SIE

Stocks

Represent equity, investor holding security has ownership interest in something (Usually corporation)

Bonds

Represents debt, the investor is owed something (usually money) and the person that owes (debtor) will have to pay according to the terms of the IOU

Common Stock

A type of security that represents ownership in a corporation, offering shareholders voting rights and potential dividends

Capital Appreciation

A rise in the market price of an asset

Capital

Accumulated money or goods of an asset for use in producing more money or goods

Board of directors

Individuals elected by stockholders to establish corporate management policies. Decide when stockholders are paid dividends

Position

The amount of security either owned (a long position) or owed (a short position) by an individual or dealer

Issued Stock

Authorized stock that has been sold to investors. Investors bought the stock and company received the money

Unissued Stock

Does not carry the rights of issued shares and is not considered in determining a company’s value

Outstanding Stock

includes all shares that a company has issued and are in the hands of investors.

Treasury Stock

A stock a corporation has issued and then later bought back. The corporation can hold this stock indefinitely or can reissue it or retire it. This stock does not carry the rights of outstanding common shares, and is not considered in a company’s value

Market Capitalization

Number of outstanding shares multiplied by the current market price. Classed as Large cap, Mid cap, Small cap, and micro cap

Large cap stocks

Largest companies (growing technology companies or familiar name ones). Large cap stocks have a market capitalization in excess of $10 billion dollars.

Mid cap stocks

Reflect characteristics of both small and large caps, stocks have a market cap from 2 billion to 10 billion

Small cap stocks

The smallest companies that are still large enough to be listed on national exchanges are small caps. They tend to be oriented toward growth and produce very few dividends. Small-cap stocks have market capitalization of $250 million to $2 billion.

Penny stocks

Unlisted security trading at less than $5 per share. Highly speculative as they are risky investments

SEC

Securities and exchange Commission

Registered Representative

An associated person engaged in the investment banking or securities business. This includes any individual who supervises, solicits, or conducts business in securities or who trains people to supervise, solicit, or conduct business in securities

Street Name

Security registered under name of the Broker Dealer on the issuer’s books where the firm holds the security for clients in book entry form

Cash dividend

Money paid to the corporation’s stockholders out of the corporates current earnings or accumulated profits. The BOD must declare all dividends

Qualified Dividends

These dividends are taxed at a lower rate than an investor’s marginal tax rate

Tax Bracket

A point on the income tax rate schedule

Cost Basis

Price paid for an asset, including any commissions or fees, used to calculate capital gains or losses when the asset is sold. Includes any reinvested distributions

Stock dividend

company issues additional shares of its common stock to its current shareholders instead of cash.

Investor buys 200 shares of XYZ at $60 per share totaling 12,000. They declare and pay 20% stock dividend, how many shares does the investor have?

Number of shares * stock dividend percent = 40 additional shares totaling 240 shares.

Dividend from Stock

Cash dividend

Adjusted cost per share

Value of the shares / new number of shares

Four dates associated with dividend disbursing process

Declaration date, ex-dividend date, record date, payable date

Ex dividend date

Set by exchange where the stock trades, or FINRA if the stock is not traded on an exchange. Ex div date is normally the same as the record date.

Record Date

Stockholders of record (those who own the stock) as of the end of the day on the record date receive the dividend distribution

Payable date

On the payable date, the dividend disbursing agent sends dividend checks to all stockholders whose names appear in the records as owners as of the record date. Investors are taxed for the tax year the dividend is paid, based on the payable date

DERP

Order of dates is declaration, ex-dividend, record, and payable

The declaration date, record date, and payable date are established by…

Company’s board

The ex-dividend date is set by the…

Regulator (FINRA or an exchange

Statutory voting

Allows a stockholder to cast one vote per share owned for each item on a ballot, such as candidates for the BOD. A board candidate needs a simple majority to be elected

Cumulative voting

Allows shareholders to allocate their total votes in any manner they choose.

Common stock is freely transferable to?

Anyone who wants to buy it or receive it as a gift. Shareholders have the right to sell or give away their shares without permission of the corporation.

Common Stockholders have a right to..

limited access to the corporations book’s, right to examine the minutes, and right to examine list of stockholders for a credible reason

Preemptive rights

Common stockholders usually have the preemptive right to maintain their proportionate share of ownership in the corporation.

Limited liability

Investors right to limit potential losses to no more than amount invested. Equity shareholders, such as corporate stockholders and limited partners, have limited liability.

Hedge

Investment made to reduce the risk of adverse price movements in a security. Derivatives are a common way to hedge

Capital gain

The profit realized when a capital asset is sold for a price higher than the purchase price

Appreciation

Increase in value of an asset

General Partner

An active party in a direct participation program who is personally liable for all debts of the program and who manages the business of the program

Residual claim

Right of a common stockholder to claim corporate assets in the event that the corporation ceases to exist. A common stockholder may claim assets only after claims of all creditors and other securities have been satisfied.

Preferred stock

An equity security that represents nonvoting ownership in a corporation. Preferred stock is senior to common and junior to debt.

Equity Security

A financial instrument representing proportional ownership interest held in a corporation, company, or other enterprise recognized in the form of shares (common stock, preferred stock, convertible bonds, rights, warrants, and options).

Cash Flow

The money received by a business minus the money paid out. Cash flow is also equal to net income plus depreciation or depletion

Market Capitalization

The number of outstanding shares multiplied by the current market price. Classed as large cap, mid cap, small cap, and micro cap

Current Market Value

The worth of securities in an account. The market value of listed securities is based on the closing prices on the previous business day.

Cumulative preferred stock

accrues payments due to its shareholders if dividends are reduced or suspended. This means that the unpaid dividends adds up until paid. These dividends accumulate on the company’s books until coorporatio’s BOD decides to pay them.

A preferred Stock may be either

cumulative or straight, not both

Callable preferred stock

Type of preferred stock issued with a provision allowing the corporation to call in the stock at a certain price and retire it.

Convertible preferred stock

An equity security that may be exchanged for common stock at specific prices or rates. Dividends may be cumulative or non cumulative.

Treasurey Bills

Marketable US government debt security with maturity of 52 weeks.

Adjustable rate preferred stock would be the least appropriate choice for

Investors looking for a fixed income

Participating preferred stock

offers its owners an additional share of corporate profits after all other dividends are paid.

Benefits of owning preferred stock

Diverse preference, priority at dissolution over common stock

What is the assumed par value of a preferred share?

$100

Two benefits of owning common stock

Priority for payment of dividends ahead of wages and taxes and liquidation priority over wages.

Are dividends guarenteed?

No