vocab 1 Flashcards
Accounts payble
Money owed by a company for goods or services puchased, payable within one year. A surrent liability on the balance sheet.
Acounts receivable
money owed to a company for goods or sevices it has sold, for which payment is accepted within one year. A current asset on the balance sheet.
Accredited investor
An individual or institutional investor who meets certain minimum requirements in income, net worth or investment knowlege. Also reffered to as a sophisticated investor.
Accrued interest
interest accumulated on a bond or debenture since the last interest date.
adjusted cost base
the deemed cost of an asset representing the sum of the amount originally paid plus any additionsl cost, such as brokerage fees and commissions
Advance-decline line
A tool used in technical analaysis to measure the breadth of the market. The analyst takes difference between the number of stocks that increased in value each day less the number that has decreased.
affiliated company
A company with less than 50% of its shares owned by another corporation, or one whose srock, with that of another company, is owned by the same controlling interest.
After aquired clause
Aprotective clause found in a bonds indenture or contract that binds the bond issuer to pledging all subsequently purchased assets as part of the collateral for a bond issue.
Agent
An investment dealer operates as an agent when it acts on behalf of a buyer or a seller of a security and does not itself own title to thye securities at any time during the transaction.
Allocation
The administrative procedure by which income generated by the segregated fund’s investment portfolio is flowed through to the individual contractholders of the fund.
All or none order (AON order)
A type of order in whereby the trader must execute the total numbers of shares as specified by the number on the order before the client will recieve a fill.
Any part order
A type of order in which the client will accept all stock in odd, broken or board lots up to the full amount of the order.
Alpha
A statistical measure of the value a fund manager adds to the performance of the fund managed. If alpha is positive, the manager has added value to the portfolio. If the alpha is negative, the manager has underperformed the market.
Alternative trading systems (ATS)
Privately-owned computerized networks that match orders for securities outside of recognized exchange facilities. Also reffered to as Proprietary Electronic Trading Systems(PETS) or Non-SRO- Operated Trading Systems (NETS)
American option
An option that can be exercised at any time during the option’s lifetime.
Amortization
Gradually writing off the value of an intangible asset over a period of time. Commonly applied to items such as goodwill, improvements to leased premises, or expenses of a new stock or bond issue.
Annual Information form (AIF)
A document which contains information, requires by law, which is not included in a mutual fund or other company’s simplified prospectus or annual financial statements. Investors do not have to be given a copy of the AIF but the prospectus must state that it is available on request.
Annual Report
The formal financial statement and report on operations issued by a company to its shareholders after its fiscal year end.
Annuitant
Person on whose life the maturity and death benefit guarantees are based. It can be the contract holder or someone else designated by the contract holder. In registered plans, the annuitant and contract holder must be the same person.
Annuity
A contract usually sold by life insurance companies that guarantees an in come to the beneficiary or annuitant at some time in the future .The income stream can be very flexible. The original purchase price may be either a lump sum or a stream of payments.
Arbitrage
The simultaneous purchase of a security on one stock exchange and the sale of the same security on another exchange at prices which yield a profit to the arbitrageur.
Arbitration
A method of dispute resolution in which an independant arbitrator is chosen to assist aggrieved parties to recover damages.
Arrears
Interest or dividends that were not paid when due but are still owed. For example, dividends owed but not paid to cumulative preferred shareholders accumulate in a seperate account(arrears). When payment resume, dividends in arrears must be paid to the preferred shareholders before the common shareholders.
Ask
The lowest price a seller will accept for the financial instrument being quoted.
Assets
Everything a company or a person owns or has owed to it. A balance sheet category.
Asset allocation
Apportioning investment funds among different categories of assets, such as cash, fixed income securities and equities. The allocation of assets is built around an investor’s risk tolerance.
Asset mix
The percentage distribution of assets in a portfolio among the three major asset classes; cash and equivalents, fixed income and equities.
Assignment
The random process by which the clearing corporations allocated the exercise of an option to a members firm. A client of that member firm is then chosen to fulfil the obligation taken on when the option was written, by; in the case of a put, purchasing the underlying security from the put holder; or, in the case of a call, delivering the inderlying security to the call holder.
At-The-Money
An option with a strike price equal to ( or almost equal to) the market price of the underlying security.
Attribution Rules
A Canada custom and revenue agency rule stating that an investor cannot avoid paying taxes at their marginal rate by transferring assets to other family members who have lower personal tax rates.
Auction market
Auction in which securities are bought and sold by brikers acting as agents for their clients, in contrast to a dealer market ehere teades are conducted over-the-counter. For example the Toronto stock exchange is an auction market.
Auction preferred shares
A type of preferred share that offers a dividend rate determined by an auction between the holder and the issuer.
Audit
A professional review and examination of a company’s financial statement required under corporate law for the purpose of ensuring that the statements are fair, consistent and conform with Generally Accepted Accounting Principles (GAAP)
Authorized shares
The maximum number of commom (or preferred) shares that a corporation may issue under the terms of its charter.
Automatic Stabilizers
Elements in the economy which mitigate the extremes of the business cycle by running counter to it. Example; government payouts for unemployment insurance in recessionary periods.
Averages
A statistical tool used to measure the direction of the market. The most common average is the Dow Jones industrial average.
Back-end load
A sale charge applied on the redemption of a mutual fund.
Balance of payments
Canada’s interaction with the rest of the world which are captures in both the current and capital accounts. The balance of payments is divided into two components ; the current account and the capital account.
Balance sheet
A financial statement showing a company’s assets, liabilities and shareholders equity on a given date.
Balloon
In some seriel bond issues or mortgages an extra large amount may mature in the final year of the series - the “balloon” payment.
Bank of Canada
Canada’s central bank which exercises its influence in the economy by raising and lowering short term interest rates.
Bank rate
The minimum rate at which the Bank of Canada makes short-termadvances to the chartered bankd, other members of the Canadian Payment Association and investment dealers who trade in the money market.
Bankers Acceptance
A type of short-term negotiable commercial paper issued by a non-financial corporation but guaranteed as to principal and interest by its bank. The guarantee results in a higher issue price and consequent lower yields.
Banking group
A group of investment firms, each of which individually assumes financial responsibility for the part of underwriting.
Bankrupt
The legal status of an individual or company that is unable to pay irs creditors and whose assets are therefore administered for its creditors by a trustee in bankruptcy.
Basis point
A phrase to describe differences in bond yields, with one basis point representing one-hundredth of a percentage point. Thus, if Bond X yields 11.50% and Bond Y 11.75%, the is 25 basis points.
Bear market
A sustained decline in equity prices. Bear markets are usually associated with a downturn (recession or contraction) in the cycle. As a memory aid, it is said that a bear walks with his head down while a bull walks with his head up.
Bearer security
A security (stock or bond) which does not have the owner’s name recorded in the books of the issuing company nor on the security itself and which is payable to the deemed owner of the security.
Beneficial owner
The real owner of shares (or other assets). An investor may own shares which are registered in the name of a broker, trustee or bank to facilitate transfer or to preserve anomymity, but the investor would be the beneficial owner.
Beneficiary
The individual or individuals who have been designated to receive the death benefit. Beneficiaries may be either revocable or irrevocable.
Best Efforts underwriting
The underwiter agrees to use its best efforts to sell a new issue of securities, but does not guarantee the issuing company that any or all of the issue will be sold. The inderwriter acts as an agent for the issuer in distributing the issue to its clients.
Beta
A measure of the sensitivity (i.e. volatility) of a stock or a mutual fund to movements in the overall stock market. the beta for the market is considered to be 1. A fund that mirrors the market, such as an index fund, would also has a beta of 1. Funds or stocks with a beta greater than 1 are more volatile than the market and are therefore riskier. A beta less than 1 is not as volatile and can be expected to rise and fall by less than the overall market.
Bid
The highest price a buyer is willing to pay for the financial instument being quoted.
Blue chip
An active, leading, nationally known common stock with a record of continuous dividend payments and other strong investment qualities. The implication is that the company is of ‘good’ investment value.
Blue sky
A slang term for laws that various Canadian provinces and American states have enacted to protect the public againsts securities frauds. The term blue skyed is used to indicate that a new issue has been cleared by a securities commision and may be distributed.
Board lot
A regular trading unit which has uniformly been decided upon by stock exchanges, in most cases 100 shares
Bond
A certificate evidencing a debt on which the issuer promises to pay the holder a specified amount of interest based on the coupon rate, for a specified lenght of time, and to repay the loan on its maturity. Strickly speaking, assets are pledged as security for a bond issue, except in the case of government “bonds” , but the term is often loosely used to describe any funded debt issue.
Bond contract
the actual legal agreement between the issuer and the bondholder. The contract outlines the terms and conditions - the coupon rate, timing of coupon payments, maturity date and other terms. The bond contract is usually administered by a trust company on behalf of all the bondholders. Also called a Bond indenture or Trust deed.
Bond switches
An investment strategy whereby the investor may sell one bond and replace it with another, to capture some advantage such as yield improvement.
Book value
The amount of net assets belonging to the owners of a business (or shareholders of a company) based on the balance sheet values. Also represents the original cost of the units allocated to a segregated fund contract.
Bottom-up investment approach
An investment approach that seeks out indervalued companies. A fund manager may find companies whose low share prices are not justified. They would buy these securities and when the market fianlly realizes that they are undervalued, the share price rises giving the astute bottom up manager a profit.
Bought deal
A new issue of stocks or bonds bought from the issuer by an investment dealer, frequently acting alone, for resale to its clients, usually by a way of private placement or short form prospectus. The dealer risks its own capital in the bought deal. In the event that the price has to be lowered to sell out the issue, the dealer absorbs the loss.
Bourse de Montreal
A stock exchange that deals exclusively eith non-agricultural options and futures in Canada, including all options that previously traded on the Toronto Stock Exchange and all futures products that previously traded on the Toronto Futures Exchange.
Broker
A securities firm or a duly registered individual associated with one. The broker does not usually own the securities that it buys and sells, but acts as agent for the buyer or seller and charges a commision for its services.
Broker of record
The broker named as the official advisor to a corporation on financial matters; has the right of first refusal on any new issue.
Budget deficit
Occurs when total spending by the government for the year is higher than revenue collected.
Budget surplus
Occurs when government revenue for the year exceeds expenditures.
Bucketing
Confirming a transaction when no trade has been executed.
Bull market
A general and prolonged rising trend in security prices. Bull markets are usually associated with an expansionary phase of the business cycle.
Business cycle
The recurrence of periods of expansion and recession in economic activity. Each cycle is expected to move through five phases - the trough, recovery, expansion, peak, contraction (recession). Given an understanding of the relationship between the business cycle and security prices an investor or fund manager would select an asset mix to maximize returns.
Business risk
The risk inherent in a company’s operations, reflected in the variability in earnings. A weakening in consumer interest or technological obsolescence usually causes the decline. Examples include manufacturers of vinal records, eight track recording tapes and beta video machines.
Buy-Back
A company’s purchase of its common shares either by tender or in the open market for cancellation, subsequent resale or for dividend reinvestment plans.
Buy-ins
If a client or a broker fails to deliver securities sold to another broker within a specified number of days after the value (settlement) date, the receiving brokers may buy-in the securities in the open market and charge the client or the delivering broker the cost of such purchases.
Callable
May be redeemed (called in) upon due notice by the security’s issuer.
Call feature
A clause in a bond or preferred share agreement that allows the issuer the right to “call back” the securities prior to maturity. The company would usually do this if they can refinance the debt at a lower rate ( similar to refinancing a mortgage at a lower rate). Calling back a security prior to maturity may involve the payment of a penalty known as a call premium.
Call option
The right to buy a specific number of shares at a specified price (the strike price) by a fixed date. The buyer pays a premium to the seller of the call option contract. An investor would buy a call option if the underlying stock’s price is expected to rise.
Call price
The price at which a bond or preferred share with a call feature is redeemed by the issuer. This is the amount the holder of the security would receive if the security was redeemed prior to maturity. The call price is equal to par (or a stated value for preferred shares) plus any call premium.
Call protection
For callable bonds, the period before before the first possible call date.
Canadian Deposit Insurance
CDIC
A federal crown corporation providing deposit insurance against loss ( up to $60,000 per depositor) when a member institution fails.
Canada education saving grant
CESG
An incentive for those investing in a Registered education savings plan (RESP) whereby the federal government will make a matching grant of 20% of the first $2000 contributed each year to the RESPof a child under age 18.
Canadian pension plan
CPP
A mandatory contributory pensionplan designed to provide monthly retirement, disability and suvivor benefits for all canadians. Employers and employees make equal contributions. Quebec has its own parallel pension plan Quebec pension plan (QPP).
Canada premium bonds
CPBs
A relatively new type of savings product that offers a higher interest rate compared to the Canada Savings Bond and is redeemable once a year on the anniversary of the issue date or during the 30 days thereafter without penalty.
Canada Savings Bonds
(CSBs)
A type of savings product that pays a competitive rateof interest and that is guaranteed for one or more years. They may be cashed at any time and, after the first three months, pay interest up to the end of the month prior to being cashed.
Canadian council of insurance regulators
The association of insurance regulators in jurisdictions across Canada.
Canadian Depository for Securities Limited
(CDS)
The national securities depository, clearing and settlement centre in Canada that handles settlement for most bonds.
Canadian Derivatives clearing Corporation
(CDCC)
The sole clearing corporation for all exchange- traded options and futures in Canada.
Canadian investor protection fund
(CIPF)
A fund set up by the stock exchanges and the Investment Dealers Association to protect investors from losses resulting from bankruptcy of a member firm.
Canadian Life and Health Insurance Association Incorporated
(CLHIA)
The national trade group of the life insurance industry, which is actively involved in overseeing applications and setting industry standards.
Canadian Originated Preferred Securities
(COPrS)
Introduced to the Canadian market in March 1999, as long-term junior subordinated debt intruments. This type of instrument offers features that resemble both long term corporate bonds and preferred shares.
Canadian payments association
Established in the 1980 revision of the bank act, this association operates a highly automated national clearing system for interbank payments. Members include chartered banks, trust and loan companies and some credit uniions and caisses.
Canada Securities Administrators
(CSA)
An association that is comprised of the administrators of each province that meets regulatory issues of national importance as well as to coordinate the implementation of national policies.
CanadianTrading and Quotation system inc.
(CNQ)
Launched in 2003 as an alternative market place for trading equity securities and emerging companies.
CanDeal
Provides institutional investors with electronic access to federal bond bid and offer prices and yields from its six bank-owned dealers.
CanPx
A joint venture of several IDA member firms and operates as an electronic trading system for fixed income securities providing investors with real time bid and offer prices and hourly trade data.
Capital
Has two distinct but related meanings. To an economist, it means machinery, factory and inventory required to produce other products. To an investor, it may mean the total of financial assets invested in securities, a home and other fixed assets, plus cash.
Capital and financial account
Account which reflects the transactions occurring between Canada and foreign countries with respect to the acquisition of assets, such as land or currency. Along with the current account a component of the balance of payments.
Capital Asset Pricing Model
(CAPM)
A model that looks at the relationship between risk and return. In simple terms, the CAPM says that the return on an asset or security is equal to the risk-free return plus a risk premium.
Capital Cost Allowance
(CCA)
An amount allowed under the income tax act to be deducted from the value of certain assets and treated as an expense in computing an individual’s or company’s income for a taxation year. It may differ from the amount charged for the period in depreciation accounting.
Capital gain
Selling a security for more than its purchase price. For non registered securities, 50% of the gain would be added to income and taxed at the investor’s marginal rate.
Capital leases or capitalized leases
An expenditure recorded on the balance sheet as an asset rather than as an expense.
