Stock Valuation ch 8

Vocabulary flashcards covering key concepts related to stock valuation.

Dividend

A payment made by a corporation to its shareholders, usually in cash or additional shares.

Preferred Stock

A type of stock that has a fixed dividend and priority over common stock in the payment of dividends and during liquidation.

Common Stock

Equity ownership in a corporation without priority for dividends or in bankruptcy.

Present Value

The current worth of a cash flow or series of cash flows that will be received in the future, discounted at the required rate of return.

Dividend Growth Model

A method to determine the current price of a stock as its expected dividend next period divided by the difference between the discount rate and the growth rate.

Cumulative Voting

A voting system that allows shareholders to allocate all their votes to one candidate for the board of directors.

Straight Voting

A voting process where shareholders vote separately for each board member, allowing them to allocate votes individually.

Proxy

An authority granted by a shareholder allowing another individual to vote their shares.

Price-Earnings (PE) Ratio

A valuation ratio calculated by dividing the current share price by the earnings per share (EPS).

Discount Rate

The interest rate used to determine the present value of future cash flows.

Market Maker

A dealer who posts prices at which they will buy or sell securities, providing liquidity to the market.

Bid Price

The price that a buyer is willing to pay for a security.

Ask Price

The price at which a seller is willing to sell a security.

Dividend Yield

The ratio of a company's annual dividend compared to its share price.

Capital Gains Yield

The price appreciation component of an investment's total return.

Supernormal Growth

A temporary period of growth that exceeds the normal growth rate of a company.

Nonconstant Growth

A phase during which the dividend growth rate is expected to vary significantly before stabilizing.

Bear Market

A market condition characterized by a prolonged decline in investment prices.

Bull Market

A market condition characterized by rising prices and investor confidence.