Investing Test Flashcards
Company
A business or an association usually formed to manufacture or supply products or services for profit.
Corporation
A company legally separate from stockholders who own it and the managers who run it.
Brand
A trademark or distinctive name identifying a product or a company setting it aside from rival products or company.
Common Stock
Shares of a company that do not guarantee a dividend and have more risk and volatility than preferred shares. Common stock holders have the benefit of providing shareholders with the right to vote for the board of directors as well as on issues that come before the board at the annual meeting of
shareholders.
Earnings
revenue - expenses
Investor
Someone who risks funds by purchasing financial products with the hope the investments will increase in value over time.
IPO
Initial Public Offering; the initial sale of stock to the public by investment bankers.
Preferred Stock
Shares of ownership of a company in which the share holder is guaranteed a dividend if one is declared and whose shares are usually not as volatile as common stock. Preferred stock holders do not have voting rights in company elections and decisions.
Private Company
A company that is owned by a person, family, or small group of investors that does not sell shares of stock in the company to the public.
Public Company
A company that is owned by investors who buy shares of stock, partial ownership of the assets of a business, in the corporation usually through one of the stock exchanges.
Risk
The chance of losing all or part of an investment.
Stock
A type of security that signifies ownership in a corporation and represents a claim to a part of the company’s profits or losses.
Tombstone Ad
An announcement appearing in financial publications such as The Wall Street Journal announcing a company’s Initial Public Offering (IPO.)
Underwriter
Typically an investment banker, buys an entire new securities issue from the company or government offering it, and resells the issue as individual stocks or bonds to the public.
Volatility
Indicates how much and how quickly the value of an investment, market, or market sector changes.
Dividend
Part of a company’s profits (earnings) paid periodically to stockholders.
P/E Ratio
Stands for price-to-earnings ratio. The P/E is the relationship between a company’s earnings and its share price. It is calculated by dividing the current price per share by the earnings per share.
Share
A share is a unit of ownership in a corporation or mutual fund.
Volume
The number of shares traded in a company’s stock.
Diversification
An investment strategy in which you spread your investment dollars among industry sectors.
Index
Reports changes, usually expressed as a percentage, in a specific financial market.
Industry
A group of companies that make the same products.
Portfolio
A collection of investments owned by one individual or organization.
Risk Tolerance
An individual investor’s ability to accept loss of some or all of the money they have invested. A person’s risk tolerance is based on a number of factors including age, financial stability,
amount of time before the invested funds are needed for other purposes, etc.
Sector
A group of stocks, often in one industry.
Corporate bonds
Debentures, the most common type of corporate bond, are backed by the general credit of the corporation, while asset-backed bonds are backed by specific corporate assets, such as property or equipment.
Municipal bonds
General obligation bonds are backed by the full faith and credit of the issuer, and revenue bonds by the income generated by the particular project being financed.
Agency bonds
Some government sponsored but privately owned corporations (like Fannie Mae and Freddie Mac), and certain federal government agencies (like Ginnie Mae and Tennessee Valley Authority) issue bonds to raise funds either to make loan money available or to pay off new projects.
U.S. Treasury bonds
US Treasury bonds are backed by the full faith and credit of the United State government. When the government spends more than it collects in taxes and other revenues, it issues Treasury notes, bills, and bonds to borrow the money to pay the difference. Treasury bonds have the longest term or period of time before the loan must be repaid (10 years or more). Treasury bills have the shortest (less than two years).
Default
Failure to pay principal or interest when due.
Fixed-Income Investments
Payment of interest on a set schedule. Fixed-Income Investments include corporate, municipal, agency, and U.S. Treasury bonds.
High-Yield Bonds
To attract investors, the issuers of these bonds pay a higher rate of interest than investment grade bonds with the same maturity.
Maturity
The date when the principal amount of a security is payable.
Interest rate
Compensation paid or to be paid for the use of money.
Investment Grade Bonds
Bonds that are sold by a very reliable issuer, the government, a large corporation, or a government agency that is most likely to repay the loan and the interest as promised.
IOU
I Owe You
Prepayment
The unscheduled partial or complete payment of the principal amount outstanding on a mortgage or other debt before it is due.
Principal
The face amount of a bond, payable at maturity (also referred to as face or par value)
Trade date
The date when the purchase or sale of a bond is transacted.
Investment Grade Bonds
Bonds sold by a very reliable issuer, a large corporation, government, or government agency that is most likely to repay the loan and the interest on specified date as promised.
Stock Holders
Also known as shareholder; ownership of shares in a business.
Earnings
Whatever profits or net income remains after subtracting the company’s expenses from its revenue; a company’s profit.
Growth Stock
Are stocks that attract investors by their potential for growth and higher stock prices (most times by reinvesting their earnings). They offer small or no dividends.
Beta Number
A calculation that helps measure the level of risk in investing in a stock.
Conservative Stock
Fixed income and preferred stocks
Moderate Stock
Stocks that grow faster and higher than stocks of other companies
Speculative Stock
Stocks that are highly unpredictable.
Conservative Risk (Low)
Limited risk on secure stocks and fixed income investments.
Moderate Risk
Stocks that grow faster and higher than stocks of other companies (Medium)
Speculative Risk (High):
Stocks that carry major risks on investments with unpredictable results, but the potential to earn very high returns. When investing in speculative stocks, the investor must realize that while there is a chance of great returns, there is also the possibility for great loss.
Capital Loss
The loss uncured when an investment’s value decreases.
Blue Chip Stock
A stock that has a reputation of being reliable and being profitable in good and bad times.
