SIE chapter 2 Flashcards
common stockholders have the right to
vote for corporate directors
Proxy
an absentee ballot made available for shareholders who want to vote but can’t attend the meeting
preempt means
to put oneself in front of another
growth(capital gains )
an increase in the market price of securities is capital appreciation
income
this is in relation to dividends which can be a significant source of income for invests
limited liability
in the event of the corporation bankruptcy, personal assets are not at risk
market risk
the chance that a stock will decline in price
decreased or no dividend income
a risk of stock ownership is that dividend income could decrease or ceasing entirely if the company loses money
low priority at dissolution
if a company enters bankruptcy, the holders of its bonds and preferred stock have priority over common stockholders
in owning common equity
the investor stands to lose current income through dividend reduction or suspension, as well as capital loss, should the market price decline. In return however, the shareholder has limited liability; that is the liability is limited to the amount invested
bankruptcy
general term for a federal court procedure that allows both individuals and businesses to get relief from their debts or make a plan to repay their creditors
reorganization vs liquidation
liquidation would be to liquidate all assets for repayment. Reorganization allows to to retain property and continue doing business and stick to a repayment plan for some time frame
in corporate liquidation priority who is paid last
common shareholders
preferred shareholders generally have
no voting rights nor do they have preemptive rights
all corporations issue____ but not all issue ___
common stock
preferred stock
dividend preference
when the board of directors declares dividends, owners of preferred shares must be paid prior to any payment to common shareholders
priority at dissolution over common stock
if a corporation goes bankrupt, preferred stockholders have a priority over common stockholders on the assets remaining after creditors have been paid
(risk of owning preferred stock) purchase power risk
the risk that inflation will make it so that your money will not be able to buy as much in the future as it does today
(risk of owning preferred stock) interest rate sensitivity
when interest rates rise, the value of preferred shares declines
(risk of owning preferred stock) decreased or no dividend income
possibility of decreased or no dividend income
(risk of owning preferred stock) priority at dissolution
even though preferred stock holders have priority over common stockholders, they are still behind creditors
straight(non cumulative)
has no special features beyond the states dividend payment, missed dividends are not paid to the holder
cumulative preferred stock
accrues payments due to its shareholders in the event dividends are reduced or suspended.
callable preferred
(redeemable) corporations issue this which a company can buy back from investors at a stated price at a specified date.
convertible preferred
a preferred stock is convertible if the owner can exchange shares for a fixed number of shares of the issuing corporations common stock
adjustable rate preferred
some preferred stocks are issued with adjustable dividend rates
participating preferred
offers its owners a share of corporate profits that remain after all dividends and interest due other securities are paid
control securities
those owned by directors, officers, or persons who own or control 10% of more of the issuers voting stock
restricted securities
those acquired through some means other than a registered public offering.
penny stocks
unlisted security trading for less than $5 per share
the provisions of the penny stock rules apply on to
solicited transactions like those that might occur during a cold call. Unsolicited transactions are exempt.
established customer
has held an account with a broker dealer for at least one year (and has made a deposit of funds or securities)
has made at least 3 penny stock purchases of different issuers on different days
debt capital(bonds) represents
money borrowed by corporations, the federal gov, or local governments from investors
term bond
principal of whole issue matures at once
serial bond issue
schedules portions of the principal to mature at intervals over a period of years until the entire balance has been repaid
balloon
issuer repays part of the bonds principal before final maturity but pays off the major portion of the bond at maturity
coupon
represents the interest rate the issuer has agreed to pay the investor
interest is generally paid on a
semi-annual basis
a bonds yield expresses
the cash interest payments in relation to the bonds balue
yield to maturity
reflects the annualized return of the bond if held to maturity
call feature
allowed the issuer to call in a bond before maturity
put feature
an investor can put the back to the issuer before it matures
convertible
converting bond into shares of common stock
t bills
short term debt obligations of us government (1 year)
treasury notes
direct debt obligations of us government (2-10 years)
treasury bonds
direct debt obligations of us government(10-30 years)
treasury receipts or treasury stripes backed by us gov
stripes are and receipts are not
the settlement of agency issued securities occurs regular way-
two business days
generally known as asset-backed or mortgage backed securites
farm credit system
national network of lending institutions that provides agricultural financing and debt
government national mortgage association
governmental owned corporation that supports the department of housing and urban development
federal home mortgage corp
public corporation created to promote the development of a nationwide secondary maket in mortgages by buying residential mortgages from financial institutions and packagings them into mortgage backed securities for sale to investors
federal national mortgage association
publicaly held corporation that provides mortgage capital
mortgage bond
borrowing money backed by real estate and physical assets of the corporation
equipment trust certificates
used by railroads and other transportation companies to financial their equipment
collateral trust bonds
when a corporation wants to borrow money and deposits its own securities into a trust to use as collateral
debentures
debt obligation of the corporation backed only by its word and general creditworthiness
debentures can be safer than secured bonds of less creditworthy companies why
because the credit standing can be so good for issuers
guaranteed bonds
backed by a company other than the issuing corporation such as a parent company
don’t be fooled by the word guaranteed when it comes to guaranteed bonds because
these are unsecured debt securities
income bonds used when
used when a company is reorganizing and coming out of bankruptcy
not suitable for investor seeking income
municipal securities
ether issued by state or local governments, us territories , authorities, and special districts
General obligation bonds (full faith/credit issues)
municipal bonds issued for capital improvements that benefit the entire community
Ad valorem
a tax whose amount is based on the value of a transaction or of property.
revenue bonds
used to finance any municipal facility that generates sufficent income
municipal anticipation notes
short term securities that generates funds for a municipality that expects other revenues soon
build america bonds
municipal issue thats taxable
local government investment pools
states establish these to provide other government entitities with short term investment vehicle to invest funds
achieve a better life experience accounts
tax advantaged savings accounts for individuals with disabilities and their families
capital market
serves as a source of intermiediate term to long term fiancing usually in the form of equity or debt securities with maturities of more than one year
money market
provides very short term funds to corporations, banks, BDS, government municipalites, and us fed gov
bankers acceptance
postdated check or line of credit
