Chapter 1 Flashcards
Debt Financing
`The practice of raising money by issuing debt securities
non-cumulative preferred stock
Preferred stock that doesn’t entitle the shareholder for the past missed payments once the dividend payments resume again
Cumulative preferred stock
Preferred stock, which entitles the shareholders for past missed payments to be paid when the dividend payments resume again.
Creditors
Parties/People that have lent money to the company
participating preferred stock
Adjustable-rate preferred stock
Preferred stock that ties returns and dividends to an outside interest rate, most often a treasury bill rate
Established customer
A customer who has had her assets with the firm for atleast 1 year and has purchased unsolicited penny stocks from atleast 3 different issuers on 3 separate days
American Depository Receipts
A certificate issued by a U.S. Bank for the purpose of trading a specified number of shares of a foreign corporation in the U.S. stock market.
Derivative Suit
A lawsuit that shareholders may file on behalf of the corporation against the directors to safeguard their rights
Convertible preferred stock
Preferred stock that allows the holder t convert preferred shares into common shares at a set conversion ratio.
Risk-free rate of return
Return on investing in U.S. Treasuries or other risk free investments
Conversion Parity
The stock price at which a convertible bond can be exchanged into equity without gain or loss to the shareholder
Authorized shares
Shares that a corporation is authorized to issue
Physical certificate
A printed stock certificate that represents an ownership in the company
Direct Registration System (DRS)
An electronic system of registration where the securities are recorded on the issuer’s books in book-entry form in the owner’s name.
Selling group
A group of brokers-dealers who help sell the share of an offering to the investors. However, they are under no obligation to buy the bonds.
Stock power
Assignment of a security on a sheet of paper detached from the stock certificate authorizing a third party with the power of substitution
Secondary market
The market where the previously issued securities are bought and sold by public at large
Debt securities
Securities that allow the issuing companies to borrow money from investors. For example, bonds
Callable preferred stock
A class of preferred stock that gives the issuing company the right to call in its shares at a prescribed price after a prescribed date.
Underwriter
A financial institution that assist the issuer in issuing new securities by purchasing the company’s shares and reselling them to the investors.They write the IPO.
Warrant
A financial instrument which gives the holder the right to purchase the securities from the issuing company within a specified time frame at a specified price
Rescission
Preemptive right
It is a stockholder’s right to maintain her current share of ownership in a company by purchasing a proportionate amount of securities in a rights offering.
