SIE (Training Consultants v3.5, 2025): Ch. 1 Equity Securities, Sec. 2 - Common Stock Terminology

Authorized Stock

The maximum number of shares a corporation is allowed to sell as defined in its corporate charter.

Issued Stock

The portion of authorized stock that has been sold to the public in a primary distribution.

Treasury Stock

Stock that a corporation has repurchased from shareholders; it does not vote, receive dividends, or count in EPS calculations.

Outstanding Shares

Shares that are issued and held by stockholders; these shares vote, receive dividends, and are used in EPS calculations.

Long Position

Owning a security; investors generally expect the price to rise (bullish).

Short Position

Selling borrowed stock with the intention of buying it back at a lower price; investors generally expect the price to fall (bearish).

Par Value

The nominal fixed value printed on a stock certificate, often irrelevant to investors; many new issues are no-par stock.

Market Value

The current price at which a stock can be bought or sold in the open market, determined by supply and demand.

Point

A unit of measurement for common stock equal to $1 per share.

Trade Date

The date on which a buy or sell order is executed.

Regular Way Settlement Date

The date on which a trade must be settled (buyer pays, seller delivers); for common stock, T+2 business days.

Regulation T Settlement

Federal Reserve regulation requiring payment for purchased securities within three business days after the trade date (T+3).

What is authorized stock?

The maximum number of shares a corporation is allowed to sell as defined in its charter.

What is issued stock?

The portion of authorized stock that has been sold to the public.

What is treasury stock?

Stock repurchased by a corporation; it cannot vote, receive dividends, or count in EPS calculations.

Why would a company repurchase its own stock?

To increase EPS, finance future acquisitions, provide stock for employee plans, or fight a takeover attempt.

What are outstanding shares?

Issued shares held by stockholders that vote, receive dividends, and are used to calculate EPS.

How do you calculate outstanding shares?

Issued Stock - Treasury Stock = Outstanding Shares.

What is a long position in stock?

Owning a security with the expectation that its price will rise (bullish).

What is a short position in stock?

Selling borrowed stock to repurchase later at a lower price; expectation that the price will fall (bearish).

Give an example of a short sale profit calculation.

Borrow 100 shares at $50, sell for $5,000, buy back at $40 per share for $4,000; profit = $1,000.

What is par value?

The stated nominal value printed on a stock certificate, often irrelevant for investors.

What is market value?

The price at which a stock can be sold in the open market, determined by supply and demand.

What is a point in common stock trading?

$1 per share.

What is the trade date?

The date on which a buy or sell order is executed.

What is the regular way settlement date for common stock?

Two business days after the trade date (T+2).

What is Regulation T settlement?

Federal Reserve regulation requiring payment for purchased securities within three business days after the trade date (T+3).