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FHCE 4200 Exam 3 Review (Chapter 6)

Terms in this set (37)

Residual Owners
A common stockholder's claim on company wealth is subordinate to the claims of other investors, such as lenders, and thus there is no guarantee that they will receive any return on their investment.
Stock Returns
Take into account both price behavior and dividend income.
Equity Capital
Every share of common stock represents an equity (ownership) position in a company. This is why stocks are sometimes called "equity securities".
Publicly Traded Issues
Shares of stock that are readily available to the general public and that are bought and sold in the open market.
Public Offering
An offering to sell to the investing public a set number of shares of a firm's stock at a specified price.
Rights Offering
Existing stockholders are given the first opportunity to purchase new shares of the company's stock in proportion to his or her current ownership position.
Stock Spin-Off
Conversion of one of a firm's subsidiaries or divisions to a stand-alone company by distribution of stock in the new company to existing shareholders.
Stock Split
When a company increases the number of shares outstanding by exchanging a specified number of new shares of stock for each outstanding share.
Treasury Stock
Shares of stock that were originally sold by the company and have been repurchased by the company. Share repurchases are often called "buybacks."
Classified Common Stock
Common stock issued in different classes, each of which entitles holders to different privileges and benefits.
Market Capitalization
Total number of shares outstanding multiplied by the share price (market value per share).
Round-Lot
100 shares of stock or multiples of 100.
Odd-Lot
Less than 100 shares of stock.
Par Value
Arbitrary (Random) amount assigned to a stock when it is first issued.
Book Value
Stockholders' equity in the firm as reported on the balance sheet.
Market Value
The current price of the stock in the stock market.
Investment Value
The amount that investors believe the stock should be trading for, or what they think it is worth.
Earnings Per Share
the amount of annual earnings available to common stockholders, stated on a per-share basis.
Date of Record (Dividend Decision)
Date on which the investor must be a registered shareholder of the firm (holder of record) to be entitled to a dividend.
Payment Date (Payable Date) (Dividend Decision)
Actual date on which the company will mail dividend checks to holders of record; generally follows the date of record by a week or two.
Ex-Dividend Date (Dividend Decision)
Dictates whether you were an official shareholder and therefore eligible to receive the declared dividend.
Cash Dividend
Dividend paid out in the form of cash.

Tend to increase over time as companies' earnings grow; Average annual increase 3% to 5%
Stock Dividend
Dividend paid out in the form of stock.

The firm pays its dividend by distributing additional shares of stock.
Dividend Yield
A measure of dividends on a relative (percentage) basis rather than on an absolute (dollar) basis.
Dividend Payout Ratio
Measures the percentage of earnings that a firm pays in dividends.
Dividend Reinvestment Plan (DRIP)
A corporate-sponsored program where shareholders can have their cash dividends automatically reinvested into additional shares of the company's stock.
Blue-Chip Stocks
Stocks issued by large, well-established firms with long track records of earning profits and paying dividends.
Income Stocks
Stocks with a long history of regularly paying higher-than-average dividends.
Growth Stocks
Stocks issued by companies experiencing rapid growth in revenues and earnings.
Tech Stocks
Stocks representing the technology sector of the market.
Speculative Stocks
Stocks that offer potential for substantial price appreciation, but that lack sustained records of success.
Cyclical Stocks
Stocks issued by companies whose earnings are closely linked to the overall economy.
Defensive Stocks
Stocks that tend to hold their value, and even do well, when the economy starts to falter.
Large-Cap Stocks
Stocks of large companies with market capitalizations over $10 billion.
Mid-Cap Stocks
Stocks of medium-sized companies with market capitalizations between $2 billion and $10 billion.
Small-Cap Stocks
Stocks of small companies with market capitalizations less than $2 billion.
American Depository Receipts (ADRs)
Are dollar-denominated instruments that represent ownership interest an American Depository Shares (ADSs).
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