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57 Cards in this Set
- Front
- Back
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The economy
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is the large set of inter-related production and consumption activities thataid in determining how scarce resources are allocated. This is also known as an economic system.
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Industries
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A classification that refers to a group of companies that are related in terms oftheir primary business activities. In modern economies, there are dozens of differentindustry classifications, which are typically grouped into larger categories called sectors.
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Stocks
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securities that represent a portion of ownership in the corporation that issued thestock. Also called equities.
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Securities business
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a financial instrument that represents anownership position in a publicly-traded corporation (stock), a creditor relationship withgovernmental body or a corporation (bond), or rights to ownership as represented by anoption
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Averages
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a number expressing the central or typical value in a set of data, in particular the mode,median, or (most commonly) the mean, which is calculated by dividing the sum of the values in the setby their number.
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Index firm
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A business organization, such as a corporation, limited liability company or partnership. Firmsare typically associated with business organizations that practice law, but the term can be used fora wide variety or business operation units.
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Brokerage firm
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is a financial institution that facilitates the buyingand selling of financial securities between a buyer and a seller
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Business cycle
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The fluctuations in economic activity that an economy experiences over a period of time.A business cycle is basically defined in terms of periods of expansion or recession.
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Coincident indicator
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A metric which shows the current state of economic activity within a particulararea.
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Deficit
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The amount by which a resource falls short of a mark, most often used to describe a differencebetween cash inflows and outflows.
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Discount rate-
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The interest rate charged to commercial banks and other depository institutions for loansreceived from the Federal Reserve Bank’s discount window
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Fiscal Policy
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- Government spending policies that influence macroeconomic conditions.
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Split shares
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bring shares into a more affordable range for investor. The company thinks its price/ worthwill increase.
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Gross domestic product-
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is the monetary value of all the finished goodsand services produced within a country's borders in a specific time period
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Lagging indicators
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A measurable economic factor that changes after the economy has already begun tofollow a particular pattern or trend.
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Leading indicator
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A measurable economic factor that changes before the economy starts to follow aparticular pattern or trend.
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Monetary Policy
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Monetary policy is the actions of a central bank, currency board or other regulatorycommittee that determine the size and rate of growth of the money supply, which in turn affectsinterest rates.
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Bottom up approach
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assumes that individual companies can do well even inan industry that is not performing very well.
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Top-down approach
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also known as autocratic leadership, isthe process of upper management or the chief executive officer reaching independent conclusions thatchange or improve the workplace or business systems.
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Monopolies
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A situation in which a single company or group owns all or nearly all of the market for agiven type of product or service.
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Oligopolies
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A situation in which a particular market is controlled by a small group of firms.
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Pure competition
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is a term that describes a market that has a broad range ofcompetitors who are selling the same products.
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Imperfect competition
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is a type of market structure showing some but not allfeatures of competitive markets
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Beta
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is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison tothe market as a whole.
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General dividend valuation model-
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Mathematical formula used generally by stockbrokers to puta price on a firm's shares, based on the firm's potential dividend level
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Economic leading indicators
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stock price/SandP 500.
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Dividend growth mode
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is a valuation method which takes intoconsideration dividend per share and its expected growth.
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Equity risk premium
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, is the excessreturn that investing in the stock market provides over a risk-free rate, such as the returnfrom government treasury bonds
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Earnings valuation model
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A method for determining a company's worth thatis based on book value and earnings.
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Growth companies-
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Any firm whose business generates significant positive cash flows or earnings, whichincrease at significantly faster rates than the overall economy
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Growth stock
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- Shares in a company whose earnings are expected to grow at an above-average raterelative to the market. Also known as a "glamor stock".
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Price earnings ratio
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a ratio for valuing a company thatmeasures its current share price relative to its per-share earnings.
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Required state of return
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The minimum annual percentage earned by an investment that will induceindividuals or companies to put money into a particular security or project.
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Risk free rate
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The theoretical rate of return of an investment with zero risk.
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Valuation
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The process of determining the current worth of an asset or company
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Primary Markets
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Involvethe sale of new securities, ones that are coming from the issuing corporationto the investment bank.) A market that issues new securities on an exchange
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Secondary Markets
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Providea forum for the trading of securities after their initial sale; a stockexchange.) A market where investors purchase securities or assets from otherinvestors, rather than from issuing companies themselves.
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Investment Bankers
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providethe liquidity to firms by acting as intermediaries between investors andcompanies
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Best Effort Underwriting
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InvestmentBanker provides a best effort at selling the entire issue. The remainder isrepurchased by the firm.
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Stand-By Underwriting
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standbyas firm does issuing
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Un-Syndicated Offering
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DirectPlacement - Issuing firm sells shares directly to institutional investorsbypassing the underwriters
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Secondary Distributors
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Saythat a Mutual Fund or wealthy individual wants to unload large number of sharesand they need help selling.
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Cash Account
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plainvanilla account where you deposit cash to buy stocks, bonds, mutual funds, etc.It is the most common.
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Margin Account
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Abrokerage account in which the broker lends the customer cash to purchasesecurities.
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Full-Service Firm
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introducesthe investor to a broker, a broker that 'knows his client,' has spoken to hisclient, understands the client's account, risk tolerances,
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Discount Firm
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offersa commission discount because they do not offer individual advice to theaccount holder
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Long:
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Thebuying of a security such as a stock, commodity or currency, with theexpectation that the asset will rise in value
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Making money off of rising prices
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1) You own the stock (bond, etc.)
2) Why did you buy it? (buying & sellingprofitable trade “round trip”) a. Buy (low) b. Sell (high) 3) Limited Liability a. Unlimited gain b. Limited loss (limited liability: could fall tozero) |
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Short
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The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.
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Making money off of falling prices:
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1) You don’t own the stock (bond, etc.)2) Why did you short it? (selling & buyingprofitable trade “round trip”)
a. Sell (high) b. Buy (low) 3) Selling borrowed securities 4) No time limit on buying them back 5) Must eventually return borrowed securities 6) Liability a. Limited gain (example: sell for $100 can onlymake $100 when price drops) b. Unlimited loss (example: sell for $100 if pricerises you lose everything gained) |
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Market Order
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: The most common order
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Limit Order
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Sets sell or buy limits that an investor will accept
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Stop Order
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Protect a profit or stop a loss
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Short Interest
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The quantity of stock shares that investors have sold short but not yet covered or closed out
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Days to Cover
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How many days it would take under the normal trading volume to cover the short sales.
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Short Squeeze:
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When the market rises and short trades start buying to remove their short position/trade to not lose money
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Short Against the Box (Hedging):
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Holding a long position and a short position simultaneously in the same stock
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