FIN Chapter 12

market

A ____________ order is a request to buy or sell a stock at the current price.

Record Date

A _____________ __________________ is the date on which a stockholder must be registered in the corporations books in order to receive dividend payments.

Total Return

A calculation that includes the annual dollar amount of income (dividends) as well as any increase or decrease (gain or loss) in the original purchase price of the investment.

price

A dividend yield is the annual dollar amount of income generated by an investment dividend by the investment's current share _______________.

Investment Bank

A financial firm that assists corporations in raising funds, usually by helping to sell new security issue.

Account Executive or Stockbroker

A licensed individual who buys or sells securities for clients is oftentimes called:

Dollar Cost Averaging

A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals.

Secondary Market

A market for existing financial securities that are currently traded among investors.

Primary Market

A market in which an investor purchases financial securities through an investment bank or other representative from the issuer of the securities.

Dividend Reinvestment Plan (DRIP)

A plan that allows a current stockholders the option to use their cash dividends to purchase stock of the corporation.

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.

Limit Order

A request to buy or sell stock at a specified price.

Margin

A speculative technique whereby an investor borrows part of the money needed to buy a particular stock.

Exchange

After stock is sold to the public, the federal government requires that corporations report financial information to the Securities and ______________ Commission.

Dividend

An advantage of being a preferred stockholder is the ability to receive _____________ payments before common stockholders.

required by most brokerages

An advantage of dividend reinvestment plans is that they require lower investment minimums which allow you to purchase stock for less money than:

first

An initial public offering is when a corporation sells stock to the public for the _____________ time.

Stop-Loss Order

An order to sell a particular stock at the next available opportunity after its after market price reaches a specified amount.

limit; stop-loss

Both ______________ orders and ____________ orders may be a good for one day, one week, one month, or until canceled.

stock; products

Corporate dividends for common stock may take the form of cash, additional ______________, or company __________.

Newspaper

Daily printed material that provides useful information about stock.

Preferred Stock

Dividend amount is known before the purchase in:

Common Stock

Dividend amount is unknown until declared.

high; low

Dollar cost averaging is used to avoid buying ___________ and selling ___________.

previous owner

During the ex-dividend time period, the ____________ ______________ of the stock is entitled to the declared dividend payment.

Earnings per share and Price-earning ratios

Earning estimates exist to provide estimates of:

Price-Earning Ratios and Earnings per Share

Earning estimates exist to provide estimates of:

capital

For corporations, the dividend reinvestment program provides another source of _____________ for the company.

decrease

For more mature and older corporations that have a lower earnings expectations, the price of their stock will ______________ if the future expectations decreases.

selling price - purchase price

For stock investors, profit =

dividends

For stockholders, _______________ are typically paid on a quarterly basis if they are paid.

25

Hannah's stock, valued at $50 per share, underwent a 2-for-1 stock split. The price of each one of Hannah's shares is now worth $_____________.

Earning Estimates

Helps to provide projections of price-earnings ratios and earnings per share.

Investors

Hold stocks for at least a year.

dividend

If one is paid, most corporations pay a _____________ of 30%-70% of their earnings to stockholders.

30

If the price per share is equal to $75.00 and earnings per share is equal to $2.50, then the price-earnings ratio is equal to _______________.

Call Option

If you think the market price of stock will increase during a short period of time, you should purchase a:

call

If your margin stock decreases significantly below the original purchase price, you may receive a margin ____________ from your broker.

increase

Immediately following the split of a stock price may _____________ for two to three days.

buy; sell

Options are the right to ___________ or __________________ a stock at a predetermined price during a specified period of time.

earnings; share

Price-earning ratio is equal to the price of a share of stock divided by the corporation's _________________ per _____________ of stock.

1. Price-earnings ratios 2. Beta 3. Earnings per share

Provide historical measures.

1. She arranges to borrow a stock certificate for a number of shares. 2. Using borrowed stock, she sells the stock. 3. She buys the same quantity of shares at a lower price. 4. She replaces the stock borrowed to her broker.

Samantha wants to sell short stock in Exxon Mobil. Rank the steps in the process:

brokerage

Selling short is selling stock that has been borrowed from a(n) __________________ firm and must be replaced at a later date.

1.65/78 = .02 = 2%

Solve for dividend yield. Annual income is $1.65, and market value is $78.

vote; share

Stockholders can vote at the annual meeting. They are entitled to one ___________ per _____________ of stock.

One day, one week, one month, or good until canceled.

Stop-loss and limit orders can be put in place for how long?

Dividend Yield

The annual dollar amount of dividends generated by an investment divided by the stock's current market value.

Dividends and stock value

The buy-and-hold technique potentially increases value in what two ways?

higher

The higher the company's expected future earnings, the _________ the stock value.

Buying Long

The idea that when you buy a stock it will increase in value over time.

time

The more ____________ an investment has to work, the more money it will accumulate.

Put Option

The right to sell 100 shares of stock at a guaranteed price before the expiration date.

Fast growing firm

Type of firm that typically does not pay dividend.

Traders

Typically hold stocks for less than a year.

Prospectus

What document must disclose corporate earnings, assets, liabilities, products, or services and the qualifications of top management?

Electronic Marketplace

What is Nasdaq?

Book Value

What is determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock?

1. Price of share at time of sell. 2. Amount of dividends earned. 3. Price of share at time of purchase.

When calculating total return on stock, you must consider:

Make money

When selling short a decrease in stock price means you

Lose money

When selling short a increase in stock price means you

Stockholders

Who elects the board of directors and approves major changes in the corporate policies?

remains unchanged

With a stock split, a company's total market capitalization:

stop-loss

You buy a stock at $30 per share and want to sell your stock automatically if it reaches $23. This is an example of a(n) ______________-______________ order.

Initial

____________ public offerings are often considered very speculative and risky.