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Understanding Business College of Western Idaho > Chapter 19 > Flashcards

Chapter 19 Flashcards

1
Q

Financial market places for stocks, bonds, and other investments

A

Securities

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2
Q

Two major functions for security markets

A
  1. They assist businesses in finding long term capital financing
  2. Provide private investors a place to buy and sell securities.
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3
Q

Markets that handle the sale of new securities

A

Primary markets

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4
Q

Markets that handle trading of securities between investors

A

Secondary markets

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5
Q

The first public offering of a corporation’s stock.

A

Initial public offering (IPO)

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6
Q

Specialists who assist in the issue and sale of new securities.

A

Investment Banker

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7
Q

Large organizations—such as pension funds, mutual funds, and insurance companies—that invest their own funds or the funds of others.

A

Institutional investors

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8
Q

An organization whose members can buy and sell (exchange) securities for companies and investors.

A

Stock Exchange

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9
Q

Exchange that provides a means to trade stocks not listed on the national exchanges.

A

Over-the-counter market

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10
Q

A nationwide electronic system that communicates over-the-counter trades to brokers.

A

NASDAQ

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11
Q

Federal agency that has responsibility for regulating the various exchanges.

A

Securities and Exchange Commission (SEC)

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12
Q

A condensed version of economic and financial information that a company must file with the SEC before issuing stock

A

Prospectus

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13
Q

using knowledge of information that individuals gain through their position that allows them to benefit unfairly from fluctuations in security prices

A

Insider Trading

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14
Q

Part of a firm’s profits that the firm may distribute to stockholders as either cash payments or additional shares of stock.

A

Dividends

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15
Q

What are 3 advantages to issuing stock

A

Stockholders are owners so they don’t have to be repaid
No legal obligation to pay dividends
Selling stock can improve firms balance sheet since issuing stock creates no debt.

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16
Q

Disadvantages of issuing stocks

A

Stockholders have the right to vote for board of directors
Dividends are not tax-deductible
Stockholders have to be kept happy.

17
Q

The most basic form of ownership in a firm; it confers voting rights and the right to share in the firm’s profits through dividends, if offered by the firm’s board of directors.

A

Common stock

18
Q

Stock that gives its owners preference in the payment of dividends and an earlier claim on assets than common stockholders if the company is forced out of business and its assets sold.

A

Preferred Stock

19
Q

A corporate certificate indicating that a person has lent money to a firm.

A

Bond

20
Q

The exact date the issuer of a bond must pay the principal to the bondholder.

A

Maturity date

21
Q

The payment the issuer of the bond makes to the bondholders for use of the borrowed money.

A

Interest

22
Q

Advantages of bonds

A

Bondholders don’t have ownership the company
Bond interest is tax deductible
Bond payments are temporary
They can repaid prior to maturity date

23
Q

Drawback of bonds

A

increase debt
Interest is a legal obligation
Face value must be repaid on maturity date

24
Q

Bonds that are unsecured (i.e., not backed by any collateral such as equipment).

A

debenture bonds

25
Q

sometimes called mortgage bonds, they require collateral

A

Secured bonds

26
Q

A reserve account in which the issuer of a bond periodically retires some part of the bond principal prior to maturity so that enough capital will be accumulated by the maturity date to pay off the bond.

A

sinking fund

27
Q

A registered representative who works as a market intermediary to buy and sell securities for clients.

A

stockbroker

28
Q

the chance that and investment will. be worth less at some future time than it’s worth now.

A

investment risk

29
Q

Buying several different investment alternatives to spread the risk of investing.

A

Diversification

30
Q

The positive difference between the purchase price of a stock and its sale price.

A

capital gains

31
Q

An action by a company that gives stockholders two or more shares of stock for each one they own.

A

Stock Split

32
Q

Purchasing stocks by borrowing some of the purchase cost from the brokerage firm.

A

buying stock on margin

33
Q

An organization that buys stocks and bonds and then sells shares in those securities to the public.

A

mutual fund

34
Q

The average cost of 30 selected industrial stocks, used to give an indication of the direction (up or down) of the stock market over time.

A

Dow Jones Industrial Average

Understanding Business College of Western Idaho (22 decks)

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