Common Stock Flashcards
Common Stock
Ownership Interest (Equity) in an issuing corporation
Authorized Stock
Fixed number of common shares that may be issued
Issued Stock
Number of shares out of the total authorized tock that have actually been issued (sold to public)
Outstanding shares
Issued shares that can be traded between investors
Treasury Stock or Treasury Shares
Shares repurchased by the issuing company
Regular Way Settlement
T + 2
Settlement
When securities and the purchase price have officially changed hands. When buyer becomes owner of record
Par value for common stock
arbitrary value assigned to the shares at the time of issuance
Cash Dividend
Part of a company’s after-tax earnings which its Board of Directors decides, usually quarterly, to distribute to the shareholders.
Subscription Rights
Preemptive rights, able to purchase more stock
Rights of Common Shareholders
Right to inspect books and records, right to transfer ownership, preemptive rights, right to corporate distributions and residual assets upon dissolution, right to vote
Statutory voting method
Requires shareholder to divide their total votes equally amount the issues or directors being decided; standard voting method at most corporations
Cumulative Voting Method
Allows shareholder to allocate their aggregate votes on issues or directorships in any combination they choose (helps smaller investors)
Stated yield
stated rate of interest, as a percentage of par value, that is paid as fixed income security. Same as coupon rate or nominal yield
Cumulative preferred stock
If a company misses a dividend, the holders have a right to receive all back dividends as well as current dividends before any distributions can be made to common shareholders. Missed dividends accrue. Virtually all preferred stock is cumulative
Callable Preferred stock
issuer can redeem or repurchase at a specified price from the stock holders. Usually called at a premium to its par value. Issuers will call when interest rates fall. Common stock is never callable.
Convertible Preferred security
a security senior to common stock that allows the holder to convert into a predetermined number of common shares.
Participating Preferred Stock
Shareholder receives fixed dividend and participates in better-than-expected earnings with common shareholder (extra dividend)
Discount Bond
Bond selling below par (below $1000), market value is below par value
Premium Bond
Bond selling above par value (more than $1000), market value is above par value
Coupon
Rate of interest earned annually, based on par value, typically fixed
Market Value
Price investors are willing to pay for a security, fluxtuates
