Stock Valuation - BUAD 306 Lecture Notes

These flashcards cover key terms and concepts related to stock valuation and types of stocks discussed in the BUAD 306 lecture.

Common Stock

A claim on the income generated by the firm and a residual claim on the firm's assets.

Preferred Stock

A type of stock that provides the holder with a promised fixed dividend that must be paid before dividends are paid to common stockholders.

Dividend Growth Model (DGM)

A method used to value a stock by assuming that dividends will grow at a constant rate.

Capital Gain

The profit from the sale of a stock, calculated as the difference between the selling price and purchase price.

Proxy Voting

A process where shareholders authorize someone else to vote on their behalf.

Cumulative Voting

A voting system where shareholders can allocate all their votes to a single candidate for the board of directors.

Discounted Cash Flow (DCF)

A valuation method used to estimate the value of an investment based on its expected future cash flows.

Earnings Per Share (EPS)

The portion of a company's profit allocated to each outstanding share of common stock.

Price-Earnings (PE) Ratio

A ratio used to value a company, calculated by dividing the market value per share by the earnings per share.

Zero Growth Perpetuity

A situation in which a stock pays a constant dividend indefinitely, valued like preferred stock.

Non-constant Dividend Growth

A scenario where dividends are expected to grow at varying rates before settling into a constant growth rate.

Residual Claim

The right of shareholders to claim any remaining assets after all debts and obligations have been paid.

Market Risk

The possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets.

Voting Rights

The rights that shareholders have to participate in company decisions, typically by voting on important issues.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.