Chapter 17 Managing Business Finances

Time Value of Money

principle that invested money grows, over time, by earning interest or some other form of return

Compound Growth

compounding of interest over time - with each additional time period, interest returns accumulate and earn more interest

Stock

portion of ownership of a corporation

Common Stock

most basic form of ownership, including voting rights on major issues, in a company

Market Value

current price of a share of stock in the stock market

Book Value

value of a common stock expressed as the firm’s owners’ equity divided by the number of common shares

Dividend

payment to shareholders, on a per-share basis, out of the company's earnings

Blue-Chip Stock

common stock issued by a well-established and respected company with a sound financial history and a stable pattern of dividend payouts

Mutual Fund

company that pools cash investments from individuals and organizations to purchase a portfolio of stocks, bonds, and other securities

No-Load Fund

mutual fund in which investors pay no commissions when they buy in or sell out

Load Fund

mutual fund in which investors are charged sales commissions when they buy in or sell out

Exchange-Traded Fund (ETF)

bundle of stocks or bonds that are in an index that tracks the overall movement of a market, but unlike a mutual fund can be traded like a stock

Securities

stocks, bonds and mutual funds, representing secured, or asset-based, claims by investors against issuers

Securities Markets

markets in which stocks and bonds are sold

Private Securities Markets

market in which new stocks and bonds are bought and sold by firms and government

Securities and Exchange Commission (SEC)

government agency that regulates U.S securities markets

Investment Bank

financial institution that specializes in issuing and reselling new securities

Secondary Securities Market

market in which existing (not new) stocks and bonds are sold to the public

Stock Exchange

an organization of individuals to provide an institutional auction setting in which stocks can be bought and sold

National Association of Securities Dealers Automated Quotation (NASDAQ) System

world’s oldest electronic stock market consisting of dealers who buy and sell securities over a network of electronic communications

Electronic Communication Network (ECN)

electronic trading system that brings sellers and buyers together outside traditional stock exchanges

Stock Broker

individual or organization that receives and executes buy and sell orders on behalf of outside customers in return for commissions

Book-Entry Ownership

procedure that holds investor’s shares in book-entry form, rather than issuing a physical paper certificate of ownership

Market Index

statistical indicator designed to measure the performance of a large group of stocks or track the price changes of a stock market

Bull Market

period of rising stock prices, lasting 12 months or longer, featuring investor confidence for future gains and motivation to buy

Bear Market

period of falling stock prices marked by negative investor settlements with motivation to sell ahead of anticipated losses

Dow Jones Industrial Average (DJIA)

oldest and most widely used