1.1 Equity Securities Flashcards
The securities industry is fundamentally about two things. What are those two things?
Raising money - FINANCING or finding sources of money
Investing money- Allocating money in the expectation of some benefit/ return in the future. OR Owning an asset or an item with the goal of generating income from the investment or the appreciation of your investment which is an increase in the value of the asset over a period of time.
When a company wants to raise money, it can offer investors two options.
- Sell partial ownership in the business. Company does this by issuing equal units of ownership called SHARES or STOCK
- Issue debt securities. Like a loan or IOU, in exchange for money from an investor, the company agrees to pay the investor a specific amount of money in the future and also to pay the investor periodic interest along the way. BONDS are a common type of debt security
The more shares a company sells to investors…
The more money it raises
Selling partial ownership in the form of shares or stock is called?
EQUITY FINANCING
The purchased shares or stock are called?
EQUITY SECURITIES
EQUITY means?
What is left over after all debts have been paid.
EQUITY is the portion of the company that is owned by the…?
INVESTORS
DEBT FINANCING
When a company raises money by issuing debt securities.
Governments cannot sell ownership, so instead they…?
Issue debt securities such as BONDS to raise money.
Treasury Bond
A bond issued by the federal government
Municipal bond
A bond issued by a city, state or county
EQUITY =
OWNERSHIP
Issuing Bonds
Borrowing money from investors by selling them debt securities
Buying an equity security
Purchasing ownership
