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CSI glossary > vocab 2 > Flashcards

vocab 2 Flashcards

1
Q

Capital loss

A

Selling a sedurity for less than its purchase price. Capital losses can only be applied against capital gains. Surplus lesses can be carries forward indefinitely and used against future capital gains. Only 50% of the loss can be used to offset any taxable capital loss.

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2
Q

Capital market

A

Financial markets where debt and equity securities trade. Capital markets include organized exchanges as well as private placement sources of debt and equity.

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3
Q

Capital stock

A

All shares representing shares of a company, including preferred as well as common. Also referred to as equity capital.

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4
Q

Capitilization or capital structure

A

Total dollar amount of all debt, preferred and common stock, contributed surplus and retained earnings of a company. Can also be expressed in percentage terms.

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5
Q

Capitalize

A

Recording an expenditure initially as an asset on the balance sheet rather than an earnings statement expense, and then writing it off or amortizing it (as an earnings statement expense) over a period of years. Examples include capitalized leases, interest, and research and development.

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6
Q

Carry forward

A

The amount of RRSP contributions that can be carried forward from the previous years. For example, if a client was to place $13,500 in a RRSP and only contributed $10,000, the difference of $3,500 would be the unused contribution room and can be carried forward indefinately.

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7
Q

Cash account

A

A type of brokerage account where the investor is expected to have either cash in the account to cover their purchases or where an investor will deliver the required amount of cash before the settlement date of the purchase.

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8
Q

Cash flow

A

A company’s net income for a stated plus any deductions that are not paid out in actual cash, such as appreciation and amortization, deferred income taxes, and minority interest. For an investor, any source of income from an investment including divedends, interest income, rental income etc.

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9
Q

Cash-Secured put write

A

Involves writing a put option and setting aside an amout of cash equal to the strike price. If the cash-secured put writer is assigned, the cash is used to buy the stock from the exercising put buyer.

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10
Q

Cash value

A

The current market value of a segregated fund contract, less any applicable deferred sales charges or withdrawal fees.

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11
Q

CBID

A

An electronic trading for fixed income securities operating in both retail and institutional markets.

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12
Q

Central Bank

A

A body established by a national Government to regulate currency anf monetary policy on a national-international level. In Cananda, ir is the Bank of Canada; in the united states, the Federal reserve board; in the UK , the Bank of England.

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13
Q

Chinese walls

A

Policies implemented to seperate and isolate persons within a firm who make investment decision from persons within a firm who are privy to undisclosed material information which may influence those decisions. For example, there should should be seperate fax machines for research departments and sales departments.

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14
Q

Class A and B stocks

A

Shares that have different classes sometimes have different rights. Some may have superior claims over other classes or may have different voting rights. Class a stock is often similar to a participating preferred share with a prior claim over class B for a stated amount of dividends orr assets or both, but without voting rights; the class B may have voting rights but priority as to dividends or assets. Note that these distinctions do not always apply.

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15
Q

Clearing corporations

A

A not-for-profit service organization owned by the exchanges and their members for the clearance, settlement and issuance of options and futures. A clearing corporation provides a guarantee dor all options and futures contracts it clears, by becoming the buyer to every seller and the seller to every buyer.

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16
Q

Clone fund

A

Generally a fund that tries to mimic the performance and/or the obvjectives of a successful existing fund within a family of funds. A common example of a clone fund is when a fund company issues an RRSP version of a foreign equity fund, consisting of derivatives managed in a way tha duplicates tha returns of the underlying fund.

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17
Q

Closet indexing

A

A portfolio strategy whereby the fund manager does not replicate the market exactly but sticks fairly clise to the market weightings by industry sector, country or region or by the average market capitilization.

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18
Q

Coincident indicators

A

Statistical date that, on average, change at approximately the same time and in the same direction as the economy as a whole.

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19
Q

Collateral Trust bond

A

A bond secured by stocks or bond of companies controlled by the issuing company, or other securities, which are deposited with a trustee.

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20
Q

Commercial paper

A

Short term negotiable debt securities issued by non financial corporations with terms of a few days to a year.

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21
Q

CompCorp

A

The short-form name of the Canadian life and health insurance compensation corp., a not for profit company whose member firms are issyers of life-insurance contracts and whose mandate is to provide prtection to contract holders against the insolvency of a member company.

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22
Q

Competitive tender

A

A distribution method used in particular by the Bank of Canada in distributing new debt issues. Bids are requested from primary ditributers and the higher bids are awarded the securities for distribution.

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23
Q

Confirmation

A

A printed acknoledgement giving details of a purchase or sale of a security which is normally mailed to a client by the broker within 24 hours of an order being executed. Also called a contract.

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24
Q

Conglomerate

A

A company directly or indirectly operating in a variety of industries, usually unrelated to each other. Conglomerates often aquire outside companies through the exchange of their own shares foe the shares of the majority owners of the outside companies.

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25
Q

Consolidated financial statements

A

A combination of the financial statements of a parent company and its subsidiaries, presenting the financial position as a whole.

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26
Q

Constrained Share companies

A

Include Canadian banks , trust, insurance, broadcasting and communication companies having constraints on the transfer of shares to persons who are not Canadian citizens or not Canadian residents.

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27
Q

Consumer price index

(CPI)

A

Price index which measures the cost of living by measuring the prices of a given basker of goods.The CPI is often used as an indicator of inflation.

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28
Q

Continuation disclosure

A

In ontario, a reporting issuer must issue a press release as soon as a material change occurs in its affairs and, in any event, within ten days.

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29
Q

Contract holder

A

The owner of the segregated fund contract, otherwise known as the contract holder.

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30
Q

Contraction

A

Represents a downturn in the economy and can lead to a recession if prolonged.

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31
Q

Contribution surplus

A

A component of shareholders equity which originates from sources other that earnings, such as the initial sale of stock above par value.

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32
Q

Contributions in kind

A

Transferring secrities into an RRSP. The general rules are that when an asset is transferred there is a deemed disposition. Any capital gain would be reported and taxes paid. Any capital losses that resullt cannot be claimed.

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33
Q

Convertible

A

A bond, debenture or preferred share which may be exchange by the owner, usually fot the cokkon stock of the same company, in accordance with the termsof the conversion privilege. A company can force conversion by calling in such shares for redemption if the redemption price is below the market price.

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34
Q

Conversion price

A

The dollar value at which a convertible bond or security can be converted into common stock.

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35
Q

Conversion privilege

A

The right to exchange a bond for common shares on specifically determined terms.

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36
Q

Convertible Arbritrage

A

A strategy that looks for mispricing between a convertible security and the underlying stock. A typical convertible arbitrage position is to be long the convertible bond and short the common stock of the same company.

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37
Q

Conversion Ratio

A

The number of common shares for which a convertible security can be exchanged. Convertible preferreds and debentures would have a stated number outlined in their prospectus or indenture as to the exchange rate. For example, the conversion ration on a bond may be 25. This means that the bond could be exchange for 25 commpon shares. If the conversion ration is combined into par value, the result is called the conversion price.

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38
Q

Convexity

A

A measure of the rate of change in the duration over changes in yields. Typically, a bond will rise in price more if the yield change is negative than it will fall in price if the yield change is positive.

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39
Q

Correlation coefficient

A

A measure of the relationship between the returns of two securities or two classes of securities.

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40
Q

Corporate note

A

An unsecured promise made by the borrower to pay interest and repay the principal at the specific date.

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41
Q

Cost Accounting method

A

Used when a company owns less than 20% of a subsidiary.

42
Q

Cost of goods sold

A

An earnings statement account representing tthe cost of buying raw materials that go directly into producing finished goods.

43
Q

Cost-push inflation

A

A type of inflation that develops due to the increase of the cost of production. For example, an increase in the cost of oil may contribute to higher input cost for a company and could lead to higher inflation.

44
Q

Country Banks

A

A colloquial term for non-bank lenders who provide short term sources of capital for investment dealers; e.g corporations and other institutional short term investors, none of whom is under jurisdiction of the bank act.

45
Q

Coupon rate

A

The rate of interest that appears on the certificate of a bond. Multiplying the coupon rate times the principal tell the holder the dollar amount of interest to be paid by the issuer until maturity. For example; a bond with a principal of $1000 and a coupon rate of 10% would pay a $100 in interest each year. Coupon rates remain fixed throughout the term of the bond.

46
Q

Covenant

A

A pledge in a bond indenture indicating the fulfilment of a promise or agreement by the company issuing the debt. An example of a covenant may include the promise not to issue anymore debt.

47
Q

Cover

A

Buying a security previously sold short.

48
Q

Covered Writer

A

The writer of an option who also holds a position that is equivalent to, but on the opposite side of the market from the short option position. In some circumstances, the equivalent position may be in cash, a convertible security or the inderlying security itself. The rules for establishing wether a position is covered or not are detailed in the CSI’s Canadian option course

49
Q

Cross on the board

A

Also called a put-through or contra order. When a broker has both an order to buy and to sell the same stockat the same price, a cross is allowed on the exchange floor without interfering with the limits of the pravailing market.

50
Q

Cum dividend

A

With dividend. If you buy shares quoted cum dividend, i.e., before the ex dividend date, you will receive an upcoming already declared dividend. If shares are quoted ex-dividend (without dividend) you are not entitled to the declared dividend.

51
Q

Cub

A

Canadian unlisted board- a web base trade reporting system for unlisted securities. Cum rights: With rights. Buyers of shares quoted cum rights, i.e., before the ex-rights date, are entitled to forthcoming already declared rights. If shares are quoted ex rights (without rights) the buyer is not entitled to receive the declared rights.

52
Q

Cumulative Preferred

A

A preferred stock having a provision that if one or more of its dividends are not paid, the unpaid dividends accumulate in arrears and must be paid before any dividends may be paid on the company’s common shares.

53
Q

Current Account

A

Account that reflects all payments between Canadians and foreigners for goods, services, interest and dividends. Along with the capital account it is a component of the balance of payments.

54
Q

Current assets

A

Cash and assets which in the normal course of business would be converted into cash, usually within a year, e.g. accounts receivable, inventories. A balance sheets category.

55
Q

Current liabilities

A

Money owed and due to be paid within a year, e.g., accounts payable. a balance sheet category.

56
Q

Current ratio

A

Aliquidity ratio that shows a company’s ability to pay its current obligations from current assets. A current ratio of 2:1 is the generally accepted standard.

57
Q

Current yield

A

The annual income from an investment expressed as a percentage of the invstments current value. On stock, calculated by dividing yearly dividend by the market price, on bonds, by dividing the coupon by the market price

58
Q

CUSIP

A

Committee on the Uniform Security identification Procedures is the trademark for a standard system of securities identification (i.e. CUSIP numbering system) and securities description (i.e. CUSIP descriptive system) that is used in processing and recording securities transactions in North America.

59
Q

Custodian

A

A firm that holds the securities belonging to a mutual fund or a segregated fund for safekeeping. The custodian can be either the insurance company itself, or a qualified outside firm based in Canada.

60
Q

Cyclical unemployment

A

The amount of unemployment that rises when the economy softens,firm’s demand for labour moderates, and some firms lay off workers in response to lower sales. It drops when the economy strenghtens again.

61
Q

Cyclical stock

A

A stock in an industry that is particularly sensitive to swings in the economic conditions. Cyclical stocks tend to rise quickly when the economy does well and fall quickly when the contracts. In this way, cyclicals move in conjunction with the business cycle.

62
Q

Dealer market

A

A market in which securities are bought and sold over-the- counter in which dealers acts as principal when buying and selling securities for clients. also reffered to as the unlisted market.

63
Q

Dealer’s spread

A

The difference between the bid and the ask prices on a security.

64
Q

Death benefit

A

The amount that the policy agrees to pay to the beneficiary or the estate on the death of the annuitant.

65
Q

Debenture

A

A certificate of the indebtness of a government or company backed only by the general credit of the issuer and unsecured by mortgage or lien on any specific asset. In other words, no specific assets have been pledged as collateral.

66
Q

Debt

A

Money borrowed from lenders for a variety of corporate purposes. The borrower typically pays interest for the use of the money and is obligated to repay it at a set price.

67
Q

Debt ratios

A

Financial ratios that show how well the company can deal with its bebt obligation.

68
Q

Debt/Equity ratio

A

A ratio that shows whether a company’s borrowing is excessive. The higher the ratio, the higher the financial risk.

69
Q

Deemed disposition

A

Under certain circumstances, taxation rules state that a transfer of property has occured, even without a purchase or sale, e.g., there is a deemed disposition on death or emigration from Canada.

70
Q

Default

A

A bond is in default when the borrower has failed to live up to its obligations under its trust deed with regard to interest, sinking fund payments or has failed to redeem the bonds at maturity.

71
Q

Default risk

A

The risk that a debt security issuer will be unable to pay interest on the prescribed date or the principal at maturity. Default risk applies to debt securities not equities since equity dividendd payments are not contractual.

72
Q

Defensive stock

A

A stock of a company with a record of stable earnings and continuous dividend payments and which has demonstrated relative stability in poor economic conditions.

73
Q

Deferred annuity

A

This type of contract, usually sold by life insurance companies, pays a regular stream of income to the beneficiary or annuitant at some agreed-upon start date in the future. Thr original payment is usually a stream of payments made over time, ending prior to the beginning of the annuity payments.

74
Q

Deferred charges

A

An asset shown on a balance sheet representing payments made by the company for which the benefit will extend to the company over a period of years. Similar to a prepaid expense except that the benefit period is fot a longer period. Deferred charges may include expenses incurred in issuing bonds, organizational expenses or research expenses.

75
Q

Deferred income

A

Results when a company redeives payment for goods or services that it has not yet provided. For example, a prepaid subscription to a magazine.

76
Q

Deferred profit sharing plan

(DPSP)

A

Atrust arrangement whereby an employer distributes a certain percentage of company profits to his/her employees. It must be an arms lenght transaction, and employees are not eligible to make a contribution.

77
Q

Deferred preferred shares

A

A type of preferred share that pays no dividend until a future maturity date.

78
Q

Deferred sales charge

A

The fee charged by a mutual fund or insurance company for redeeming units. it is otherwise known as a redemtion fee or back-end load. These fees decline over time and are eventually reduced to zero if the fund is held long enough.

79
Q

Defined benifit plan

A

A type of registered pension plan in which the annual payout is based on a formula. The plan pays a specific dollar amount at retirment using a predetermined formula.

80
Q

Defined contribution plan

A

A type of registered pension plan where the amount contributed is known but the dollar amount of the pension to be recieved is unknown. Also known as a money purchase plan.

81
Q

Delist

A

Removal of a security’s listing on a stock exchange.

82
Q

Delayed floater

A

A type of variable rate preferred share that entitles the holder to a fixed dividend for a predetermined period of ttime after which the dividend becomes variable. Also known as a fixed-reset or fixed floater.

83
Q

Delivery

A

Delayed delivery- a transaction in which there is a clear understanding that the delivery of the securities involved will be delayed beyond the normal settlement period.

Good delivery- When a security that has been sold os on prper forjm to transfer title by delivery to the buyer.

Regular delivery- Unless otherwise stipulated, sellers of stock must deliver it on or before the third business day after the sale.

84
Q

Demand pull inflation

A

A type of inflation that develops when continued consumer demand pushes prices higher.

85
Q

Demutualization

A

The process by which insurance companies, owned by policy holders, reorganize into companies owned by shareholders. Policy holder become shareholders in an insurance company.

86
Q

Depletion

A

Refers to consumption of a company’s natural resources that are part of a company’s assets. Producing oil, mining and gas companies deal in prodects that cannot be replenished and as such are known as wasting assets. The recording of depletion is a bookeeping enrty similar to depreciation and does not involve the expediture of cash.

87
Q

Deposit-based gaurantee

A

A maturity garantee consisting of seperate garantees and garantee dates for each of the deposits made in a segregated fund policy over time.

88
Q

Depreciation

A

Systematic charges against earnings to write off the cost of a asset over its estimated useful life because of wear and tear through use, action of the elements, or obsolescense. it is a book keeping entry and does not involve the expenditure of cash.

89
Q

Domestic bonds

A

Bonds issued in the currency and country of the issuer.

90
Q

Direct bonds

A

This term is used to describe bonds issued by governments that are first hand obligations of the government itself. See also guaranteed bonds

91
Q

director

A

Person elected by voting common shareholders at annual meeting to direct company policies.

92
Q

Directional hedge fund

A

A type of hedge fund that places on the anticipated movement in the market prices of equities, fixed income securities, foreign currencies and commodities.

93
Q

Director’s circular

A

Information sent to the share holders by the directors of that company that are the target takeover bid. A recommendation to accept or reject the bid, and reasons for this recommendation must be included.

94
Q

Discount rate

A

In computing the value of a bond, the discount rate is the interest rate used in calculating the present value of future cash flows.

95
Q

Discount

A

The amount by which a preferred stock or bond sells below its par value.

96
Q

Discretionary account

A

A securities account where the client has given specific written authorization to a partner, director or qualified portfolio manager to select securities and execute trades for him. See also managed acoount and wrap acct.

97
Q

Disposable income

A

Personal income minus income taxes ans any other transfers to governments.

98
Q

Distressed securities funds

A

A type of hedge fund that invests in the equity or debt of companies that are in or facing bankrupcy or reorganization or are in financial difficulty.

99
Q

Dividend discount model

A

The relationship between a stocks current price and present value of all future dividend payments. it is used to determine the price at which a stock should be selling based on projected future dividend payments.

100
Q

Dividend payout ration

A

A ratio that mesures the amount or the percentage of the company’s net earnings that are paid out to shareholders in the firm of dividends.

101
Q
A

CSI glossary (5 decks)

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