Chapter 1 & 2 Flashcards
An accumulation of assets owned by the investor and designed to transfer purchasing power to the future
Portfolio
The purchase of plant, equipment, or inventory.
Investment (in economics)
Acquisition of an asset such as a stock or a bond
Investment ( in lay terms)
A market for buying and selling previously issued securities
Secondary market
The initial sale of securities
Primary market
What something is worth; the present value of future benefits
Value
The process of determining the current worth of an asset
Valuation
The sum of income plus capital gains earned on an investment in as asset
Return
The flow of money or its equivalent produced by an asset; dividends and interest
Income
An increase in the value of a capital asset, such as a stock.
Capital gain
The annual percentage return realized on an investment
Rate of return
The possibility of loss; the uncertainty of future returns
Risk
An investment that offers a potentially large return but is also very risky; a reasonable probability that the investment will produce a loss
Speculation
The ease with which an asset may be bought and sold
Marketability
Moneyness; the ease with which assets can be converted into cash
Liquidity
The informal secondary market for unlisted securities
Over the counter market
Market makers who buy and sell securities for their own accounts
Dealers
The general unit of trading in a security, such as 100 shares
Round lot
A unit of trading, such as 22 shares, that is smaller than the general unit of sale
Odd lot
Prices at which a securities dealer offers to buy and sell stock
Bid and ask
The difference between the bid and the ask prices
Spread
A price that equates supply and demand
Equilibrium price
Over-the-counter market for securities listed on an exchange
Third market
An agent who handles buy and sell order for an investigator
Broker
A person who buys and sells securities for customers; a broker
Registered representative
Earning assets for their income and possible price appreciation
Long position
Expecting that prices will rise
Bullish
Selling borrowed assess for possible price deterioration; being short and a security or a commodity
Short position
Expecting that prices will decline
Bearish
In order to buy or sell at the current market price or quote
Market order
An order placed with a broker to buy or sell at a specified price
Limit order
An order placed with the broker that is canceled at the end of the day if it is not executed
Day order
Order placed with a broker that remains in effect until it is executed by the broker or canceled by the investors
Good-till-cancelled-order
A purchase or sell order designed to limit an investors loss or to assure a profit on a position in a security
Stop order
A statement received from a brokerage firm detailing the sale or purchase of a security and specifying a settlement date
Confirmation statement
The amount an investor must put down to buy securities on credit
Margin
The minimum percentage, established by the Federal Reserve, that the investor must put up in cash to buy securities
Margin requirement
The minimum equity required for a margin account. (The minimum level of funds required before a margin call)
Maintenance margin
The registration of securities in a brokerage firm’s name instead of in the buyers name
Street name
Fees charged by brokers for executing orders
Commissions
A broker who charges lower commissions on security purchases and sales
Discount broker
The sale of borrowed securities in anticipation of a price decline; a contract for future delivery
Short sale
The purchase of securities to close a short position
Covering the short sale
Receipts issued for foreign securities held by a trustee
American depositary receipts
The federal and state laws requiring publicly held firms to disclose financial and other information that may affect the value of their securities.
Full disclosure laws
Required annual report filed with the SEC by publicly held firms.
10-K report
A required quarterly report filed with the SEC by publicly held firms
10-Q report
A document filed with the SEC that describes a change in a firm that may affect the value of its securities
8-K report
Document filed with the SEC by an individual who acquires 5 percent of a publicly heals firms stock
13-D report
The agency that insures investors against failures by brokerage firms
Securities investor protection corporation
A financial institution, such as a commercial bank, that borrows from one group and lends to another
Financial intermediary
The non public sale of securities
Private placement
Firm specializing in the securities of small, emerging companies.
Venture capitalist
An underwriter, a firm that sells new issues of securities to the general public
Investment banker
The first sale of common stock to the general public
Initial public offering (IPO)
The process by which securities are sold to the general public and in which the investment banker buys the securities from the issuing firm
Underwriting
An investment banker that makes in agreement with a firm to sell a new issue of securities and forms the syndicate to market them
Originating house
A selling group assembled to market an issue of securities
Syndicate
Agreement with an investment banker who does not guarantee the sale of a security but who agrees to make the best efforts to sell it
Best-efforts agreeement
Agreement with an investment banker who guarantees a sale of securities by agreeing to purchase the entire issue at a specified price
Firm commitment
Initial document detailing the financial condition of a firm that must be filed with the SEC to register a new issue of securities
Preliminary prospectus
Government agency that enforces the federal securities laws
Securities and Exchange Commission (SEC)
Process of filing information with the SEC concerning a proposed sale of securities to the general public
Registration
