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Definition
| An investment that represents either an ownership stake or a debt stake in a company. |
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| Usually acquired by buying a company's bonds. |
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| A loan to a company in exchange for interest income and the promise to repay the loan at a future maturity date. Does not confer ownership. |
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| What the company owns: cash in the bank, accounts receivable (money it is owed), investment, property, inventory and so on. |
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| What the company owes: accounts payable (current bills it must pay), short and long-term debt, and other obligations |
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| The excess of the value of assets over the value of liabilities (the company's net worth.) |
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| Math equation for Net Worth |
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Definition
Assets = liabilities + net worth
Assets - liabilities = net worth |
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| Represents equity ownership in a corporation, but it usually does not have the same voting rights or appreciation potential as _____ stock. |
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| This pays a fixed, semiannual dividend and has priority claims over ____ stock. This stock is paid first if a company declares bankruptcy. |
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| Stock classified as authorized, issued, outstanding, and treasury. |
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| Refers to a specific number of shared the company has authorization to issue or sell. |
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| T/F: If a company decides to sell more shares than are authorized, the charter must be amended through a stockholder vote. |
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Definition
| This stock has been authorized and distributed to investors. |
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| T/F: Authorized but unissued stock does not carry the rights and privileges of issued shares and is not considered in determining a company's total capitalization. |
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Definition
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Definition
| This stock type includes an shares that a company has issued but has not repurchased- that is, stock that is investor owned. |
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| A stock type that a corporation has issued and subsequently repurchased from the public. |
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| T/F: Treasury stock carries the same rights of outstanding common shares, such as voting rights and the right to receive dividends |
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Definition
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| Equation for outstanding stock is: |
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Definition
| Issued stock - Treasury stock = ________ |
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| A common stock's meaningless value. This value is given in the company's articles of incorporation and has no effect on the stock's market price. |
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| Capital in excess of par: also known as: |
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Definition
| Pain-in surplus, capital surplus, or paid-in capital: also known as: |
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| A measure of how much a common stockholder could expect to receive for each share if the corporation were liquidated. |
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| Voting rights of common stock holders: |
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Definition
-Issuance of convertible securities (dilutive to current stockholders) or additional stock.
-Substantial changes in the corps business, such as mergers or acquisitions
-declarations of stock splits (forw & rev) |
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Term
| If a stockholder owns 450 shares, how many votes do they have? |
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Definition
| If a stockholder can vote 450 times, how many shares do they have. |
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| This voting allows a stockholder to cast one vote per share owned for each item on the ballot. |
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Definition
| Cumulative voting allows stockholders to allocate their total votes in any manner they choose. |
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| ______ voting benefits the smaller investor, whereas ______ voting benefits larger shareholders |
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Definition
| Cumulative vs. Statutory. |
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Term
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Definition
| When a corporation raises capital through the sale of additional common stock, it may be required by law or its corporate charter to offer the securities to its common stockholders before the general public. |
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Definition
| This protects stockholders from having to pay a corporation's debts in bankruptcy. |
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| What is the most junior security? |
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Definition
| Because common stock is last in line in a corporate liquidation, it is known as the ____________. |
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Term
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Definition
| To make the stock price attractive to a wider base of investors- that is, retail vs institutional investors - the company can declare ___________ |
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Definition
| This split increases the number of shares and reduces the price without affective the total market value of shares outstanding; an ivestor will receive more shares, but the value of each share is reduced. The total market value of the ownership interest is the same before and after the split. |
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Term
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Definition
| Multiply the original number by 2(the first number of the split) and then divide by 1 (the second number). |
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Term
| Take note in a forward stock split: |
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Definition
| The percentage decrease in price will always be less than the percentage increase in shares. In a 2:1 split, the number of shares doubles (a 100% increase) whereas the price of the stock is halved. |
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Definition
| This split results in investors owning fewer shares worth more per share. |
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Term
| A long investor's losses are limited to his total investment in a stock. |
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Definition
| A short seller's losses are theoretically unlimited because there is no limit to how high a stock's price may climb. |
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Term
| Preferred stock is a________ security because |
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Definition
| This stock represents ownership in the company. (Equity) However, it does not normally offer the appreciate potential associated with common stock. |
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Term
| Unlike common stock, most preferred stock is (voting/nonvoting) |
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Definition
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Term
| Advantage of preferred stock: |
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Definition
| When the BOD declares dividends, owners of preferred stock receive their dividends before common stockholders |
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Term
| Advantage of preferred stock 2: |
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Definition
| If a corporation goes bankrupt, preferred stockholders have a priority claim over common stockholders on the assets remaining after creditors have been paid. |
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Term
| A preferred stock's fixed dividend is a key attraction for income-oriented investors. |
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Definition
| Normally, a preferred stock is identified by its annual dividend payment stated as a percentage of its par value, usually $100. Always assume preferred par value is 100 unless stated differently. (a pref stock's par value is meaningful, vs com stock) |
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Term
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Definition
| Preferred stock dividends, like common stock dividends, are not guaranteed. Payment would have to be approved by the BOD |
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Term
| No maturity date or set maturity rate: ________ |
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Definition
| Preferred stock, unlike bonds, has no preset date at which it matures and no scheduled redemption date. |
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Term
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Definition
| Although preferred stock is an equity instrument, it fluctuates in price more like a debt instrument. The fixed rate of dividend payment causes preferred stock to trade like bonds. |
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Term
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Definition
| When interest rates rise, the preferred price falls. Conversely, when interest rates fall, the preferred stock's price rises. What is this called? |
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| Two exceptions that preferred stock has voting rights for shareholders: |
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Definition
1) If a corp defaults on its dividend payments for a certain number of payment dates
2) Corp wishes to issue a new class of preferred stock equal to or senior to the existing preferred stock. |
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Term
| Straight Preferred (noncumulative) |
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Definition
| This category of stock has no special features beyond the stated dividend payment. Missed dividends are not paid to the holder. |
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Term
| Cumulative preferred stockholders |
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Definition
| When the company can resume full payment of dividends, these stockholders receive their current dividends plus the total accumulated dividends - dividends in arrears - before any dividends may be distributed to common stock holders. The safest category of preferred stock |
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Term
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Definition
| A preferred stock is _____ if the owner can exchange each preferred share for shares of common stock. |
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Term
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Definition
| This is often issued with a lower stated dividend rate than nonconvertible preferred because the investor may have the opportunity to convert to common shares and enjoy capital gains. |
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Term
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Definition
| This stock offers its owners a share of corporate profits that remain after all dividends and interest due other securities are paid. |
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Term
| Callable (or redeemable) preferred |
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Definition
| Corporations often issue this, which a company can buy back from investors at a stated price after a specified date. This allows companies to replace a relatively high fixed dividend obligation with a lower one. |
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Term
| Which type of preferred stock typically has the highest stated rate of dividend, all other factors being equal? |
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Definition
| Callable preferred: when a stock is called, dividend payments are no longer made. To compensate for that possibility, the issuer pays a higher dividend. |
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Term
| Of straight and cumulative preferred, which would you expect to have the higher stated rate? |
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Definition
| Straight preferred, because cumulative preferred is safer, and there is always a risk/reward trade-off. Because straight preferred has no special features, it will pay a higher stated rate of dividend. |
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Term
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Definition
| An investments total return is a combination of the dividend income and price appreciate or decline over a given period. |
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Term
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Definition
| (held in a brokerage account in the firm's name to facilitate payments and delivery.) |
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Term
| Current yield (dividend yield) |
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Definition
| The annual dividend (normally four times the quarterly dividend) divided by the current market value of the stock. |
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| Equation for dividend yield: |
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Definition
| = Annual dividend/current market value of the stock. |
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Term
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Definition
| For over-the counter equity securities that trade at or above $175 per share, the unit of trade or round lot will be 1 share. For these securities, trades of less that 100 shares will no longer be considered odd-lot transactions and for last sale dissemination purposes will be treated as round lots. |
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Term
| A transfer agent for a corporation is responsible for: |
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Definition
1) ensuring that its securities are issued in the correct owners name
2) canceling old an issuing new certs
3) maintaining records of ownership
4) handling problems relating to lost, stolen, or destroyed certs. |
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Term
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Definition
| This ensures that a corporation does not have more shares outstanding than have been authorized. |
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Term
| Determining price of a round lot |
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Definition
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Term
| PE Ratio (price to earnings ratio) |
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Definition
| This follows the Yld column. It gives the ratio of the stock's current price to its most recent 12 months earnings per share. |
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Term
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Definition
| this means that a buyer will not receive the next dividend check. |
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Term
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Definition
| OTC stocks that have both national and global interest are listed here |
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Term
| The Nasdaq Global Select Market |
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Definition
| This market tier, the newest circa 2006, has initial listing standards both financial and with regard to liquidity that are among the highest of any other market. |
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Term
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Definition
| The largest of the 3 markets. These OTC stocks have high interest appeal. |
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Definition
| This collects and distributes cash dividends for stocks held in street name. This also handles interest payments, stock dividends, stock splits, rights offerings, warrants, and any special distributions to stock holders or bond holders |
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Term
| If the broker/dealer holds the securities in street name: |
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Definition
| the dividend disbursing agent (DDA) (in the case of dividends) or the transfer agent (in the case of stock splits) makes the appropriate distributions or transfers directly to the broker/dealer. |
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Term
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Definition
| When the BOD approves a dividend payment, it also designated the payment date and the dividend record date. |
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Term
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Definition
| This date is two business days before the record date. "If the investor wishes to purchase the stock with the dividend, they must purchase the stock before it is without the dividend -the ex date" |
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Term
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Definition
| ON the ex date, the stocks opening price is reduced by the amount of the dividend to compensate for the fact that customers who buy the stock that day do not qualify for the dividend. |
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Term
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Definition
| The stockholders of record on the record date receive the dividend distribution. |
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Term
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Definition
| Three or four weeks after the record date, the dividend disbursing agent sends dividend checks to all stockholders whose names appear on the books as of the record date. |
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Term
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Definition
| These settle same day, so they go ex-dividend on the day after the record date because no lag occurs between the trade date and the transaction settlement. |
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Term
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Definition
| The order of dates: Declaration, Ex, Record, Payable. |
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Definition
| Declaration, record and payment are determined by the BOD. FINRA determines the ex-date |
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Term
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Definition
| This is a printed statement showing a buyer's right to a dividend |
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Term
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Definition
| This entitles stockholders to maintain their proportionate ownership in a company by buying newly issued shares before the company offers them to the general public. |
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Term
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Definition
| this allows stockholders to purchase common stock below the current market price. |
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Term
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Definition
| This is a certificate representing a short-term (30-45 days) privilege to buy additional shares of a corporation. One right is issued for each common stock share outstanding. |
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Definition
| These parts to a rights offering are stipulated n the subscription right certificates mailed to stockholders. These describe how many new shares a stockholder may buy, the price, the date the new stock will be issued, at the final date for exercising the rights. |
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Definition
| One right: Market price-subscription price/ (number of rights to purchase 1 share + 1) |
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Term
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Definition
| Market price-subscription price / (number of rights to purchase one share) |
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Term
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Definition
| This is done on a firm commitment basis, meaning the underwriter buys all unsold shares from the issuer and then resells them to the general public. |
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Term
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Definition
| This is a certificate granting its owner the right to purchase securities from the issuer at a specified price (normally higher than the current market price) as of the date of issue. |
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Definition
| Unlike a right, a warrant is usually a long term instrument, giving the investor the choice of buying shares at a later date at the exercise price. |
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Term
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Definition
| Warrants typically have a life of five years, but in the past, perpetual warrants have been issued, which do not expire. |
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Definition
| After issuance, the warrants are detachable and trade separately from the bond or preferred stock. |
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Term
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Definition
| The long term nature of warrants is said to be attractive to speculators because of the leverage it offers. Warrants also allow issuers to offer bonds or preferred stock at an interest or dividend rate lower than the market rate because the issuer is offering investors something extra: the long term right to buy stock at a fixed price. |
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Term
| American Depositary receipts (ADR's) |
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Definition
| These faciliatate the trading of foreign stocks in the US markets. THis is a negotiable security that represents a receipt for shares of stock in a non US corporation, usually from 1-10 shares |
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Term
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Definition
| Have most of the rights common stkhld normally have. Right to receive dividends when declared. Generally do not have voting rights. As for preemptive rights, the issuing bank sells off the rights and distributes the proceeds pro rata to holders |
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Term
| Delivery of foreign security |
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Definition
| ADR owners have the right to exchange their ADR certs for the foreign shares they represent. |
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Term
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Definition
| In most countries, a withholding tax on dividends is taken at the source. in the case of investors holding ADRs, this would be a foreign income tax. |
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Term
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Definition
| This is a possibility that an investment denominated in one currency could decline if the value of that currency declines in its exchange rate with the US Dollar. |
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Term
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Definition
| ADRS are registered on the books of US banks responsible for them. |
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Definition
| this is a company that manages a portfolio fo real estate investments in order to earn profits for shareholders. These are normally traded publicly and serve as a source of long term financing for real estate projects. |
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Term
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Definition
| Trusts. This thing can avoid being taxed as a corporation by having at least 75% of total investment assets in real estate, deriving at least 75% of gross income from rents or mortgage interest and distributing 90% or more of its net investment income into its shareholders. |
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Definition
| Reits allow investors the opportunity to invest in real estate without incurring the degree of liquidity risk historically associated with real estate because REITs trade on exchange and OTC. |
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Definition
| REITS can provide some hedge to price movements in other equity markets. while it isn't always the care, real estate prices historically have had a negative correlation to stock prices. |
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Term
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Definition
| The investor has no direct control over the portfolio and relies on professional managem,ent to make all purchase and sale decisions. While the expectaion of having a professionally managed port should be considered advantageous, the quality of the portfolio lies with the quality of the professional management. |
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Term
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Definition
| problematic loans with mortgage reits ports can cause decreases in income flow and diminish capital returns. |
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Term
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Definition
| Dividends paid by the trusts do not meet the requirements of qualified dividends and therefore are taxable at full ordianry income tax rates to the investor. |
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Term
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Definition
| No preemptive rights, dividends in dollars, currency risk. |
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Term
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Definition
| not a limited partnership, not an investment company, pass through income not losses, 75% of total investment assest in real estate, 75% of gross income from rents and mrotgage interest, must distribute 90% of income to shareholders, trade on exchanges or OTC, dividends received frmo reits are taxed as ordinary income. |
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