Business Finance Chapter 7: Stocks

Vocabulary flashcards based on Chapter 7 of Business Finance, covering key concepts and terms related to stocks.

Common Stock

A share of ownership in a corporation that typically gives shareholders voting rights.

Preferred Stock

Stock that has preference over common stock in the distribution of dividends or during liquidation.

Dividend-Discount Model

A method used to determine the value of a stock based on the present value of its expected future dividends.

Market Order

An order to buy or sell a stock immediately at the best available current price.

Limit Order

An order to buy or sell a stock at a specific price or better, which may not execute immediately.

Capital Gain Rate

The rate at which the price of an asset increases over time.

Dividend Yield

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

Share Repurchase

A corporate action in which a company buys back its own shares from the marketplace.

Total Payout Model

A valuation approach that considers both dividends and share repurchases as total payouts to shareholders.

Earnings Per Share (EPS)

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

Retention Rate

The percentage of net earnings that a firm retains, rather than paying out as dividends.

Equity Cost of Capital

The return required by equity investors given the risk of the investment in the company.

Proxy

An authority to act on behalf of a shareholder for voting purposes.

Tradeoff

Balancing the benefits of increasing growth versus the potential reductions in dividends.

Ticker Symbol

An abbreviation used to uniquely identify publicly traded shares of a stock.

Annual Meeting

A yearly gathering of a company's shareholders to discuss the company's performance and make decisions.

Normal Trading Size (Round Lot)

A standard unit of stock trading, typically 100 shares.

Floor Broker

A person who has trading authority on the stock exchange floor and executes buy and sell orders.

Non-Dividend-Paying Stocks

Stocks that do not distribute dividends to shareholders and may need to use modified valuation methods.

Constant Growth Rate

An assumption that a company's dividends will grow at a steady rate indefinitely.