Vocab 5

Question 1

Point

Answer 1

Points apply to security prices. In the case of shares, one point indicates $1.00 per share. For bonds and debentures, one point means 1% of par value. Par value is almost universally 100 for bonds. on a 1000 dollar bond, one point represents 1% of the face value of the bond or 10$

Question 2

Policy-based gaurantee

Answer 2

A maturity guarantee based on the date when the policy was first issued. This type of guarantee may involve restrictions on the size of and date of subsequent deposits.

Question 3

Pooling of interest

Answer 3

Occurs when a company issues treasury shares for the assets of another company so that the latter becomes a division or subsidiary of the acquiring company. Subsequent accounts of the parent company are set up to include the retained earnings and assets at book value (subject to certain adjustments) of the acquired company.

Question 4

Potential output

Answer 4

What the economy is capable of producing when all of its available resources of labour, capital and technology are employed to their most efficient use.

Question 5

Preemptive rights clause

Answer 5

A term in a company’s charted that states that if a company wishes to issue additional shares they must give the “right of first refusal” to the existing shareholders. This allows the existing shareholders to maintain their proportionate interest.

Question 6

Poison Pill:

Answer 6

A corporate provision to combat hostile takeovers. When triggered, the poison pill allows shareholders to acquire additional shares at below market price, thereby increasing the number of shares outstanding and making the takeover prohibitively expensive. Such plans are relatively new in corporate Canada and are the subject of some controversy regarding whom they are designed to protect - the shareholders or the management.

Question 7

Prepaid expenses

Answer 7

Payments made by a company for the services to be received in the near future . For example, rents, insurance premiums and taxes are sometimes paid in advance. A balance sheet item.

Question 8

Prescribed Rate

Answer 8

A quarterly interest rate set out, or prescribed by Canada customs and revenue agency under attribution rules. The rate is based on the bank of Canada rate.

Question 9

Present value

Answer 9

The current worth of a sum of money that will be received sometime in the future.

Question 10

Prime rate

Answer 10

The interest rate chartered banks charge their most credit worthy borrowers.