Finance Chapter 11 Vocabulary

Securities

All of the investments, including stocks, bonds, mutual funds, options, and commodities, that are traded

Private Corporation

A company that issues stock to a small group of people

Public Corporation

A corporation whose stock anyone may buy, sell, or trade

Return

Income earned on an investment

Appreciate

To increase in value

Preemptive Right

Stockholders' right to maintain their proportionate interest in a corporation with any additional shares issued

Par Value

A value assigned to a share of stock and printed on the stock certificate

Current Yield

The annual dividend or interest of an investment divided by the current market value

Total Return

A calculation that includes the annual dividend as well as any increase or decrease in the original purchase price of the investment

Earnings Per Share

Measures the net income earned per share of common stock

Price Earnings Ratio

Market price per share/earnings per share

Projected Earnings

Both earnings per share and the price-earnings ratio are based on historical numbers

Fundamental Theory

Assumes that a stock's real value is determined by a company's future earnings

Technical Theory

Based on the idea that a stock's value is really determined by forces in the stock market itself

Efficient Market Hypothesis

An argument that suggests that stocks are always priced about right and that bargains are hard to find because they are closely watched by so many investors

Primary Market

A market in which new issues of securities are offered to the public

Initial Public Offering (IPO)

A corporation's first offer to sell shares to the public

Secondary Market

Previously issued securities are traded among investors

Securities Exchange

A marketplace where brokers who represent investors meet to buy and sell securities

New York Stock Exchange (NYSE)

The world's largest physical stock exchange

Over-the-counter (OTC) market

An electronic marketplace for stocks and bonds

What does NASDAQ stand for?

National Association of Securities Dealers Automated Quotations

Full-service Agency

An advertising agency that provides the most complete range of services, including market research, media selection, copy development, artwork, and production

Discount Brokerage

Offers a reduced level of service, lower costs, and often the ability to make your trades yourself online

Churning

Occurs when an account executive does a lot of buying and selling of stocks within portfolios

Market Orders

Buy or sell orders that are to be executed immediately at current market prices

Limit Order

A request to buy or sell a stock at a specified price

Stop Orders

Trade is not to be executed unless stock hits a price limit

Buying on Margin

Paying a small percentage of a stock's price as a down payment and borrowing the rest

Blue Chip Stock

A safe investment that generally attracts conservative investors

Income Stock

Pays higher-than-average dividends compared to other stock issues

Growth Stock

A company stock that tends to increase in capital value rather than yield high-income

Cyclical Stock

Has a market value that tends to reflect the state of the economy

Large-cap Stock

Stock from a corporation that has issued a large number of shares of stock and has a large amount of capitalization

Capitalization

The total amount of stocks and bonds issued by a corporation

Small Stocks

Portfolio comprised of the smallest 20% of the companies on the NYSE

Penny Stock

Stock that costs less than $1 per share; Extremely high risk

Bull Market

A steady rise in the stock market over a period of time (Optimistic)

Bear Market

A steady drop in the stock market over a period of time (Pessimistic)

Prospect

Outlook; Expectation