Chapter 8 Terms

Question 1

shares or portions of ownership in a corporation

Answer 1

Stock

Question 2

the most prevalent type of stock that companies offer, represents true ownership of the firm

Answer 2

Common stock

Question 3

a distribution of a portion of the corporation’s profits

Answer 3

Dividends

Question 4

stock that carries less risk of loss because preferred shareholders have claim to the company’s assets before the common shareholders if business losses force the corporation to close

Answer 4

Preferred stock

Question 5

a person who generally works for a brokerage company and who specializes in buying and selling stocks on behalf of his clients

Answer 5

Stock broker

Question 6

the fee paid for a stockbroker’s services

Answer 6

Commission

Question 7

stock traders physically present on the trad­ing floor to execute requested trades

Answer 7

Floor trades

Question 8

an electronic message board used to indicate stock prices and transactions

Answer 8

Tape

Question 9

the initial sale of a company’s stock through an investment bank

Answer 9

Initial public offering (IPO)

Question 10

a location at which stock is traded

Answer 10

Stock exchange

Question 11

the most well-known and reputable stock market in the world

Answer 11

New York Stock Exchange (NYSE)

Question 12

the National Association of Securities Dealers Automated Quotations, the largest exchange that does not have a trading floor

Answer 12

NASDAQ

Question 13

a lesser-known but still reputable American stock market

Answer 13

American Stock Exchange (Amex)

Question 14

a group of stocks that analysts use to help identify stock trends in specific industries

Answer 14

Stock index

Question 15

the most well-known American stock index

Answer 15

Dow Jones Industrial Average (DJIA)

Question 16

a commonly reported investment index that includes five hundred stocks and is intended to give an even broader perspective on business in the United States than the DJIA

Answer 16

Standard and Poor’s 500 (S&P 500)

Question 17

privately managed stock portfolios

Answer 17

Mutual funds

Question 18

a collection of stocks from different individual corporations

Answer 18

Stock portfolio

Question 19

actively buying and selling stocks for the purpose of taking advantage of short-term price changes

Answer 19

Speculation

Question 20

stock prices rising in an industry or across the entire market simply because of expectations and rising in excess of the corporations’ true value

Answer 20

Speculative bubble

Question 21

a govern­mental agency founded to ensure that corporations pro­vide accurate and current information to the public about their financial situations and their business dealings

Answer 21

Securities and Exchange Commission (SEC)