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Chapter 4 SIE

Conversion Price Price at which a convertible bond or other convertible security can be exchanged for common stock
conversion ratio formula that determines the number of shares of common stock that will be received in exchange for each convertible bone or preferred stock during a conversion
Debentures unsecured bonds backed only by the general credit of the issuer, rather than a specific lien on particular assets
Debt instruments loan obligations that enable companies to raise capital with an agreement to repay the lender according to the terms of a contract; examples include notes and bonds
dividend portion of a corporation's profits paid to shareholders. They are normally paid in cash or additional stock, and have to be declared.
leverage the use of borrowed money, or debt, to increase the potential return of an investment
liabilities a company's financial obligations, such as money owed to lenders, suppliers and employees
liquidation the process by which a company sells its assets to dissolve the business
proxy voting a type of voting that enables an investor to vote on shareholder issues without being physically present at a shareholder meeting by authorizing another party to vote on his behalf
Public Offering Price (POP) price of a new issue of securities at the time the issue is first offered to the public
retained earnings a corporation's cumulative earnings that have not been distributed to its shareholders
subscription price price at which the current shareholders of a company are authorized to buy its common stock in a rights issue
Security a financial instrument that trades for value based on the expectation of profit from the efforts of third party management
Risk the possibility of an investment losing or not gaining in value
Principal a person actively engaged in the management of the member firm's business
capital structure the sum of all issued securities of a corporation
Equity securities also known as stocks, represent a portion of ownership in a corporation
Common stock a company stock that does not pay a specified dividend, it is a junior security.
Authorized Shares total number of shares authorized in the corporate charter
Issued shares portion of total authorized shares that are actually sold to investors
unissued shares authorized shares that have not yet been sold
treasury stock stock that has been issued and subsequently bought back by the corporation.
Outstanding stock the number of shares in the hands of investors at any given time. It is calculated by subtracting the number of shares of treasury stock from the number of issued shares.
Market Capitalization the number of outstanding common shares multiplied by the market price per share
statutory voting shareholders have one vote per share per candidate, but the votes must be spread evenly among the candidates, that is, the same number of votes for each vacancy
cumulative voting shareholders get one vote per candidate, but they are able to divide the votes among them in any way they wish. Designed to benefit the small shareholder.
stock certificates legal documents that certify the stockholder's share ownership. It identifies the issuing corporation, the registered owner, the transfer agent and registrar, the number of shares represented by the certificate, and the authorized signatures
Trade date when a customer places an order to buy a security with his broker/dealer. Stocks settle 2 business days after trade date (T+2)
settlement date when the purchase is completed and the customer becomes the legal owner of the security
declaration date the date on which the board of directors declares the dividend and it becomes a current liability
ex-dividend date the first trade date on which the stock purchaser is not legally entitled to receive the dividend. It is 1 day prior to the record date. Set by the SRO.
Record date the date on which the corporation consults the stockholder record.
payable date the date on which the corporation actually distributes dividends to those shareholders of record
dividend yield also known as current yield, is a method for measuring a stockholder's return on investment. It is found by dividing the annual dividend by the current share price.
Preemptive right the right to maintain the same percentage of ownership in a corporation when new shares are issued at a fixed price.
Subscription price the offering price of a stock to shareholders exercising preemptive rights.
cost basis the original purchase price of a security, inclusive of sales charges.
senior securities bonds and preferred stock of a corporation
par value of preferred stock $100
Preferred dividend represents the maximum dividend that the stock will pay.
cumulative preferred also called dividend preferred, is a stock that offers the stockholder any unpaid dividends in arrears.
straight preferred (noncumulative) pays a stated dividend but does not catch up dividends that may have gone unpaid during any given period.
participating preferred provides investors with the benefit of receiving dividends in addition to the stated dividend. They may participate in excess earnings remaining after the company meets its normal interest and dividend obligations.
convertible preferred allows owners to convert or exchange their preferred stock for a designated number of common shares.
Conversion price the price that would be feasible for the preferred shareholder or bondholder to convert common stock
conversion ratio the number of shares that will be received for each share of preferred stock or corporate bond it is 1:5
Stock split existing shares are changed in number and the price per share adjusted proportionately, there is no net dollar change
dilution the reduction in earnings per share and proportional ownership that occurs when holders of convertible securities convert those securities into common stock
Right a security giving shareholders the opportunity to purchase new shares issued by the corporation prior to the shares being offered to the public. They are issued only for a short period of time.
Exercise price the price at which the investor can purchase the newly issued shares and is generally lower than the current market price
Warrant the right to purchase securities at a specified price referred to as the subscription price. They can lower the interest rate on a bond issued by a corporation, and are long-term instruments.
American Depositary Receipts (ADRs) certificates issued by a U.S. commercial bank. They represent ownership of a foreign company's shares listed on a foreign exchange. They carry currency risk for the investor.
Created by: emulligan
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