Common stock
The most basic form of ownership for a cooperation
Equity financing
Money received from the sale of shares of ownership in a business
Dividend
A distribution of money, stock, or other property that a corporation pays to stockholders
Proxy
A legal form that lists the issues to be decided at a stockholders' meeting and requests that stockholders transfer their voting rights to some individual or individuals
Ex-dividend
A situation when a stock trades "without dividend," and the seller- not the buyer- is entitled to a declared dividend payment
Record date
The date on which a stockholder must be registered on the corporations books in order to receive dividend payments
stock split
A procedure in which the shares of stock owned by existing stockholders are divided into a larger number of shares
Preferred stock
A type of stock that gives the owner the advantage of receiving cash dividends before common stockholders are paid any dividends
Blue chip stock
A safe investment that generally atracts conservative investors
Cyclical stock
A stock that follows the business cycle of advances and declines in the economy
Defensive stock
A stock that remains stable during declines in the economy
Growth stock
A stock issued by a corporation that has the potential of earning profits above the average profits of all firms in the economy
Income stock
An investment that pays higher-than-average dividends
Large cap stock
A stock issued by a corporation that has a large capitalization, in excess of $10 billion
Midcap stock
A stock issued by a corporation that has capitalization of between $2 and $10 billion
Small cap stock
A stock issued by a company that has a capitalization of between $300 million and $2 billion
Micro cap stock
A stock issued by a company that has a capitalization of $300 million or less
Penny stock
Often defined as a stock that sells for $1 or less per share (or in some cases, less than $5 per share)
Earnings per share
A corporation's after-tax income divided by the number of outstanding shares of a firm's common stock
Price-earnings ratio
The price of a share of stock divided by the corporation's earnings per share of stock. P/E
Dividend payout
The percentage of a firm's earnings paid to stockholders in cash
Dividend yield
The annual dividend amount generated by an investment divided by an investment's current price per share
Total return
A calculation that includes the annual dollar amount of dividends as well as any increase or decrease in the original purchase price of the investment
Annualized holding period yield
A yield calculation that takes into account the total return, the original investment, and the time the investment is held
Beta
A measure that compares the volatility associated with a specific stock issue with the volatility of the Standard & Poor's 500 Stock Index
Book value
Determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock
Market-to-book ratio
The current market value of one share of stock divided by the book value for one share of stock
Fundamental analysis
An investment practice based on the assumption that a stock's intrinsic or real value is determined by the company's future earnings
Technical analysis
An investment practice based on the assumption that a stock's market value is determined by the forces of supply and demand in the stock market as a whole
Efficient market hypothesis
An investment theory based on the assumption that stock price movements are purely random
Primary market
A market in which an investor purchases financial securities, via an investment bank or other representative, from the issuer of those securities
Investment bank
A financial firm that assists corporations in raising funds, usually by helping to sell new security issues.
Initial public offering (IPO)
Occurs when a corporation sells stock to the general public for the first time
Secondary market
A market for existing financial securities that are currently traded among investors
Securities exchange
A marketplace where member brokers who represent investors meet to buy and sell securities
Specialist
Buys or sells a particular stock in an effort to maintain an orderly market
Over-the-counter (OTC) market
A network of dealers who buy and sell the stocks of corporations that are not listed on a securities exchange
Nasdaq
An electronic marketplace for approximately 3,200 different stocks
Account executive
A licensed individual who buys or sells securities for clients; also called a stock broker
Market order
A request to buy or sell a stock at the current market value
Limit order
A request to buy or sell a stock at a specified price
Stop order
An order to sell a particular stock at the next available opportunity after its market price reaches a specified amount.
Dollar cost averaging
A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals
Direct investment plan
A plan that allows stockholders to purchase stock directly from a corporation without having to use an account executive or a brokerage firm
Dividend reinvestment plan
A plan that allows current stockholders the options to reinvest or use their cash dividends to purchase stock of the corporation
Day trader
An individual who buys and then later sells stocks and other securities in a very short period of time
Margin
A speculative technique whereby an investor borrows part of the money needed to buy a particular stock
Selling short
Selling stock that has been borrowed from a brokerage firm and must be replaced at a later date
Option
The right to buy or sell a stock at a predetermined price during a specified period of time