Term
1.Sarbanes-Oxley Act
2. Protection for whistle blowers |
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Definition
A law passed by Congress that requires the CEO and CFO to verify that their firm's financial statements are accurate.
2. Bill was made to protect whistleblowers and lower level employers who sound an alarm over the actions of their superiors. |
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| Avoids double taxation. Allows small businesses to be taxed as if they were a proprietorship. |
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| Shareholder Wealth Maximization |
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| Primary goal for managers of publicly owned companies is to maximize the long run value of their common stock. |
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| (fair Value) Estimate of stock's true value based on accurate risk and return data. This can be estimated but not measured. |
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| (current Selling Price) Stock value based on perceived but possibly incorrect info. |
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| (MP=Iv) Temporary Actual market price=Intrinsic value |
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1. Increase Globalization of business
2. Increase in information technology.
3.Easier to replace bad corporate governance. |
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| Be thought of as a company's attitude/conduct toward its employees, customers, community, and stockholders. |
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| Markets in which corporations raise capital by issuing new securities |
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| Securities and other financial assets are traded among investors after they have been issued by corporations |
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| Markets in which transactions are worked out directly between two parties. (selling your car online) |
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| Markets in which standardized contracts are traded on organized exchanges. (Going to a Dealership) |
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| Any financial asset whose value is derived from the value of some other underlying asset. |
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| Sold by the U.S Treasury to finance federal expenditures. Default free close to riskless |
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| Investment in Treasury bills, CDs, and commercial paper; held by individual and businesses. Low degree of risk. |
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| U.S Treasury notes and bonds |
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Definition
| Issued by U.S Government. No default risk, but price will decline if interest rates rise. |
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| State and Local Government Bonds (municipal Bonds) |
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Definition
| Issued by state and local governments, held by individual and institutional investors. Riskier than U.S Securities, but exempt from most taxes. |
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| Issued by corporations; held by individuals and institutional investors. Riskier than US Gov't securities but less risky than preferred and common stock |
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Definition
| issued by corporations. Riskier than corporate bonds |
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| issued by corporations. Riskier than bonds and preferred stock. |
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| An organization that underwrites and distributes new investment securities and helps businesses obtain financing. |
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| Money market Mutual Funds continued |
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Definition
| Mutual funds that invest in short term, low risk securities and allow investors to write checks against their accounts. |
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| Physical location exchanges |
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Definition
| Formal organizations having tangible physical locations that conduct auction markets in designated securities. |
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| Over-The-Counter Market (OTC) |
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Definition
| A large collection of brokers and dealers connected electronically by telephones and computers that provides for trading unlisted securities. |
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| Closely Held Corporations |
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Definition
| A corporation that is owned by a few individuals who are typically associated with the firm's management. |
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| Publicly owned corporations |
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Definition
| A corporation that is owned by a relatively large number of individuals who are not actively involved in the firm's management. |
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| Initial public offering market (IPO) |
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Definition
| The market for stocks of companies that are in process of going public. |
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| oldest market includes 30 of the best companies. |
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| 500 leading companies in their industry |
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| Measures performance of all stocks on the nasdaq. (3200) Tend to be smaller companies except for Apple& Microsoft |
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Definition
Market price
Intrinsic value
Equilibrium Price |
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| A long-term debt instrument |
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| Bonds issued by the federal government sometimes referred to as government bonds. |
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| The face value of a bond. (for this class it's always 1,000) |
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| A bond that pays no annual interest but is sold at a discount below par, thus compensating investors in the form of capital appreciation. |
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| A specified date on which the par value of a bond must be repaid. |
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| A provision in a bond contract that gives the issuer the right to redeem the bonds under specified terms prior to the normal maturity date.( Freely, deferred, non) |
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| A provision in a bond contract that requires the issuer to retire a portion of the bond issue each year. |
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| A bond that is exchangeable at the option of the holder for the issuing firm's common stock. |
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| A long term option to buy a stated number of shares of common stock at a specified price. |
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| A bond that pays interest only if it is earned. |
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| A bond that sells below its par value; occurs whenever the going rate of interest is above the coupon rate. |
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| A bond that sells above its par value; occurs when the going rate of interest is below the coupon rate. |
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| The rate of return earned on a bond if it is held to maturity. Only if you reinvest the stream of interest payments. |
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| The risk of a decline in a bond's price due to an increase in interest rates. |
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| The risk that a decline in interest will lead to a decline in income from a bond portfolio. |
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| A bond backed by fixed assets. First mortgage bonds are senior in priority to claims of second mortgage bonds. |
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| A formal between the issuer and the bondholders. Bond Contract |
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| A long term bond that is not secured by a mortgage on a specific property. |
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| A bond having a claim on assets only after the senior debt has been paid in full in the event of liquidation. |
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| bonds rated triple-B or higher; many banks and other institutional investors are permitted by law to hold only investment- grade bonds |
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| A high risk, high yield bond. |
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