INVESTMENT TERMS GLOSSARY
SIMPLIFYING THE MARKETPLACE
Keeping up with the increasing number of investment products and services in the marketplace today can be confusing. This glossary is designed to help investors understand some common investment and financial terms.
A
Accrued interest - The interest due on a bond since the last interest payment was made. The buyer of the bond pays the market price plus accrued interest.
Acquisition - The acquiring of control of one corporation by another. In "unfriendly" takeover attempts, the potential buying company may offer a price well above current market values and new securities to stockholders. The management of the subject company might ask for a better price or try to join up with a third company.
Averages - Various ways of measuring the trend of securities prices, one of the most popular of which is the Dow Jones Industrial Average of 30 industrial stocks listed on the New York Stock Exchange. The prices of the 30 stocks are totaled and then divided by a divisor that is intended to compensate for past stock splits and stock dividends, and that is changed from time to time. As a result, point changes in the average have only the vaguest relationship to dollar-price changes in stocks included in the average.
Acquisition - The acquiring of control of one corporation by another. In "unfriendly" takeover attempts, the potential buying company may offer a price well above current market values and new securities to stockholders. The management of the subject company might ask for a better price or try to join up with a third company.
American Stock Exchange (AMEX) - The second largest stock exchange in the United States, located in the financial district of New York City. (Formerly known as the Curb Exchange from its origin on a Manhattan street.)
Annual report - The formal financial statement issued yearly by a corporation. The annual report shows assets, liabilities, revenues, expenses and earnings - how the company stood at the close of the business year, how it fared profit-wise during the year, as well as other information of interest to shareowners.
Assets - Everything a corporation owns or that is due to it: cash, investments, money due it, materials and inventories, which are called current assets; buildings and machinery, which are known as fixed assets; and patents and goodwill, called intangible assets.
Auditor's report - Often called the accountant's opinion, it is the statement of the accounting firm's work and its opinion of the corporation's financial statements, especially if they conform to the normal and generally accepted practices of accountancy.
B
Balance sheet - A condensed financial statement showing the nature and amount of a company's assets, liabilities and capital on a given date. In dollar amounts, the balance sheet shows what the company owned, what it owed and the ownership interest in the company of its stockholders.
Bear - Someone who believes the market will decline.
Bear market - A declining market.
Bearer bond - A bond that does not have the owner's name registered on the books of the issuer. Interest and principal, when due, are payable to the holder.
Bid and Asked - Often referred to as a quotation or quote. The bid is the highest price anyone wants to pay for a security at a given time, the asked is the lowest price anyone will take at the same time.
Block - A large holding or transaction of stock - popularly considered to be 10,000 shares or more.
Blue chip - A company known nationally for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends.
Bond - Basically an IOU or promissory note of a corporation, usually issued in multiples of $1,000 or $5,000, although $100 and $500 denominations are not unknown. A bond is evidence of a debt on which the issuing company usually promises to pay the bondholders a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. In every case a bond represents debt - its holder is a creditor of the corporation and not a part owner, as is the shareholder.
Book value - An accounting term. Book value of a stock is determined from a company's records, by adding all assets then deducting all debts and other liabilities, plus the liquidation price of any preferred issues. The sum arrived at is divided by the number of common shares outstanding and the result is book value per common share. Book value of the assets of a company or a security may have little relationship to market value.
Broker - An agent who handles the public's orders to buy and sell securities, commodities or other property. A commission is charged for this service.
Bull - One who believes the market will rise.
Bull market - An advancing market.
Bear - Someone who believes the market will decline.
Bear market - A declining market.
Bearer bond - A bond that does not have the owner's name registered on the books of the issuer. Interest and principal, when due, are payable to the holder.
Bid and Asked - Often referred to as a quotation or quote. The bid is the highest price anyone wants to pay for a security at a given time, the asked is the lowest price anyone will take at the same time.
Block - A large holding or transaction of stock - popularly considered to be 10,000 shares or more.
Blue chip - A company known nationally for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends.
Bond - Basically an IOU or promissory note of a corporation, usually issued in multiples of $1,000 or $5,000, although $100 and $500 denominations are not unknown. A bond is evidence of a debt on which the issuing company usually promises to pay the bondholders a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. In every case a bond represents debt - its holder is a creditor of the corporation and not a part owner, as is the shareholder.
Book value - An accounting term. Book value of a stock is determined from a company's records, by adding all assets then deducting all debts and other liabilities, plus the liquidation price of any preferred issues. The sum arrived at is divided by the number of common shares outstanding and the result is book value per common share. Book value of the assets of a company or a security may have little relationship to market value.
Broker - An agent who handles the public's orders to buy and sell securities, commodities or other property. A commission is charged for this service.
Bull - One who believes the market will rise.
Bull market - An advancing market.
C
Capital gain or capital loss - Profit or loss from the sale of a capital asset. The capital gains provisions of the tax law are complicated. You should consult your tax advisor for specific information.
Capital stock - All shares representing ownership of a business, including preferred and common.
Capitalization - Total amount of the various securities issued by a corporation. Capitalization may include bonds, debentures, preferred and common stock, and surplus. Bonds and debentures are usually carried on the books of the issuing company in terms of their par or face value. Preferred and common shares may be carried in terms of par or stated value. Stated value may be an arbitrary figure decided upon by the director or may represent the amount received by the company from the sale of the securities at the time of issuance.
Cash flow - Reported net income of a corporation plus amounts charged off for depreciation, depletion, amortization, and extraordinary charges to reserves, which are bookkeeping deductions and not paid out in actual dollars and cents.
Certificate - The actual piece of paper that is evidence of ownership of stock in a corporation. Watermarked paper is finely engraved with delicate etchings to discourage forgery.
CSEC - The Chinese Securities Regulatory Commission, It is the main securities regulator of the PRC. China's Securities Law (passed December 1998, effective July 1, 1999), the nation's first comprehensive securities legislation, grants CSRC "authority to implement a centralized and unified regulation of the nationwide securities market in order to ensure their lawful operation. The CSRC oversees China's nationwide centralized securities supervisory system, with the power to regulate and supervise securities issuers, as well as to investigate, and impose penalties for, "illegal activities related to securities and futures. Its functions are similar to that of the Securities and Exchange Commission in the United States.
Collateral - Securities or other property pledged by a borrower to secure repayment of a loan. (See also Net Capital Charge)
Commission - The broker's basic fee for purchasing or selling securities or property as an agent.
Common stock - Securities that represent an ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation. The terms common stock and capital stock are often used interchangeably when the company has no preferred stock.
Current assets - Those assets of a company that are reasonably expected to be realized in cash, sold or consumed during one year. These include cash, U.S. Government bonds, receivables and money due usually within one year, as well as inventories.
Current liabilities - Money owed and payable by a company, usually within one year.
D
Day order - An order to buy or sell that, if not executed, expires at the end of trading day on which it was entered.
Dealer - An individual or firm in the securities business who buys and sells stocks and bonds as a principal rather than as an agent. The dealer's profit or loss is the difference between the price paid and the price received for the same security. The dealer's confirmation must disclose to the customer that the principal has been acted upon. The same individual or firm may function, at different times, either as a broker or dealer.
Debit balance - In a customer's margin account, that portion of the purchase price of stock, bonds or commodities that is covered by credit extended by the broker to the margin customer. (See: Margin)
Depreciation - Normally, charges against earnings to write off the cost, less salvage value, of an asset over its estimated useful life. It is a bookkeeping entry and does not represent any cash outlay nor are any funds earmarked for the purpose.
Director - Person elected by shareholders to serve on the board of directors. The directors appoint the president, vice presidents, and all other operating officers. Directors decide, among other matters, if and when dividends shall be paid.
Discretionary account - An account in which the customer gives the broker or someone else discretion to buy and sell securities or commodities, including selection, timing, amount, and price to be paid or received.
Dollar-cost-averaging - A system of buying securities at regular intervals with a fixed dollar amount. Under this system investors buy by the dollars' worth rather than by the number of shares. If each investment is of the same number of dollars, payments buy more shares when the price is low and fewer when it rises. Thus temporary downswings in price benefit investors if they continue periodic purchases in both good and bad times, and the price at which the shares are sold is more than their average cost. Dollar-cost-averaging does not assure a profit and does not protect against loss in declining markets. Since dollar-cost-averaging involves continuous investment in securities regardless of fluctuating price levels of such securities, investors should consider their financial ability to continue purchases through periods of low price levels.(See: Formula investing)
Dealer - An individual or firm in the securities business who buys and sells stocks and bonds as a principal rather than as an agent. The dealer's profit or loss is the difference between the price paid and the price received for the same security. The dealer's confirmation must disclose to the customer that the principal has been acted upon. The same individual or firm may function, at different times, either as a broker or dealer.
Debit balance - In a customer's margin account, that portion of the purchase price of stock, bonds or commodities that is covered by credit extended by the broker to the margin customer. (See: Margin)
Depreciation - Normally, charges against earnings to write off the cost, less salvage value, of an asset over its estimated useful life. It is a bookkeeping entry and does not represent any cash outlay nor are any funds earmarked for the purpose.
Director - Person elected by shareholders to serve on the board of directors. The directors appoint the president, vice presidents, and all other operating officers. Directors decide, among other matters, if and when dividends shall be paid.
Director stock - Shares issued by a corporation usually when the corporation is formed which although are transferable are in some cases restricted and may carry non-detachable warrants.
Diversification - Spreading investments among different types of securities and various companies in different fields.
Dividend - The payment designated by the board of directors to be distributed pro rata among the shares outstanding. On preferred shares, it is generally a fixed amount. On common shares, the dividend varies with the fortunes of the company and the amount of cash on hand, and may be omitted if business is poor or the directors determine to withhold earnings to invest in plant and equipment. Sometimes a company will pay a dividend out of past earnings even if it is not currently operating at a profit.
E
Earnings report - A statement, also called an income statement, issued by a company showing its earnings or losses over a given period. The earnings report lists the income earned, expenses and the net result.
Escrow Agent/Account - Escrow is a legal arrangement in which a share asset or money is delivered to a third party (called an escrow agent) to be held in trust pending a contingency or the fulfillment of a condition or conditions in a contract such as payment of a purchase price or the fulfillment of duties by the buyer or seller to make such asset legal for sale. Upon that event occurring, the escrow agent will deliver the asset to the proper recipient; otherwise the escrow agent is bound by his or her fiduciary duty to maintain the escrow account.
F
Face value - The value of a bond that appears on the face of the bond, unless the value is otherwise specified by the issuing company. Face value is ordinarily the amount the issuing company promises to pay at maturity. Face value is not an indication of market value. Sometimes referred to as par value.
Fiduciary Agent - A fiduciary duty is the highest standard of care imposed at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom they owe the duty (the "principal"): they must not put their personal interests before the duty, and must not profit from their position as a fiduciary. The fiduciary relationship is highlighted by good faith, loyalty and trust, and the fiduciary may act for two parties at the same.
Floor - The huge trading area - about the size of a football field - where stocks, bonds and options are bought and sold on the New York Stock Exchange.
Free and open market - A market in which supply and demand are freely expressed in terms of price. Contrasts with a controlled market in which supply, demand and price may all be regulated.
Fundamental research - Analysis of industries and companies based on such factors as sales, assets, earnings, products or services, markets and management. As applied to the economy, fundamental research includes consideration of gross national product, interest rates, unemployment, inventories, savings, etc. (See: Technical research)
Fiduciary Agent - A fiduciary duty is the highest standard of care imposed at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom they owe the duty (the "principal"): they must not put their personal interests before the duty, and must not profit from their position as a fiduciary. The fiduciary relationship is highlighted by good faith, loyalty and trust, and the fiduciary may act for two parties at the same.
Floor - The huge trading area - about the size of a football field - where stocks, bonds and options are bought and sold on the New York Stock Exchange.
Free and open market - A market in which supply and demand are freely expressed in terms of price. Contrasts with a controlled market in which supply, demand and price may all be regulated.
Fundamental research - Analysis of industries and companies based on such factors as sales, assets, earnings, products or services, markets and management. As applied to the economy, fundamental research includes consideration of gross national product, interest rates, unemployment, inventories, savings, etc. (See: Technical research)
G
Gold fix - The setting of the price of gold by dealers (especially in a twice-daily London meeting at the central bank); the fix is the fundamental worldwide price for setting prices of gold bullion and gold-related contracts and products.
Good delivery - Certain basic qualifications must be met before a security sold on the Exchange may be delivered. The security must be in proper form to comply with the contract of sale and to transfer title to the purchaser.
Good 'til canceled (GTC) or open order - An order to buy or sell that remains in effect until it is either executed or canceled.
Government bonds - Obligations of the U.S. Government, regarded as the highest grade securities issues.
Growth stock - Stock of a company with a record of growth in earnings at a relatively rapid rate.
Good delivery - Certain basic qualifications must be met before a security sold on the Exchange may be delivered. The security must be in proper form to comply with the contract of sale and to transfer title to the purchaser.
Good 'til canceled (GTC) or open order - An order to buy or sell that remains in effect until it is either executed or canceled.
Government bonds - Obligations of the U.S. Government, regarded as the highest grade securities issues.
Growth stock - Stock of a company with a record of growth in earnings at a relatively rapid rate.
H
Holding company - A corporation that owns the securities of another, in most cases with voting control.
Hong Kong Stock Exchange (Hang Seng) - The Hong Kong Stock Exchange is the stock exchange of Hong Kong. The exchange has predominantly been the main exchange for Hong Kong where shares of listed companies are traded. It is Asia's third largest stock exchange in terms of market capitalization, behind the Tokyo Stock Exchange and the Shanghai Stock Exchange.
Hong Kong Stock Exchange (Hang Seng) - The Hong Kong Stock Exchange is the stock exchange of Hong Kong. The exchange has predominantly been the main exchange for Hong Kong where shares of listed companies are traded. It is Asia's third largest stock exchange in terms of market capitalization, behind the Tokyo Stock Exchange and the Shanghai Stock Exchange.
I
Income bond - Generally income bonds promise to repay principal but to pay interest only when earned. In some cases unpaid interest on an income bond may accumulate as a claim against the corporation when the bond becomes due. An income bond may also be issued in lieu of preferred stock.
Initial public offering - (See: Primary distribution)
Institutional investor - An organization whose primary purpose is to invest its own assets or those held in trust by it for others. Includes pension funds, investment companies, insurance companies, universities and banks.
Investment banker - Also known as an underwriter. The middleman between the corporation issuing new securities and the public. The usual practice is for one or more investment bankers to buy outright from a corporation a new issue of stocks or bonds. The group forms a syndicate to sell the securities to individuals and institutions. Investment bankers also distribute very large blocks of stocks or bonds - perhaps held by an estate.
Investment company - A company or trust that uses its capital to invest in other companies. There are two principal types: the closed-end and the open-end, or mutual fund. Shares in closed-end investment companies, some of which are listed on the New York Stock Exchange, are readily transferable in the open market and are bought and sold like other shares. Capitalization of these companies remains the same unless action is taken to change, which is seldom. Open-end funds sell their own shares to investors, stand ready to buy back their old shares, and are not listed. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them.
I
Leverage - The effect on a company when the company has bonds, preferred stock, or both outstanding. Example: If the earnings of a company with 1,000,000 common shares increases from $1,000,000 to $1,500,000, earnings per share would go up from $1 to $1.50, or an increase of 50%. But if earnings of a company that had to pay $500,000 in bond interest increased that much, earnings per common share would jump from $.50 to $1 a share, or 100%.
Liabilities - All the claims against a corporation. Liabilities include accounts, wages and salaries payable; dividends declared payable; accrued taxes payable; and fixed or long-term liabilities, such as mortgage bonds, debentures and bank loans. (See: Assets, Balance sheet)
Liquidity - The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable price changes. Liquidity is one of the most important characteristics of a good market.
Long - Signifies ownership of securities. "I am long 100 U.S. steel" means the speaker owns 100 shares. (See: Short position, Short sale)
M
Manipulation - An illegal operation. Buying or selling a security for the purpose of creating false or misleading appearance of active trading or for the purpose of raising or depressing the price to induce purchase or sale by others.
Margin - The amount paid by the customer when using a broker's credit to buy or sell a security. Under Federal Reserve regulations, the initial margin requirement since 1945 has ranged from the current rate of 50% of the purchase price up to 100%. (See: Brokers' loan, Equity)
Market order - An order to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is represented in the trading crowd. (See: Good 'til canceled order, Limit order, Stop order)
Market price - The last reported price at which the stock or bond sold, or the current quote. (See: Quote)
Member firm - A securities brokerage firm organized as a partnership and having at least one general partner or employee who is a member of the New York Stock Exchange.
Merger - Combination of two or more corporations.
Money market fund - A mutual fund whose investments are in high-yield money market instruments such as federal securities, CDs and commercial paper. Its intent is to make such instruments, normally purchased in large denominations by institutions, available indirectly to individuals. (See: Certificate of deposit, Commercial paper)
Mutual fund - (See: Investment company)
Margin - The amount paid by the customer when using a broker's credit to buy or sell a security. Under Federal Reserve regulations, the initial margin requirement since 1945 has ranged from the current rate of 50% of the purchase price up to 100%. (See: Brokers' loan, Equity)
Market order - An order to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is represented in the trading crowd. (See: Good 'til canceled order, Limit order, Stop order)
Market price - The last reported price at which the stock or bond sold, or the current quote. (See: Quote)
Member firm - A securities brokerage firm organized as a partnership and having at least one general partner or employee who is a member of the New York Stock Exchange.
Merger - Combination of two or more corporations.
Money market fund - A mutual fund whose investments are in high-yield money market instruments such as federal securities, CDs and commercial paper. Its intent is to make such instruments, normally purchased in large denominations by institutions, available indirectly to individuals. (See: Certificate of deposit, Commercial paper)
Mutual fund - (See: Investment company)
N
NASD - The National Association of Securities Dealers, an association of brokers and dealers in the over-the-counter securities business.
Net asset value - Usually used in connection with investment companies to mean net asset value per share. An investment company computes its assets daily, or even twice daily, by totaling the market value of all securities owned. All liabilities are deducted, and the balance is divided by the number of shares outstanding. The resulting figure is the net asset value per share. (See: Assets, Investment company).
Net Capital Charge - This requirement is common with Mergers and Acquisitions and Takeover transactions when often both parties to the transaction put forward collateral, assets or money before the transaction closes. These funds are returned after the closing or as part of the payout ensuring that all the Terms and Conditions of the Agreement are met by both the seller of the asset and the buyer).
New York Stock Exchange (NYSE) - The largest organized securities market in the United States, founded in 1792. The Exchange itself does not buy, sell, own or set the prices of securities traded there. The prices are determined by public supply and demand. The Exchange is a non-profit corporation of 1,366 individual members, governed by a board of directors consisting of 10 public representatives, 10 Exchange members or allied members and a full-time chairman, executive vice chairman and president.
Nasdaq - An automated information network that provides brokers and dealers with price quotations on securities traded over-the-counter. Nasdaq is an acronym for National Association of Securities Dealers Automated Quotations.
Net Capital Charge - This requirement is common with Mergers and Acquisitions and Takeover transactions when often both parties to the transaction put forward collateral, assets or money before the transaction closes. These funds are returned after the closing or as part of the payout ensuring that all the Terms and Conditions of the Agreement are met by both the seller of the asset and the buyer).
New issue/IPO (Initial Public Offering) - A stock or bond sold by a corporation for the first time. Proceeds may be used to retire outstanding securities of the company, for new plant or equipment, for additional working capital, or to acquire a public ownership interest in the company for private owners.
O
Odd Lot - An amount of stock less than the established 100-share unit. (See: Round lot)
Offer - The price at which a person is ready to sell. Opposed to bid, the price at which one is ready to buy. (See: Bid and Asked)
Open order - (See: Good 'til canceled order)
Over-the-counter/Pink Sheets - A market for securities made up of securities dealers who may or may not be members of a securities exchange. The over-the-counter market is conducted over the telephone and deals mainly with stocks of companies without sufficient shares, stockholders or earnings to warrant listing on an exchange. Over-the-counter dealers may act either as principals or as brokers for customers. The over-the-counter market is the principal market for bonds of all types. (See: NASD, Nasdaq)
Off-board - This term may refer to transactions over-the-counter in unlisted securities or to transactions of listed shares that are not executed on a national securities exchange.
Open order - (See: Good 'til canceled order)
Over-the-counter/Pink Sheets - A market for securities made up of securities dealers who may or may not be members of a securities exchange. The over-the-counter market is conducted over the telephone and deals mainly with stocks of companies without sufficient shares, stockholders or earnings to warrant listing on an exchange. Over-the-counter dealers may act either as principals or as brokers for customers. The over-the-counter market is the principal market for bonds of all types. (See: NASD, Nasdaq)
P
Par - In the case of a common share, par means a dollar amount assigned to the share by the company's charter. Par value may also be used to compute the dollar amount of common shares on the balance sheet. Par value has little relationship to the market value of common stock. Many companies issue no-par stock but give a stated per share value on the balance sheet. In the case of preferred stocks it signifies the dollar value upon which dividends are figured. With bonds, par value is the face amount, usually $1,000.
Penny stocks - Low-priced issues, often highly speculative, selling at less than $1 a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment-caliber issues.
Portfolio - Holdings of securities by an individual or institution. A portfolio may contain bonds, preferred stocks, common stocks and other securities.
Preferred stock - A class of stock with a claim on the company's earnings before payment may be made on the common stock and usually entitled to priority over common stock if the company liquidates. Usually entitled to dividends at a specified rate - when declared by the board of directors and before payment of a dividend on the common stock - depending upon the terms of the issue.
Price-to-Earnings Ratio - A popular way to compare stocks selling at various price levels. The P/E ratio is the price of a share of stock divided by earnings per share for a 12-month period. For example, a stock selling for $50 a share and earning $5 a share is said to be selling at a price-to-earnings ratio of 10.
Primary distribution - Also called primary or initial public offering. The original sale of a company's securities. (See: Investment banker)
Prime rate - The lowest interest rate charged by commercial banks to their most credit-worthy customers; other interest rates, such as personal, automobile, commercial and financing loans are often pegged to the prime.
Principal - The person for whom a broker executes an order, or dealers buying or selling for their own accounts. The term "principal" may also refer to a person's capital or to the face amount of a bond.
Prospectus - The official selling circular that must be given to purchasers of new securities registered with the Securities and Exchange Commission. It highlights the much longer Registration Statement file with the Commission.
Penny stocks - Low-priced issues, often highly speculative, selling at less than $1 a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment-caliber issues.
Portfolio - Holdings of securities by an individual or institution. A portfolio may contain bonds, preferred stocks, common stocks and other securities.
Preferred stock - A class of stock with a claim on the company's earnings before payment may be made on the common stock and usually entitled to priority over common stock if the company liquidates. Usually entitled to dividends at a specified rate - when declared by the board of directors and before payment of a dividend on the common stock - depending upon the terms of the issue.
Price-to-Earnings Ratio - A popular way to compare stocks selling at various price levels. The P/E ratio is the price of a share of stock divided by earnings per share for a 12-month period. For example, a stock selling for $50 a share and earning $5 a share is said to be selling at a price-to-earnings ratio of 10.
Primary distribution - Also called primary or initial public offering. The original sale of a company's securities. (See: Investment banker)
Prime rate - The lowest interest rate charged by commercial banks to their most credit-worthy customers; other interest rates, such as personal, automobile, commercial and financing loans are often pegged to the prime.
Principal - The person for whom a broker executes an order, or dealers buying or selling for their own accounts. The term "principal" may also refer to a person's capital or to the face amount of a bond.
Prospectus - The official selling circular that must be given to purchasers of new securities registered with the Securities and Exchange Commission. It highlights the much longer Registration Statement file with the Commission.
Q
Quote - The highest bid to buy and the lowest offer to sell a security in a given market at a given time. If you ask your financial advisor for a "quote" on a stock, he or she may come back with something like "45 1/4 to 45 1/2." This means that $45.25 is the highest price any buyer wanted to pay at the time the quote was given on the floor of the exchange and that $45.50 was the lowest price that any seller would take at the same time. (See: Bid and asked)
R
Rally - A brisk rise following a decline in the general price level of the market, or in an individual stock.
Refinancing - Same as refunding. New securities are sold by a company and the money is used to retire existing securities. The object may be to save interest costs, extend the maturity of the loan, or both.
Registered representative - The man or woman who serves the investor customers of a broker/dealer. In a New York Stock Exchange-member organization, a registered representative must meet the requirements of the exchange as to background and knowledge of the securities business. Also known as a financial advisor or customer's broker.
Registrar - Usually a trust company or bank charged with the responsibility of keeping record of the owners of a corporation's securities and preventing the issuance of more than the authorized amount. (See: Transfer)
Round lot - A unit of trading or a multiple thereof. On the NYSE, the unit of trading is generally 100 shares in stocks and $1,000 or $5,000 par value in the case of bonds. In some inactive stocks, the unit of trading is 10 shares. (See: Odd lot)
Refinancing - Same as refunding. New securities are sold by a company and the money is used to retire existing securities. The object may be to save interest costs, extend the maturity of the loan, or both.
Registered representative - The man or woman who serves the investor customers of a broker/dealer. In a New York Stock Exchange-member organization, a registered representative must meet the requirements of the exchange as to background and knowledge of the securities business. Also known as a financial advisor or customer's broker.
Registrar - Usually a trust company or bank charged with the responsibility of keeping record of the owners of a corporation's securities and preventing the issuance of more than the authorized amount. (See: Transfer)
Registration - Before an initial public offering may be made of new securities by a company, the securities must be registered under the Securities Act of 1933. A registration statement is filed with the SEC by the issuer. It must disclose pertinent information relating to the company's operations, securities, management and purpose of the public offering. Before a security may be admitted to dealings on a national securities exchange, it must be registered under the Securities Exchange Act of 1934. The application for registration must be filed with the exchange and the SEC by the company issuing the securities.
Restricted securities (Rule 144) - Shares of stock that are not registered with the SEC are subject to limitations on resale. The most well-known exemption to the limitation on resale rule is Rule 144. Rule 144, promulgated under the Securities Act of 1933, is a safe harbor provision that allows holders of restricted securities to make sales of stock when certain conditions are met.
Rights - When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the additional stock is usually offered to stockholders below the current market price, rights ordinarily have a market value of their own and are actively traded. In most cases they must be exercised within a relatively short period. Failure to exercise or sell rights may result in monetary loss to the holder. (See: Warrants)
S
Seat - A traditional figure of speech for a membership on an exchange.
Secondary distribution - Also known as secondary offering. The redistribution of a block of stock some time after it has been sold by the issuing company. The sale is handled off the NYSE by a securities firm or group of firms and the shares are usually offered at a fixed price related to the current market price of the stock. Usually the block is a large one, such as might be involved in the settlement of an estate. The security may be listed or unlisted. (See: Investment banker, Primary distribution)
Shanghai Stock Exchange - The Shanghai Stock Exchange (SSE) is a Chinese stock exchange or bourse that is based in the city of Shanghai. It is one of the three stock exchanges operating independently in the People's Republic of China, the other two are the Shenzhen Stock Exchange and the Hong Kong Stock Exchange. Unlike the Hong Kong Stock Exchange, the Shanghai Stock Exchange is still not entirely open to foreign investors due to tight capital account controls exercised by the Chinese mainland authorities.
Short sale - A transaction by a person who believes a security will decline and sells it, though the person does not own any. For instance: You instruct your broker to sell short 100 shares of XYZ. Your broker borrows the stock so delivery can be made to the buyer. The money value of the shares borrowed is deposited by your broker with the lender. Sooner or later you must cover your short sale by buying the same amount of stock you borrowed for return to the lender. If you are able to buy XYZ at a lower price than you sold it for, your profit is the difference between the two prices - not counting commissions and taxes. But if you have to pay more for the stock than the price you received, that is the amount of your loss. Stock exchange and federal regulations govern and limit the conditions under which a short sale may be made on a national securities exchange. Sometimes people will sell short a stock they already own in order to protect a paper profit. This is know as selling short against the box.
Speculation - The employment of funds by a speculator. Safety of principal is a secondary factor. (See: Investment)
Split - The division of the outstanding shares of a corporation into a larger number of shares. A 3-for-1 split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the 3-for-1 split would have 300 shares, although the proportionate equity in the company would remain the same; 100 parts of 1 million are the equivalent of 300 parts of 3 million. Ordinarily, splits must be voted by directors and approved by shareholders. (See: Stock dividend)
Stock - (See: Capital stock, Common stock)
Stock exchange - An organized marketplace for securities featured by the centralization of supply and demand for the transaction of orders by member brokers for institutional and individual investors. (See: New York Stock Exchange)
Stock ticker symbols - Every corporation whose transactions are reported on the NYSE or AMEX ticker or on Nasdaq has been given a unique identification symbol of up to four letters. These symbols abbreviate the complete corporate name and facilitate trading and ticker reporting. Some of the most famous symbols are: T (American Telephone & Telegraph), XON (Exxon), GM (General Motors), IBM (International Business Machines), S (Sears Roebuck) and XRX (Xerox).
Street name - Securities held in the name of a broker instead of a customer's name are said to be carried in "street name." This occurs when the securities have been bought on margin or when the customer wishes the security to be held by the broker.
Syndicate - A group of investment bankers who together underwrite and distribute a new issue of securities or a large block of an outstanding issue.
SEC - The Securities and Exchange Commission, established by Congress to help protect investors. The SEC administers the Securities Act of 1933, the Securities Exchange Act of 1934, the Securities Act Amendments of 1975, the Trust Indenture Act, the Investment Company Act, the Investment Advisers Act and the Public Utility Holding Company Act.
Settlement - Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale.
Short covering - Buying stock to return stock previously borrowed to make delivery on a short sale.
Speculation - The employment of funds by a speculator. Safety of principal is a secondary factor. (See: Investment)
Split - The division of the outstanding shares of a corporation into a larger number of shares. A 3-for-1 split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the 3-for-1 split would have 300 shares, although the proportionate equity in the company would remain the same; 100 parts of 1 million are the equivalent of 300 parts of 3 million. Ordinarily, splits must be voted by directors and approved by shareholders. (See: Stock dividend)
Stock - (See: Capital stock, Common stock)
Stock exchange - An organized marketplace for securities featured by the centralization of supply and demand for the transaction of orders by member brokers for institutional and individual investors. (See: New York Stock Exchange)
Stock dividend - A dividend paid in securities rather than in cash. The dividend may be additional shares of the issuing company, or in shares of another company (usually a subsidiary) held by the company.
Stockholder of record - A stockholder whose name is registered on the books of the issuing corporation.
Stop limit order - A stop order that becomes a limit order after the specified stop price has been reached. (See: Limit Order, Stop Order)
Stop order - An order to buy at a price above or sell at a price below the current market. Stop buy orders are generally used to limit loss or protect unrealized profits on a short sale. Stop sell orders are generally used to protect unrealized profits or limit loss on a holding. A stop order becomes a market order when the stock sells at or beyond the specified price and, thus, may not necessarily be executed at that price.
Syndicate - A group of investment bankers who together underwrite and distribute a new issue of securities or a large block of an outstanding issue.
T
Takeover - (See Tender Offer)
Technical research - Analysis of the market and stocks based on supply and demand. The technician studies price movements, volume, trends and patterns, which are revealed by charting these factors, and attempts to assess the possible effect of current market action on future supply and demand for securities and individual issues.
Tender offer - A public offer to buy shares from existing stockholders of one public corporation by another public corporation under specified terms good for a certain time period. Stockholders are asked to "tender" (surrender) their holdings for stated value, usually at a premium above current market price, subject to the tendering of a minimum and maximum number of shares.
Trader - Individuals who buy and sell for their own accounts for short-term profit. Also, an employee of a broker/dealer or financial institution who specializes in handling purchases and sales of securities for the firm and/or its clients. (See: Speculator)
Transfer - This term may refer to two different operations. For one, the delivery of a stock certificate from the seller's broker to the buyer's broker and legal change of ownership, normally accomplished within a few days. For another, to record the change of ownership on the books of the corporation by the transfer agent. When the purchaser's name is recorded, dividends, notices of meetings, proxies, financial reports and all pertinent literature sent by the issuer to its securities holders are mailed directly to the new owner.
Transfer agent - A transfer agent keeps a record of the name of each registered shareowner, his or her address, the number of shares owned, and sees that certificates presented for transfer are properly canceled and new certificates issued in the name of the new owner.
Technical research - Analysis of the market and stocks based on supply and demand. The technician studies price movements, volume, trends and patterns, which are revealed by charting these factors, and attempts to assess the possible effect of current market action on future supply and demand for securities and individual issues.
Tender offer - A public offer to buy shares from existing stockholders of one public corporation by another public corporation under specified terms good for a certain time period. Stockholders are asked to "tender" (surrender) their holdings for stated value, usually at a premium above current market price, subject to the tendering of a minimum and maximum number of shares.
Trader - Individuals who buy and sell for their own accounts for short-term profit. Also, an employee of a broker/dealer or financial institution who specializes in handling purchases and sales of securities for the firm and/or its clients. (See: Speculator)
Transfer - This term may refer to two different operations. For one, the delivery of a stock certificate from the seller's broker to the buyer's broker and legal change of ownership, normally accomplished within a few days. For another, to record the change of ownership on the books of the corporation by the transfer agent. When the purchaser's name is recorded, dividends, notices of meetings, proxies, financial reports and all pertinent literature sent by the issuer to its securities holders are mailed directly to the new owner.
Transfer agent - A transfer agent keeps a record of the name of each registered shareowner, his or her address, the number of shares owned, and sees that certificates presented for transfer are properly canceled and new certificates issued in the name of the new owner.
U
Underwriter - (See: Investment banker)
Unlisted stock - A security not listed on a stock exchange. (See: Over-the-counter)
Unlisted stock - A security not listed on a stock exchange. (See: Over-the-counter)
V
Volume - The number of shares or contracts traded in a security or an entire market during a given period. Volume is usually considered on a daily basis and a daily average is computed for longer periods.
Voting right - Common stockholders' right to vote their stock in affairs of a company. In some instances, voting rights may not be permitted or may be limited as in the case of director shares, some restricted shares or non-detachable warrant shares. The right to vote may be delegated by the stockholder to another person.
Voting right - Common stockholders' right to vote their stock in affairs of a company. In some instances, voting rights may not be permitted or may be limited as in the case of director shares, some restricted shares or non-detachable warrant shares. The right to vote may be delegated by the stockholder to another person.
W
Warrants - Certificates giving the holder the right to purchase securities at a stipulated price within a specified time limit or perpetually. Sometimes a warrant is offered with securities as an inducement to buy. In some cases the voting rights of shares may be limited or non-valid until Non-Detachable Warrants have been exercised. Restricted voting rights may also apply to some types of Restricted shares.
Working control - Theoretically, ownership of 51% of a company's voting stock is necessary to exercise control. In practice - and this is particularly true in the case of a large corporation - effective control sometimes can be exerted through ownership, individually or by a group acting in concert, of less than 50%.
Working control - Theoretically, ownership of 51% of a company's voting stock is necessary to exercise control. In practice - and this is particularly true in the case of a large corporation - effective control sometimes can be exerted through ownership, individually or by a group acting in concert, of less than 50%.
Y
Yield - Also known as return. The dividends or interest paid by a company expressed as a percentage of the current price. A stock with a current market value of $40 a share paying dividends at the rate of $3.20 is said to return 8% ($3.20Õ$40.00). The current yield on a bond is figured the same way.
Yield to maturity - The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.
Yield to maturity - The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.
Z
Zero coupon bond - A bond that pays no interest but is priced, at issue, at a discount from its redemption price.