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Business
Chapter 19
28
Business
Undergraduate 1
08/23/2012

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Term
initial public offering (IPO)
Definition
the first public offering of a corporation's stock
Term
investment bankers
Definition
specialists who assist in the issue and sale of new securities
Term
institutional investors
Definition
large organizations - such as pension funds, mutual funds, and insurance companies - that invest their own funds or the funds of others
Term
stock exchange
Definition
an organization whose members can buy and sell (exchange) securities for companies and individual investors
Term
over-the-counter (OTC) market
Definition
exchange that provides a means to trade stocks not listed on the national exchanges
Term
NASDAQ
Definition
a nationwide electronic system that links dealers across the nation so that they can buy and sell securities electronically
Term
Securities and Exchange Commission (SEC)
Definition
The federal agency that has responsibility for regulating the various stock exchanges
Term
prospectus
Definition
a condensed version of economic and financial information that a company must file with the SEC before issuing stock; the prospectus must be sent to prospective investors
Term
stocks
Definition
shares of owners in a company
Term
stock certificates
Definition
evidence of stock ownership that specifies the name of the company, the number of shares it represents, and the type of stock being issued
Term
dividends
Definition
part of a firm's profits that the firm may distribute to stockholders as either cash payments or additional shares of stock
Term
common stock
Definition
the most basic form of ownership in a firm; it confers voting right and the right to share in the firm's profits through dividends, if approved by the firm's board of directors
Term
preferred stock
Definition
stock that gives its owners preference in the payment of dividends and an earlier claim on assets than common stockholders if the company is forced out of business and its assets sold
Term
bond
Definition
a corporate certificate indicating that a person has lent money to a firm (or a government)
Term
maturity date
Definition
the exact date the issuer of a bond must pay the principal to the bondholder
Term
interest
Definition
the payment the issuer of the bond makes to the bondholders for use of the borrowed money
Term
debenture bonds
Definition
bonds that are unsecured (i.e., not backed by an collateral such as equipment)
Term
sinking fund
Definition
a reserve account in which the issuer of a bond periodically retires some part of the bond principal prior to maturity so that enough capital will be accumulated by the maturity date to pay off the bond
Term
stockbroker
Definition
a registered representative who works as a market intermediary to buy and sell securities for clients
Term
diversification
Definition
buying several different investment alternatives to spread the risk of investing
Term
capital gains
Definition
the positive difference between the purchase price of a stock and its sale price
Term
stock split
Definition
an action by a company that gives stockholders two or more shares of stock for each one they own
Term
buying stock on margin
Definition
purchasing stocks by borrowing some of the the purchase cost from the brokerage firm
Term
junk bonds
Definition
high-risk, high-interest bonds
Term
mutual fund
Definition
an organization that buys stocks and bonds and then sells shares in those securities to the public
Term
exchange-traded funds (ETFs)
Definition
collections of stocks, bonds and other investments that are traded on exchanges but are traded more like individual stocks than like mutual funds
Term
Dow Jones Industrial Average (the DOW)
Definition
the average cost of 30 selected industrial stocks, used to give an indication of the direction (up or down) of the stock market over time
Term
program trading
Definition
giving instructions to computers to automatically sell if the price of a stock dips to a certain point to avoid potential losses
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