Personal Finance Chapter 12

total return

A calculation that includes the yearly dollar amount of dividend as well as any increase or decrease in the original purchase price of the investment.

earnings per share

A corporation's after-tax earnings divided by the number of outstanding shares of a firm's common stock.

dividend

A distribution of money, stock, or other property that a corporation pays to stockholders.

investment bank

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

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.

account executive

A licensed individual who buys or sells securities for clients; also called a stockbroker.

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, via an investment bank or other representative, from the issuer of those securities.

securities exchange

A marketplace where member brokers who represent investors meet to buy and sell securities.

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.

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 stockholders to purchase stock directly from a corporation without having to use an account executive or a brokerage firm.

stock split

A procedure in which the shares of stock owned by existing stockholders are divided into a larger number of shares.

limit order

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

market order

A request to buy or sell a stock at the current market value.

margin

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

preferred stock

A type of stock that gives the owner the advantage of receiving cash dividends before common stockholders are paid any dividends.

Nasdaq

An electronic marketplace for stocks issued by approximately 3,200 different companies.

stop order

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

specialist

Buys or sells a particular stock in an effort to maintain an orderly market.

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.

churning

Excessive buying and selling of securities to generate commissions.

equity financing

Money received from the owners or from the sale of shares of ownership in a business.

initial public offering (IPO)

Occurs when a corporation sells stock to the general public for the first time.

selling short

Selling stock that has been borrowed from a brokerage firm and must be replaced at a later date.

record date

The date on which a stockholder must be registered on the corporation's books in order to receive dividend payments.

common stock

The most basic form of corporate ownership.

price-earnings (PE) ratio

The price of a share of stock divided by the corporation's earnings per share of stock.

option

The right to buy or sell a stock at a predetermined price during a specified period of time.

dividend yield

The yearly dollar amount of dividend generated by an investment divided by the investment's current price per share.