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DeHan Ch. 7 Vocab

Finance Ch. 7 Vocab

TermDefinition
Cumulative Dividends A protective feature on preferred stock that requires preferred dividends previously not paid to be disbursed before any common stock dividends can be paid.
Call Premium The amount in excess of par value that a company must pay when it calls a security.
Income Stocks Stocks of firms that traditionally pay large, relatively constant dividends each year.
Growth Stocks Stocks that generally pay little to no dividends so as to retain earnings to help fund growth opportunities.
Proxy A document giving one person the authority to act for another; typically it gives him or her the power to vote shares of common stock.
Preemptive Right A provision in the corporate charter or bylaws that gives existing common stock holders the right to purchase new issues of common stock on a pro rata basis.
Classified Stock Common stock that is given a special designation, such as Class A, Class B, and so forth, to meet special needs of the company.
Founders' Shares Stock, owned by the firm's founders , that has sole voting rights but generally pays out only restricted dividends (if only) for a specified number of years.
American Depository Receipts (ADRs) "Certificates" created by organizations such as banks; represent ownership in stocks of foreign companies that are held in trust by a bank located in the country where the stock is traded.
Euro stock Stock traded in countries other than the home country of the company, not including the United States.
Yankee Stock Stock issued by foreign companies and traded in the United States.
Market Price (value) The price at which stock sells in the market.
Intrinsic (theoretical) Value The value of an asset that, in the mind of a particular investor, is justified by the facts; it can be different from the asset's current market price, book value, or both.
Growth Rate (g) The expected rate of change in dividends per share.
Required Rate of Return The minimum rate of return on a common stock that stockholders consider acceptable.
Dividend Yield The expected dividend divided by the current price of a share of stock.
Capital Gains Yield The change in price during a given year divided by the price at the beginning of the year.
Expected Rate of Return The rate of return that an individual stockholder expects to receive on a common stock. It is equal to the expected dividend yield plus the expected capital gains yield.
Constant Growth Model Also called the Gordan Growth Model, it is used to find the value of a stock that is expected to experience constant growth.
Non constant Growth The part of the life cycle of a firm in which its growth is either much faster or much slower that that of the economy as a whole.
P/E Ratio The current market price of a stock divided by the earnings per share.
Economic Value Added (EVA) An analytical method that seeks to evaluate the earnings generated by a firm to determine whether they are sufficient to compensate the suppliers of funds-both the bondholders and the stockholders.
Created by: sfrase