Stock, Bonds and Break Even Analysis terminologies (Exam 4)

Equity Capital

Represents capital that belongs to the owners of the business, this includes retained earnings as well as common and preferred stocks.

Debt Capital

Represents capital borrowed from sources outside of the company with the principal and interest paid at a specific time schedule.

This includes borrowing through bond issues, loans, and mortgages.

Stocks

It represents a claim on the company's assets and earnings.

Common Stock

Majority of stocks issues by a corporation.

It represents ordinary with the return on investment influenced by the success of failure of the business with given voting rights to elect the members of the board of directors.

Preferred Stock

Stocks that guarantees the owner a fixed and regular dividend forever.

It guarantee a shareholder a regular and fixed dividend.

Initial Public Offering

Is the first sale of the stock issues by a private company.

Share

A unit of stock.

Stock

A unit of stock.

Stock Broker

Acts as a consultant and sales agent who executes the orders to buy or sell stocks depending on the instruction of the client.

Stock Exchange

An association with specific rules and regulations where stock brokers meet for the purpose of trading stocks, bonds and other forms of securities.

Securities and Exchange Commission

The government agency responsible for the regulation and disclosure of the financial practices of corporations in connection with the buying and selling of stocks and bonds

Blue Chips

The large and stable corporations that account for a huge amount of trading in an exchange.

Dividends

The share of company earnings that a company gives its shareholders, this is usually distributed annually.

Principal

The initial amount invested in a stock.

Cost of Capital

The rate paid by the company for the use of funds acquired through the sale of stocks and bonds.

Reselling Price

The amount for which a stock is sold, which is usually done when its value appreciates in the open market m

Par Value or Face Value

The amount of shareholder in the event of liquidation.

Growth Rate

The rate by which the future income from an investment is expected to increase.

Holding Period

The period from the date a share is acquired to the date it is tested or sold.

Bonds

Financial Instruments that bear interest.

It is issued by commercial and financial institutions, or by local and national government to raise funds necessary to finance improvement project or expansion activities.

A written contact between a borrower and a lender in which the borrower promises to make periodic payments at a specificed rate of interest, and repay the principal at the maturity date.

Treasury Bonds

Bonds issued and back by national government.

They are considered risk and their interest are usually exempt from income tax.

Secured or Mortgage Bonds

Bonds for which specified assets of the company have been pledged ok order to guarantee repayment. In the event that the company is unable to settle it's obligations with the bond holders, the bond holders have the option of foreclosing the mortgaged properties upon Maturity.

Debentures or Unsecured Bonds

Bonds for which no form or collateral is pledged.

These bonds are backed by the full faith of the investor in the reputation and financial stability of the company.

Convertible Bonds

Bonds that can be traded for, or converted to common stock or other securities after a specific period of time.

Junk Bonds

Bonds issued by companies in weak financial condition with large amount of debt already outstanding.

These bonds yield high rate of return because of the high risk.

Coupon Bonds

Unregistered bonds for which the bond holders receive periodic interest payments by clipping a coupon from the bond and sending it to the issued as evidence of ownership.

Zero - Coupon Bonds

Bonds that so not pay any periodic interest.

These bonds are often sold at very high discount so that their yelield to maturity will be adequate to attract investors

Current Value or Selling Price

The actual purchase for the bond, which varies with latest market interest rate.

Par Value or Face Value

The bond denomination.

It is the amount on which interest is computed for the required periodic payments.

Unless it's indicated it's also the price redemption upon Maturity.

Bonds Discount

The difference between the face value and the selling price of the bond when it is sold below its face value.

Bond Premium

The difference between the selling price and the face value of the bond when it is above it's face value.

Bond Rate

The applied nominal rate on the periodic payments due.

Current Yield or Coupon Rate

The intermediate rate of return experienced from the bond investment.

It is the interest earned each year as a percentage of the selling price.

Yield to Maturity

The effective rate of return experienced from the bond investment from the date of purchase until the bond is retired.

Maturity Date

The share on which the bond become due.

Floating Cost

The total cost incurred by a company when it issues a bond or stock to the public.

These include legal fees, underwriters fees and registration fees.

Bond ownership

Evidence by a bond certificate that stipulates the terms of the contract between the issued and bondhl purchaser.