Finance Test #2

Proxy Voting

A grant of authority by a shareholder allowing another individual to vote his or her shares.

straight voting

A procedure in which a shareholder may cast all votes for each member of the board of directors.

cumulative voting

A procedure in which a shareholder may cast all votes for one member of the board of directors.

broker

An agent who arranges security transactions among investors.

dealer

An agent who buys and sells securities from inventory.

common stock

Equity without priority for dividends or in bankruptcy.

Dividends payable on preferred stock are either cumulative or noncumulative;

If preferred dividends are cumulative and are not paid in a particular year, they will be carried forward as an arrearage

providers (SLPs)

Investment firms that are active participants in stocks assigned to them. Their job is to make a one-sided market (i.e., offering to either buy or sell). They trade purely for their own accounts.

designated market maker (DMM)

NYSE members who act as dealers in particular stocks. Formerly known as "specialists."

floor brokers

NYSE members who execute customer buy and sell orders. The job of a floor broker is to execute trades for customers, with an emphasis on getting the best price possible

dividends

Payments by a corporation to shareholders, made in either cash or stock. Unless a dividend is declared by the board of directors of a corporation, it is not a liability of the corporation. The payment of dividends by the corporation is not a business expense Dividends received by individual shareholders are taxable

Stated Value

Preferred shares have a stated liquidating value, usually $100 per share.

over-the-counter (OTC) market

Securities market in which trading is almost exclusively done through dealers who buy and sell for their own inventories.

staggering has two basic effects:

Staggering makes it more difficult for a minority to elect a director because there are fewer directors to be elected at one time. Staggering makes takeover attempts less likely to be successful because it makes it more difficult to vote in a majority of new directors.

preferred stock

Stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without voting rights.

inside quotes

The highest bid quotes and the lowest ask quotes for a security.

primary market

The market in which new securities are originally sold to investors

secondary market

The market in which previously issued securities are traded among investors.

ask price

The price at which the dealer will sell

In addition to the right to vote for directors, shareholders usually have the following rights:

The right to share proportionally in dividends paid. The right to share proportionally in assets remaining after liabilities have been paid in a liquidation. The right to vote on stockholder matters of great importance, such as a merger. Voting is usually done at the annual meeting or a special meeting. In addition, stockholders sometimes have the right to share proportionally in any new stock sold. This is called the preemptive right.

bid price

price the dealer is willing to pay

The Stock Markets

two most important of which are the New York Stock Exchange(NYSE )and NASDAQ