Personal Finance Chapter 8&9
Terms in this set (34)
Considered a high-risk investment that might earn a large profit in a short time.
5 components of risk
1) Inflation Risk 2) Interest Rate Risks 3) Business Failure Risk 4) Financial Market Risk 5) Global Investment Risk
Profits that a company reinvests usually for expansion or to conduct research and development.
How fast an investment can be turned to cash.
Money a business gets from its owner in order to operate. A corporation gets its equity capital from its stockholders, who become owners when they buy shares of stock in the company.
A unit of ownership of a company, and it entitles the owner or stockholder to voting privileges. Shareholders can earn money through dividend payments and/or through stock value increase.
A type of stock that gives the owner the advantage of receiving cash dividends before common stockholders receive cash dividends. If a company fails, preferred stock holders would be paid before common stockholders
A Corporation's written pledge to repay a specific amount of money along with interest.
Government's written pledge to repay a specific amount of money along with interest.
An investment program funded by shareholders that trades in diversified holdings and is professionally managed.
The process of spreading your assets among several types of investments to reduce risk/ Avoid "putting all your eggs in one basket."
Income that is not taxed.
Income that is taxed at a later date.
A capital gain
The profit from the sale of assets such as stocks, bonds, or real estate. Capital gains are taxed according to how long you own an asset over a short or long terms.
A capital loss
The sale of an investment for less than its purchase price. You can subtract up to $3,000 a year in capital losses from your ordinary income. If your losses are greater than $3,000 you can subtract the rest of your loss in later tax years.
A printed document that advertises or describes a school, commercial enterprise, forthcoming book, etc., in order to attract or inform clients, members, buyers, or investors.
All investments-stocks, bonds, and mutual funds that are sold on the stock market.
One that sells its shares openly in stock markets, where anyone can buy them.
A company that issues a stock to a small group of people. A private corporation's stocks are not traded openly in stock markets.
It is considered a safe investment. These stocks are issued by the strongest and most respected companies with a slow and steady growth.
Pays higher-than-average dividends compared to other stock issues.
Issued by a corporation whose potential earnings may be higher than the average earnings. These companies generally don't pay dividends.
Has a market value that tends to reflect the state of the company.
A stock that remains stable during declines in the economy.
A stock from a corporation that has issued a large number of shares of stock and has a large amount of capitalization (total number of stocks and bonds)
$500,000,000 - issued by a company with capitalization of $500 million or less. Considered a higher risk.
Typically sells for less than $1 a share, but it can sell for as much as $10 a share. (risky)
A market condition that occurs when investors are optimistic about the economy and buy stocks. The market has an upward trend.
A market condition that occurs when investors are pessimistic about the economy and sell stock. The market has a downward trend.
The annual dividend of an investment divided by the current market value. (expressed as a %)
A calculation that include the annual dividend as well as any increase or decrease in the original purchase of the investment.
Earnings per share
The corporation's net, or after-tax, earnings divided by the number of outstanding shares of common stock.
Price-earnings (PE) ration
The price of one share of stock divided by the corporation's earnings per share of stock over the last 12 months.
A collection of all the securities held by an investor.
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