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STOCK
Acquisition of stock
• Abbreviated AMEX. A market located in New York City that handles approximately
one-fifth of all securities trades within the United States.
• Abbreviated ARPS. Floating rate preferred stock, the dividend on which is adjusted
every seven weeks through a Dutch auction.
Authorized stock
• The number of shares of stock that a corporation is permitted to issue. This number
of shares is stipulated in the corporation's state-approved charter, and may be
changed only by a vote of the corporation's stock-holders.
Capital stock
• Refers to all the common and preferred shares, if any, for a corporation.
Common stock
classes of stock that may have greater or lesser voting rights than the ordinary
common shares. For many years the New York Stock Exchange only permitted one
class of common stock for a listed corporation.
• A class of stock in a company, normally with voting rights. Corporations may have
several classes of common stock, as well as Preferred Stock, or they may have a
single class of common stock. Common stockholders are on the bottom of the ladder
in a corporation's ownership structure, and have rights to a company's assets only
after bond holders, preferred shareholders and other debt holders have been
• Abbreviated CSE. All contingent securities that derive a major portion of their value
from their conversion privileges or common stock characteristics.
• A convertible security that is traded like an equity issue because the optioned
common stock is trading high.
• Ratios that are designed to measure the relative claims of stockholders to earnings
(cash flow per share), and equity (book value per share) of a firm.
• These two groups may have interests in a corporation that conflict. Sources of
conflict include dividends, distortion of investment, and underinvestment. Protective
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• The value of a convertible security measured in terms of the market price of the
common shares into which it can be converted.
• Convertible preferred stock that may be exchanged, at the issuer's option, into
convertible bonds that have the same conversion features as the convertible
• Preferred stock that can be converted into common stock at the option of the
holder.
• Determined by calculating the cost of common stock after considering both the
amount of underpricing and the associated flotation costs.
• The relationship between the cost of the preferred equity and the amount o funds
provided by the preferred share issue: found by dividing the annual preferred share
dividend, by the net proceeds from the sale of the preferred stock.
• Preferred stock for which all passed (unpaid) dividends in arrears must be paid
along with the current dividend before payment of dividends to common
shareholders.
• Preferred stock whose dividends accrue, should the issuer not make timely
dividend payments. Related: non-cumulative preferred stock.
Cyclical stock
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• Over one hundred companies have registered with the Securities and Exchange
Commission to sell shares of their stock directly to investors. Investors typically
participate in that company's Dividend Reinvestment Plan.
• A mutual fund that invests its assets in a wide range of Common Stocks. The
fund's objectives may be growth, income, or a combination of both. See also: Growth
Fund; Mutual Fund.
• Abbreviated ESOP. A company contributes to a trust fund that buys stock on behalf
of employees.
Exchange of stock
• A fund that invests in stocks with prices that are above average in relation to their
current earnings because they are considered to have above-average growth
prospects.
Growth stock
• A company with excellent prospects for above-average future increases (or growth)
for sales, earnings, and price. Look for a company that is a leader in its industry.
• Common stock of a company that has an opportunity to invest money and earn
more than the opportunity cost of capital.
• Common stock with a high dividend yield and few profitable investment
opportunities.
• A stock that pays regular and steady income, typically of well established
companies, such as utilities and others whose businesses generate steady cash
flows.
• Inherent worth.
Letter stock
• Privately placed common stock, so-called because the SEC requires a letter from
the purchaser stating that the stock is not intended for resale.
Listed stocks
cash, or sell a portion of the stock. Margin rules are federally regulated, but margin
requirements and interest may vary among broker/dealers.
• Abbreviated NYSE. Also known as the Big Board or The Exhange. More than 2,00
common and preferred stocks are traded. The exchange is the older in the United
States, founded in 1792, and the largest. It is located on Wall Street in New York
City
• Preferred stock whose holders must forgo dividend payments when the company
misses a dividend payment. Related: Cumulative preferred stock
• Preferred stock whose shareholders receive only the specified dividend payments.
• Is the accounting term for the capitalization of the equity. It is usually arbitrary.
• Preferred stock that provides for dividend payments based on certain formulas
allowing preferred shareholders to participate with common shareholders in the
receipt of dividends beyond a specified amount.
Preference stock
• A security that ranks junior to preferred stock but senior to common stock in the
right to receive payments from the firm; essentially junior preferred stock.
Preferred stock
• A security that shows ownership in a corporation and gives the holder a claim, prior
to the claim of common stockholders, on earnings and also generally on assets in
the event of liquidation. Most preferred stock pays a fixed dividend that is paid prior
to the common stock dividend, stated in a dollar amount or as a percentage of par
value. This stock does not usually carry voting rights. The stock shares
characteristics of both common stock and debt.
• The third major source of long-term financing for corporations that broadens the
firm's capital structure, raising financing without giving up ownership or incurring
obligations. Preferred shares get their name because they have some form of
superior preference to either or both earnings and assets upon corporate dissolution
that is superior to (preferred) the common share class. Preferred shares usually
carry a stated value, a fixed dividend and a cumulative feature in addition to the
aforementioned preferences.
• This is similar to common stock, however, it pays a fixed preferred dividend similar
to debt. They maybe cumulative or noncumulative. Also, the maturity may be fixed or
perpetual.
• Is an equity security which has a priority relative to ordinary common shares for
dividends and return of par amount in the event of a corporate dissolution. Often,
preferred shares are nonvoting equity interests. However, a default in the payment
of that issue's preferred dividend or other covenant breach may temporarily give the
preferred holders voting powers. Preferred shares can have convertible, cumulative,
Repurchase of stock
• Device to pay cash to firm's shareholders that provides more preferable tax
treatment for shareholders than dividends. Treasury stock is the name given to
previously issued stock that has been repurchased by the firm. A repurchase is
achieved through either a dutch auction, open market, or tender offer.
• A method used to raise the market price of a firm's stock by exchanging a certain
number of outstanding shares for one new share of stock.
• A proportionate decrease in the number of shares, but not the value of shares of
stock held by shareholders. Shareholders maintain the same percentage of equity
as before the split. For example, a 1-for-3 split would result in stockholders owning 1
share for every 3 shares owned before the split. After the reverse split, the firm's
stock price is, in this example, worth three times the pre-reverse split price. A firm
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generally institutes a reverse split to boost its stock's market price and attract
investors.
Safety stock
• A stock dividend that represents less than 20 to 25 percent of the common stock
outstanding at the time the dividend is declared.
• Holders have residual claims to firm and they are the owners. Holders allowed to
elect the board of directors which hires, fires, and sets the compensation of top
executives. Returns to common stock occurs with dividends declared by the board
and capital gains on sale of stock. Preferred stock has both debt and equity
characteristics. Pays fixed dividends (like debt) and dividends may be skipped (like
stocks). Holders of preferred stock do not vote at the annual shareholders meetings.
All preferred dividends must be paid before common dividends can be paid.
Stock dividend
• Payment of a corporate dividend in the form of stock rather than cash. The stock
dividend may be additional shares in the company, or it may be shares in a
subsidiary being spun off to shareholders. Stock dividends are often used to
conserve cash needed to operate the business. Unlike a cash dividend, stock
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Stock exchange
• A formalized secondary market for financial securities that allows investors to buy
and sell preferred and common shares. For example the Toronto Stock Exchange
(TSX), NASDAQ, and New York Stock Exchange (NYSE).
Stock market
• Also called the equity market, the market for trading equities.
Stock option
• An incentive allowing management to purchase stock at the market price set at the
time of the grant. Options, generally extended to management, that permit purchase
of the firm's common stock at a specified price (often at a substantial discount from
current market value) over a stated period of time.
• An employee fringe benefit that allows the purchase of a firm's stock at a discount
or on a matching basis with a part of the cost absorbed by the firm.
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• An instrument that gives its holder the right to purchase a certain number of shares
of common stock at a specified price over a certain period of time.
Stock quote
• A list of representative prices that are bid and asked during a particular trading day
for a certain stock. Stocks are quoted in points (where one point equals $1), and
1/8ths of a point, (where 1/8th equals 12.5 cents). Stock quotes are listed in the
financial press and most daily newspapers. See also: Bond Quote.
• A strategy for enhancing a portfolio's return, employed when the futures contract is
expensive based on its theoretical price, involving a swap between the futures,
treasury bills portfolio and a stock portfolio.
Stock repurchase
Stock selection
Stock split
• A method commonly used to lower the market price of a firm's common shares by
increasing the number of shares belonging to each shareholder.
• Directors of a company may order a stock split to make the shares more affordable
for small investors. If a shareholder holds 100 shares at the current share price of
$40, and the stock splits 2 for 1 (2 new for 1 old share), the new share price would
be $20, and the shareholder would then hold 200 shares. In both cases, the total
value of all shares would remain at $4000. All historical per-share items (such as
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price per share and earnings per share) are adjusted by data providers to account
for the stock split. Total sales and net income figures do not change. Stock splits by
themselves do not add any value to an investor's portfolio. However, only companies
that have experienced growth in their share prices will typically split their shares.
See also: Reverse Split.
• Occurs when a firm issues new shares of stock but in turn lowers the current
market price of its stock to a level that is proportionate to pre-split prices. For
example, if IBM trades at $100 before a 2-for-1 split, after the split it will trade at $50
• An acquisition method in which the acquiring firm exchanges its shares for shares
of the target company according to a predetermined ratio.
Stock symbol
• Also known as Ticker Symbol. A unique symbol assigned to a security. NYSE and
AMEX listed stocks have symbols of three characters or less. NASDAQ-listed
securities have four or five characters
Stock ticker
• This is a lettered symbol assigned to securities and mutual funds that trade on U.S.
financial exchanges.
Stock's multiple
Stockbroker
• An individual or firm that charges a fee or commission for executing buy and sell
orders submitted by another individual or firm. (2) The role of a firm when it acts as
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an agent for a customer and charges the customer a commission for its services.
Stockholder
Stockholder equity
• Balance sheet item that includes the book value of ownership in the corporation. It
includes capital stock, paid in surplus, and retained earnings.
Stockholder's books
Stockholders' equity
• The residual claims that stockholders have against a firm's assets, calculated by
subtracting total liabilities from total assets.
Stockout
• Are combinations which are analogous to Balanced Mutual Funds but, depending
on the underlying charter, can use higher degrees of leverage or derivatives.
Treasury stock
• Shares which have been repurchased from shareholders. The stock is held in the
treasury and is listed on the company's Balance Sheet. It is available for retirement
or resale. It is issued but not outstanding.
• Common stock that has been repurchased by the company and held in the
company's treasury.
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• Is the amount of stock held by a corporation after its issuance. When it is held by
the corporation, it is nonvoting and no dividends are paid. These shares may be
reissued subsequently for various purposes. At that time, they regain their voting
rights and dividend status. These shares may also be permanently retired. See
Authorized Shares and Issued Shares for related terms.
• A fund that invests in stocks with prices that are below average in relation to their
current earnings because they are considered to have below-average growth