Chapter 8 conceptual Flashcards
Equity without priority for dividends or in bankrupty
common stock
a grant of authority by a shareholder allowing another individual to vote his or her shares
proxy
payments by a coporation to shareholders, made in either cash or stock
dividends
- right to vote for directors
- the right to share proportionally in dividends paid
- the right to share proportionally in assets remaining after liabilities have been paid in a liquidation
- the right to vote on stockholder matters of great importance, such as a merger. voting is usually done at the annual meeting or a special meeting
shareholder rights
the right of stockholders to share proportionally in any new stock sold
- (a company that wishes to sell stock must first offer it to the existing stockholders before offering it to a general public)
preemptive right
are dividends received by individuals shareholders taxable
yes
stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without voting rights
preferred stock
dividends payable on preferred stock are either cumulative or noncumulative
cumulative
accumulated (past) preferred dividends and the current preferred dividends must be paid
before the common shareholders can receive anything
the market in which new securities are originaly sold to investors
primary market
(new issue market)
(companies sell securities to raise money)
the market in which previously issued securities are traded among investors
secondary market
an agent who buys and sells securities from inventory
dealer
(maintains an inventory and stands ready to buy and sell at any time)
the price at which the dealer is willing to sell
ask price
the price the dealer is willing to pay
bid price
the difference between the bid and ask prices
spread
(basic source of dealer profits)
an agent who arranges security transaction among investors
broker
(does not maintain an inventory)
is the owner of a tardind licence on the NYSE
members
the flow of customer orders to buy and sell securities
order flow
NYSE members who act as dealers in particular stocks
Designated market makers (DMMs)
what are the 2 differences between NYSE and Nasdaq
- Nasdaq is a computer network and has no physical location
- Nasdaq has a multiple market marker system rather than a DMM system
securities market in which trading is almost exclusively done through dealers who buy and sell for their own inventories
over the counter (OTC) market
(Nasdaq is an OTC market)
the highest bid quotes and the lowest ask quotes for a security
inside quotes
a website that allows investors to trade directly with each other
electronic comminications networks (ECNs)
