Bus 121 18-20
Terms
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- insider trading
- the use of information that is not available to the general public to make profits on securities transactions.
- NYSE
- New York Stock Exchange
- retained earnings
- profits that have been reinvested in a firm.
- debt financing
- is the deductibility of interest expense for income tax purposes, which lowers its overall cost. No loss of ownership.
- interest
- a fixed amount of money paid by the issuer of a bond to the bondholder on a regular schedule, typically every six months; stated as the coupon rate.
- high-yield (junk) bonds)
- high-risk, high-return bonds.
- venture financing
- financings obtained from venture capitalists, investment firms that specialize in a financing small, high-growth companies & receive an ownership interest & a voice in management in return for their money.
- preferred stock
- an equity security for which the dividend amount is set at the time the stock is issued.
- demand deposit
- money kept in checking accounts that can be withdrawn by depositors on demand
- municipal bonds
- bonds issued by states, cities, countries, & other state & local governments agencies.
- National Association of Securities Dealers Automated Quotation (NASDAQ) system
- the first electronic-based stock market & the fastest-growing part of the stock market.
- Federal Deposit Insurance Corporation (FDIC)
- an independent, quasi-public corporation backed by the full faith & credit of the US gov. that insures deposits in commercial banks & thrift institutions for up to a ceiling of $100,000/account
- investment bankers
- firms that act as intermediaries, buying securities from corporations and governments & reselling them to the public.
- Dow Jones Industrial Average (DJIA)
- The most widely used market average; measures the stock prices of 30 large, well-known corporations that trade on the NYSE & NASDAQ
- secondary market
- the securities market where old (already issued) securities are bought and sold, or traded, among investors.
- Standard & Poor's (S&P) 500 stock index
- an important market index that includes 400 industrial stocks, 20 transportation stocks, 40 public utility stocks, & 40 financial stocks; includes NYSE, AMEX, & NASDAQ stocks.
- open market operations
- the purchase or sale of US government bonds by the Fed to stimulate or slow down the economy.
- equity financing
- a form of permanent financing that places few restrictions on the firm. The firm is not required to pay dividends or repay the investments. More costly than debt.
- convertible bonds
- corporate bonds that are issued with an option that allows the bondholder to convert them into common stock.
- financial risk
- the chance that a firm will be unable to make scheduled interest & principal payments on its debt.
- discount rate
- the interest rate that the Fed charges.
- commercial banks
- profit-oriented financial institutions that accept deposits, make business & consumer loans, invest in government & corporate securities & provide other financial services.
- dividend
- payments to stockholders from a corporation profits.
- pension funds
- large pools of money set aside by corporates, unions & governments for later use in paying retirements benefits to their employees or members.
- bonds
- long-term debt obligations (liabilities) issued by corporations & governments.
- thrift institutions
- depository institutions formed specifically to encourage household saving & to make home mortgage loans.
- credit unions
- not-for-profit, member owned financial cooperatives.
- bear markets
- markets in which securities prices are falling.
- common stock
- a security that represents an ownership interest in a corporation.
- AMEX
- American Stock Exchange
- time deposit
- deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand.
- primary market
- the securities market where new securities are sold to the public, usually with the help of investment bankers.
- Federal Reserve System
- the central bank of the United States; it consists of 12 district banks, each located in a major U.S. city.
- debentures
- unsecured bonds that are backed only by the reputation of the issuer & its promise to pay the principal & interest when due.
- mortgage loan
- a long-term loan made against real estate as collateral.
- mortgage bonds
- corporate bonds that are secured by property, such as land, equipment, or buildings.
- bull markets
- markets in which securities prices are rising.
- principal
- the amount borrowed by the issuer of a bond; also called par value.
- underwriting
- the process of buying securities from corporations & governments & reselling them to the public, hopefully at a higher price; the main activity of investment bankers.
- bond ratings
- letter grades assigned to bond issues to indicate their quality, or level of risk; assigned by rating agencies such as Moodys & S & P.