Financial Terms - Stocks

Front 1

_____ is having a current price above face value. This would generally be the case if the coupon paid on the bond exceeds the discount rate applicable, or if market interest rates fall after the bond is bought. If the bondholder had bought at a price _____, then he/she will suffer a capital loss upon maturity since the bond will only be redeemed at face value.

Back 1

above par

Front 2

_____ is the idea that creditors' claims take precedence over shareholders' claims in the event of a liquidation or reorganization. Shareholders are compensated only after debtors have been fully paid off.

Back 2

absolute priority rule

Front 3

____ is the ratio of current assets less inventories to total current liabilities. This ratio is the most stringent measure of how well the company is covering its short-term obligations, since the ratio only considers that part of current assets which can be turned into cash immediately (thus the exclusion of inventories). The ratio tells creditors how much of the company's short term debt can be met by selling all the company's liquid assets at very short notice.

Back 3

acid-test ratio

Front 4

_____ is capital contributed to a corporation by investors on top of the par value of capital stock. In other words, the money that a company gets from potential investors in addition to the stated value of the stock. also called contributed capital or paid-in capital.

Back 4

additional paid-in capital

Front 5

____ is preferred stock whose dividend changes, usually quarterly, according to changes in the Treasury Bill rate or a similar benchmark. The changes in the dividend are determined by a pre-set formula. Like floating rate debt, _____ tends to have stable prices, since the dividend amount can be can changed to offset price changes.

Back 5

adjustable rate preferred stock

Front 6

An ____________ negotiable certificate issued by a U.S. bank representing a specific number of shares of a foreign stock traded on a U.S. stock exchange. ADRs make it easier for Americans to invest in foreign companies, due to the widespread availability of dollar-denominated price information, lower transaction costs, and timely dividend distributions.

Back 6

ADR (American Depository Receipt)

Front 7

_________ is a coefficient which measures risk-adjusted performance, factoring in the risk due to the specific security, rather than the overall market. A high value for _________ implies that the stock or mutual fund has performed better than would have been expected given its beta (volatility).

Back 7

alpha

Front 8

__________ is the extent to which a company's net assets cover its debt obligations and/or preferred stock. Expressed in dollar terms or as a percentage.

Back 8

Asset coverage

Front 9

An __________ is a stock which is believed to be undervalued based on the value of assets the company holds. Specifically, the net value of the company's assets are higher than the company's market capitalization.

Back 9

asset play

Front 10

A _____________ is stock certificate which is the property of whoever happens to be in possession of it at any given time. Accordingly, no record of ownership is maintained by the issuing company.

Back 10

bearer share

Front 11

____ is a quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market, usually the S&P 500. Specifically, the performance the stock, fund or portfolio has experienced in the last 5 years as the S&P moved 1% up or down. A _______ above 1 is more volatile than the overall market, while a ______ below 1 is less volatile.

Back 11

Beta

Front 12

A _______ is a large amount of securities being traded, typically at least 10,000 shares of stock or $200,000 in bonds. Normally, only institutional investors undertake such large trades. __________ can affect the market price of the security, depending on the liquidity of the market.

Back 12

block trade

Front 13

An ___________ is a less formal alternative to a board of directors, most commonly used by small companies. A company's ________ usually consists of 3 to 7 members, and meets periodically but doesn't have legal responsibility for operations.

Back 13

board of advisors

Front 14

_______ are individuals elected by a corporation's shareholders to oversee the management of the corporation. The members of a _______________ are paid in cash and/or stock, meet several times each year, and assume legal responsibility for corporate activities.

Back 14

Board of Directors

Front 15

_________ is stock in a short sale, which the short seller takes on loan from his/her broker and then sells in the open market. The risk involved in such a strategy is that the price of the ________________ might rise in the market, and the short seller may have to buy the stock at a higher price than he/she had sold it, taking a loss on the trade.

Back 15

Borrowed stock