Ch 6-12 Vocab
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| Authorized shares | Maximum number of shares of capital stock that can be issued.
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| Issued shares | Total number of shares that have been SOLD.
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| Treasury Stock | Issued shares that have been BOUGHT BACK by the company. No voting rights. No dividend payment. From issued stock.
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| Outstanding shares | Those shares held by investors. Dividends will be paid on the outstanding shares. From issued stock.
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| Common stock | Basic voting stock held by stockholders.
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| Par value | Serves as the “basis” for the common stock capital account. Specified in the Corporate charter. Dollar value assigned to each specific share of stock.
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| Declaration date | Board of Directors APPROVES the dividend. Dividend payable liability is recorded on this date.
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| Record date | Shareholders of record on this date receive the dividend payment. Nothing is recorded in the books and records on this date.
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| Payment date | Cash dividend is PAID to the shareholders of record. Cash payment is recorded on this date.
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| Stock dividend | Distribution of additional shares of common stock.
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| Preferred Stock | No voting. Dividends are paid first. Dividends are held in arrears, if not completely paid.
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| Earnings per share | Based on the net income of a company. Net income/# of shares outstanding.
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| Basic EPS/Diluted EPS | Includes the options granted to employees.
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| Lender (individual, bank….) | Involved in Bond Issuance. Include companies and individuals who exchange money (to corporation or the government or the municipality) for a series of fixed future payments (interest).
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| Corporate Bond | Issued by a corporation. The rates are generally higher than government bonds and the terms are 10-30 years. Called debenture bonds. Corporate bond interest is taxable to the investor.
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| Government Bond | Treasury bills, treasury notes, treasury bonds – definition depends on the term (#of years). Considered the safest investments and therefore the yield is very low. Interest is not taxable. EE Savings Bonds
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| Municipal Bond | Issued by counties, states, and taxing districts. Yield is based on rating system (Moody’s and S&P). Yield varies based on rating. Interest is not taxable at State and Federal level.
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| Face Value | Payment made when the bond matures.
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| Stated Interest Rate | Rate stated on the face of the bond, rate the interest payment is based upon.
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| Issue Price | Is the amount of money the corporation receives when a bond is issued (results in premium or discount).
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| Market Interest Rate | Rate of interest that investors demand from a bond (results in premium or discount). Is not the Stated Interest Rate. Effective return for the investor.
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| Premium | When the issue price is greater than the face value.
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| Discount | When the issue price is lower than the face value.
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| Loan Covenants | Loan terms that lenders (investors) use to monitor and, in some cases, restrict management decisions. Really good for the investor. Ask to review.
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| Seniority | Debt designated as senior is paid first in the event of a bankruptcy. Next is the subordinated debt. Go all the way down to unsecured. Senior debt will pay a lower interest rate because of lower risk.
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| Convertible Bond | Gives the creditor (investor) the option to accept stock as payment for the outstanding debt (investment in the corporate bond company).
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| Callable Bond | Gives the corporation control over the decision to fully repay the investor before the loan’s maturity.
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| Retirement of Debt | Debt matures.
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| Standard & Poors, Moodys | Bond Rating companies
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| Bond Rating company | Rates Corporate bonds after face value, stated rate, and term have been determined. Rating measures the market’s comfort with bond.
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| Bond Analysis | If market rates are higher than stated rate (risk being equal), then company will receive discount for the bond. If market rates are lower than stated rate (risk being equal), then company will receive premium for bond.
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| Cash flows from operating activities | Cash inflows and outflows directly related to normal course of business plus interest income and expense.
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| Cash flows from investing activities | Cash inflows and outflows related to the purchase or sale of long-term assets.
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| Cash flow from financing activities | Cash inflows and outflows related to financing sources who are external to the company (owners/stock and lenders/debt).
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| Indirect Method | For the operating section of the SCF, adjusts net income to compute change in cash. Investing and financing sections same for both methods.
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| Direct Method | For the operating section of the SCF, identifies cash inflows and outflows from customers, suppliers, operating expenses, interest and income taxes. Investing and financing sections same for both methods.
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