycle — rising strongly in booms and falling sharply in recessions. Examples: construction companies, luxury goods, automotive.
comprehensive definitions for eve: ry term you will encounter as an NSE investor — from the

D

Debt-to-Equity Ratio: Total debt divided by shareholders' equity. A high ratio means the company is financed mainly by borrowing, which increases financial risk.
Defensive Stocks: Stocks that tend to perform relatively well even during economic downturns because their products/services remain in demand regardless of economic conditions. Examples: food companies, utilities, essential healthcare.
Delisting: When a company's shares are permanently removed from the NSE. This can be voluntary (management chooses to go private) or involuntary (regulatory action).; Example: Bamburi Cement was delisted in 2025 after Amsons acquired 96.54% of its shares.
Dividend: A distribution of a company's profits to its shareholders, usually paid in cash. Expressed as an amount per share (e.g., KSh 4.00 per share).
Dividend Yield: The annual dividend per share divided by the current share price, expressed as a percentage. A KSh 4 dividend on a KSh 50 share gives a yield of 8%. Higher yields are generally more attractive to income investors.

E

EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortisation. A measure of operational profitability that removes the effects of financing and accounting decisions. High EBITDA margins signal a highly profitable business model.
Earnings Per Share (EPS): A company's total net profit divided by the number of shares outstanding. EPS of KSh 10 means the company earned KSh 10 for every share in existence.
Ex-Dividend Date: The cutoff date to be eligible for an upcoming dividend. If you buy shares ON or AFTER the ex-dividend date, you will NOT receive the upcoming dividend. You must buy BEFORE the ex-date.

F

Foreign Investor: An investor based outside Kenya. Foreign investors have historically been significant players in the NSE, particularly in Safaricom and the major banks. Their buying or selling can move the market.
Free Cash Flow (FCF): Operating cash flow minus capital expenditure. The actual cash a business generates after maintaining/growing its asset base. Important because it is harder to manipulate than reported earnings.

G

Gross Profit: Revenue minus the direct costs of producing or delivering the product/service (cost of goods sold). Gross Profit Margin = Gross Profit / Revenue.
Growth Stocks: Companies expected to grow earnings faster than the market average. Typically reinvest profits rather than paying large dividends. Higher P/E ratios are common.

I

Initial Public Offering: When a company sells its shares to the public for the very first time on

L

Large-Cap: Companies with very large market capitalisations. On the NSE: Safaricom (KSh 1.1 trillion+), Equity Group, KCB Group.
Limit Order: An instruction to buy or sell only at a specified price or better. Guarantees price but not execution.
Liquidity: How easily a share can be bought or sold without significantly affecting its price. Safaricom is extremely liquid — you can trade millions of shillings daily. A GEMS-listed tea company may be very illiquid.

M

Market Capitalisation: The total market value of a company's outstanding shares. Calculated
Market Order: An instruction to buy or sell immediately at the best available current price. Guarantees execution but not price.
Merger & Acquisition: When two companies combine (merger) or one company buys another
Mid-Cap: Companies with medium-sized market capitalisations. On the NSE: ABSA Bank, NCBA Group, Nation Media Group.

N

NSE 20-Share Index: An index tracking the performance of the 20 top-performing companies on the NSE, weighted by market cap and liquidity. The most widely quoted benchmark for the overall NSE market.
NSE All-Share Index: Tracks the performance of ALL listed securities on the NSE. A broader
NSE Sectors: The NSE groups listed companies into 11 sectors: Agricultural, Automobiles & Accessories, Banking, Commercial & Services, Construction & Allied, Energy & Petroleum, Insurance, Investment, Investment Services, Manufacturing & Allied, and Telecommunications.
Net Asset Value (NAV): Total assets minus total liabilities = shareholders' equity. Represents the book value of the company. Important for valuing investment companies like Centum.
Non-Performing Loans: Loans where the borrower has not made scheduled payments for 90+

O

One of the biggest barriers to st: ock market participation is the jargon. This chapter provides
Operating Profit (EBIT): Profit after all operating expenses (including depreciation) but before interest costs and tax. Also called Earnings Before Interest and Tax.

P

Payout Ratio: The percentage of net earnings paid out as dividends. A payout ratio of 50% means half the profits are distributed; the other half is reinvested. Ratios above 80% are generally unsustainable long-term.
Price-to-Book Ratio (P/B): Current share price divided by book value per share. A P/B below 1.0 means the market values the company below its accounting value — potentially a sign of undervaluation or distress.
Price-to-Earnings Ratio: Current share price divided by EPS. A P/E of 10x means investors are
Profit After Tax (PAT): The 'bottom-line' profit — what remains after all expenses, interest, and tax have been paid. This is what gets distributed as dividends or reinvested in the business.

R

Return on Assets (ROA): Net profit divided by total assets. Measures how efficiently a company uses its assets to generate profit.
Return on Equity (ROE): Net profit divided by shareholders' equity, expressed as a percentage. Measures how efficiently management uses shareholder capital. An ROE above 15% is generally considered strong.
Revenue (Turnover): The total money a company brings in from selling its products or services before any expenses are deducted. Also called 'top-line' income.
Rights Issue: An offer by a company to existing shareholders to buy additional new shares, typically at a discount to the current market price and in proportion to their existing holdings.; Example: HF Group's 3-for-1 rights issue in 2024.

S

Share / Stock / Equity: A unit of ownership in a company. When you buy a share, you become a part-owner (shareholder) of that company, entitled to a portion of its profits and assets.
Share Buyback: When a company purchases its own shares from the market, reducing the number of shares outstanding. This typically increases EPS and signals management confidence.; Example: Centum Investment's buyback programme.
Share Price: The current price at which one share of a company is trading on the NSE. This changes throughout the trading day based on supply and demand.
Short Selling: Selling shares you do not own in anticipation of buying them back at a lower price. Not widely practiced on the NSE for individual investors.
Small-Cap / Micro-Cap: Smaller companies with lower market capitalisations and typically lower liquidity.
Special Dividend: A one-time, non-recurring dividend payment, often from asset sales or windfall profits.; Example: Bamburi Cement paid a KSh 18.25 special dividend from the proceeds of selling its Ugandan subsidiary.
Stock Split: When a company increases its number of shares by dividing existing shares, reducing the price proportionally. A 2:1 split doubles the number of shares and halves the price — total value is unchanged.
Suspension: A temporary halt to trading in a company's shares. Often occurs during a takeover, pending financial results, or regulatory investigation.; Example: Mumias Sugar and EA Cables are currently suspended.

T

T+3 Settlement: The standard NSE settlement cycle: trades are confirmed on trade day, and shares/cash transfer to the new owner 3 business days later.
Turnover: The total value (in KSh) of shares traded in a given period. Volume × Price = Turnover.

V

Value Stocks: Companies trading at what appears to be a discount to their intrinsic worth — low P/E, low P/B, often in temporarily unfavoured industries.
Volume: The number of shares traded in a given period (usually one trading day). High volume confirms price moves; low volume suggests weak conviction.

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