Chapter 6 Terms Flashcards
Residual Owners
stockholders of a firm are the owners, who are entitled to dividend income and a prorated share of the firm’s earnings only after all the firm’s other obligations have been met
Routine Decline
a drop of 5% or more in one of the major market indexes, like the Dow Jones Industrial Average (DJIA)
Correction
a drop of 10% or more in one of the major market indexes
Bear Market
a drop of 20% or more in one of the major market indexes
Equity Capital
evidence of ownership position in a firm, in the form of common stock.
Publicly Traded Issues
These are stocks available for anyone to buy or sell on the open market exchanges
Public Offering
an offering to sell to the investing public a set number of shares of a firm’s stock at a specified price
Rights Offering
an offering of a new issue of stock to existing stockholders, who may purchase new shares in proportion to their current ownership
Stock Spin-Off
conversion of one of a firm’s subsidiaries to a stand-alone company by distribution of stock in the new company to existing shareholders
Stock Split
when a company increases the number of shares outstanding by exchanging a specified number of new shares of stock for each outstanding share
Treasury Stock
shares of stock that were originally sold by the company and have been repurchased by the company. Share repurchases are often called “buybacks.”
Classified Common Stock
common stock issued in different classes, each of which offers different privileges and benefits to its holders
Par Value
the stated, or face, value of a stock
Book Value
the amount of stockholders’ equity
Market Value
the current price of the stock in the stock market
Market Capitalization
the overall current value of the company in the stock market
Investment Value
the amount that investors believe the stock should be trading for, or what they think it’s worth
Earnings Per Share
the amount of annual earnings available to common stockholders, stated on a per-share basis
Dividend Yield
a measure to relate dividends to share price on a percentage basis
Dividend Payout Ratio
the portion of earnings per share (EPS) that a firm pays out as dividends
Stock Dividend
payment of a dividend in the form of additional shares of stock
Dividend Reinvestment Plans (DRIPs)
plans where cash dividends are automatically reinvested into additional shares of the firm’s common stock
Blue Chip Stocks
financially strong, high-quality stocks with long and stable records of earnings and dividends. lower risk
Income Stocks
stocks with long and sustained records of paying higher-than average dividends
Growth Stocks
stocks that experience high rates of growth in operations and earnings
Tech Stocks
stocks representing the technology sector of the market
Speculative Stocks
stocks that offer potential for substantial price appreciation, usually due to some special situation such as a new product
Cyclical Stocks
stocks whose earnings and overall market performance are closely linked to the general state of the economy
Defensive Stocks
stocks that tend to hold their value, and even do well, when the economy starts to falter
Small-Cap Stocks
less than $2 billion
Mid-Cap Stocks
$2 billion to $10 billion
Large-Cap Stocks
more than $10 billion
