| The ever increasing number of investment | | | | broker's basic fee for purchasing or selling |
| products and financial services in the | | | | securities or property as an agent.Commission |
| marketplace today can be confusing. We have | | | | Broker - An agent who executes the public's |
| put together this glossary of financial | | | | orders for the purchase or sale of securities |
| definitions designed to help you understand | | | | or commodities.Common Stock - Securities that |
| some of the more common investment and | | | | represent an ownership interest in a |
| financial terms you may encounter. Your | | | | corporation. If the company has also issued |
| financial advisor can explain these terms | | | | preferred stock, both common and preferred |
| more completely and discuss with you those | | | | have ownership rights. Common stockholders |
| which are relevant to your situation.Accrued | | | | assume the greater risk, but generally |
| Interest - The interest due on a bond since | | | | exercise the greater control and may gain the |
| the last interest payment was made. The buyer | | | | greater award in the form of dividends and |
| of the bond pays the market price plus | | | | capital appreciation. The terms common stock |
| accrued interest.Acquisition - The acquiring | | | | and capital stock are often used |
| of control of one corporation by another. In | | | | interchangeably when the company has no |
| "unfriendly" take-over attempts, the | | | | preferred stock.Competitive Trader - A member |
| potential buying company may offer a price | | | | of the Exchange who trades in stocks on the |
| well above current market values, new | | | | Floor for an account in which there is an |
| securities and other inducements to | | | | interest. Also known as a Registered |
| stockholders. The management of the subject | | | | Trader.Conglomerate - A corporation that has |
| company might ask for a better price or try | | | | diversified its operations usually by |
| to join up with a third company.ADR - | | | | acquiring enterprises in widely varied |
| American Depositary Receipt - a security | | | | industries.Consolidated Balance Sheet - A |
| issued by a U.S. bank in place of the foreign | | | | balance sheet showing the financial condition |
| shares held in trust by that bank, thereby | | | | of a corporation and its |
| facilitating the trading of foreign shares in | | | | subsidiaries.Consolidated Tape - The ticker |
| U.S. markets.American Stock Exchange (AMEX) - | | | | tape reporting transactions in NYSE listed |
| The second largest stock exchange in the | | | | securities that take place on the NYSE or any |
| United States, located in the financial | | | | of the participating regional stock exchanges |
| district of New York City. (Formerly known as | | | | and other markets. Similarly, transactions in |
| the Curb Exchange from its origin on a | | | | AMEX listed securities, and certain other |
| Manhattan street.)Amortization - Accounting | | | | securities listed on regional stock |
| for expenses or charges as applicable rather | | | | exchanges, are reported on a separate |
| than as paid. Includes such practices as | | | | tape.Convertible - A bond, debenture or |
| depreciation, depletion, write-off of | | | | preferred share that may be exchanged by the |
| intangibles, prepaid expenses and deferred | | | | owner for common stock or another security, |
| charges.Annual Report - The formal financial | | | | usually of the same company, in accordance |
| statement issued yearly by a corporation. The | | | | with the terms of the issue.Correspondent - A |
| annual report shows assets, liabilities, | | | | securities firm, bank or other financial |
| revenues, expenses, earnings - how the | | | | organization that regularly performs services |
| company stood at the close of the business | | | | for another in a place or market to which the |
| year, how it fared profit-wise during the | | | | other does not have direct access. Securities |
| year and other information of interest to | | | | firms may have correspondents in foreign |
| shareowners.Arbitrage - A technique employed | | | | countries or on exchanges of which they are |
| to take advantage of differences in price. | | | | not members. Correspondents are frequently |
| If, for example, ABC stock can be bought in | | | | linked by private wires. Member organizations |
| New York for $10 a share and sold in London | | | | of the NYSE with offices in New York City may |
| at $10.50, an arbitrageur may simultaneously | | | | also act as correspondents for out-of-town |
| purchase ABC stock here and sell the same | | | | member organizations that do not maintain New |
| amount in London, making a profit of 50 cents | | | | York City offices.Coupon Bond - Bond with |
| a share, less expenses. Arbitrage may also | | | | interest coupons attached. The coupons are |
| involve the purchase of rights to subscribe | | | | clipped as they come due and presented by the |
| to a security, or the purchase of a | | | | holder for payment of interest.Covered Option |
| convertible security - and the sale at or | | | | - An option position that is offset by an |
| about the same time of the security | | | | equal and opposite position in the underlying |
| obtainable through exercise of the rights or | | | | security.Crown Financial Ministries - A |
| of the security obtainable through | | | | Christian ministry started by Larry Burkett |
| conversion.Assets - Everything a corporation | | | | and Howard Dayton to help equip Christians |
| owns or due to it: cash, investments, money | | | | become better financial stewards. They offer |
| due it, materials and inventories, which are | | | | help in Biblical financial management such |
| called current assets; buildings and | | | | as: budgeting, debt elimination, saving, |
| machinery, which are known as fixed assets; | | | | investing and inheritance.Cumulative |
| and patents and goodwill, called intangible | | | | Preferred - A stock having a provision that |
| assets.Assignment - Notice to an option | | | | if one or more dividends are omitted, the |
| writer that an option holder has exercised | | | | omitted dividends must be paid before |
| the option and that the writer will now be | | | | dividends may be paid on the company's common |
| required to deliver (receive) under the terms | | | | stock.Cumulative Voting - A method of voting |
| of the contract.Auction Market - The system | | | | for corporate directors that enables the |
| of trading securities through brokers or | | | | shareholders to multiply the number of their |
| agents on an exchange such as the New York | | | | shares by the number of directorships being |
| Stock Exchange. Buyers compete with other | | | | voted on and to cast the total for one |
| buyers while sellers compete with other | | | | director or a selected group of directors. A |
| sellers for the most advantageous | | | | 10-share holder normally casts 10 votes for |
| price.Averages - Various ways of measuring | | | | each of, say 12 nominees to the board of |
| the trend of securities prices, one of the | | | | directors. One thus has 120 votes. Under the |
| most popular of which is the Dow Jones | | | | cumulative voting principle, one may do that |
| average of 30 industrial stocks listed on the | | | | or may cast 120 (10 x 12) votes for only one |
| New York Stock Exchange. The prices of the 30 | | | | nominee, 60 for two, 40 for three, or any |
| stocks are totaled and then divided by a | | | | other distribution one chooses. Cumulative |
| divisor that is intended to compensate for | | | | voting is required under the corporate laws |
| past stock splits and stock dividends and | | | | of some states and is permitted in most |
| that is changed from time to time. As a | | | | others.Current Assets - Those assets of a |
| result, point changes in the average have | | | | company that are reasonably expected to be |
| only the vaguest relationship to dollar price | | | | realized in cash, sold or consumed during one |
| changes in stocks included in the | | | | year. These include cash, U.S. Government |
| average.Balance Sheet - A condensed financial | | | | bonds, receivables and money due usually |
| statement showing the nature and amount of a | | | | within one year, and inventories.Current |
| company's assets, liabilities and capital on | | | | Liabilities - Money owed and payable by a |
| a given date. In dollar amounts the balance | | | | company, usually within one year.Day Order - |
| sheet shows what the company owned, what it | | | | An order to buy or sell which, if not |
| owed, and the ownership interest in the | | | | executed, expires at the end of trading day |
| company of its stockholders.Basis Point - One | | | | on which it was entered.Dealer - An |
| gradation on a 100-point scale representing | | | | individual or firm in the securities business |
| one percent; used especially in expressing | | | | who buys and sells stocks and bonds as a |
| variations in the yields of bonds. Fixed | | | | principal rather than as an agent. The |
| income yields vary often and slightly within | | | | dealer's profit or loss is the difference |
| one percent and the basis point scale easily | | | | between the price paid and the price received |
| expresses these changes in hundredths of one | | | | for the same security. The dealer's |
| percent. For example, the difference between | | | | confirmation must disclose to the customer |
| 12.83% and 12.88% is 5 basis points.Bear - | | | | that the principal has been acted upon. The |
| Someone who believes the market will | | | | same individual or firm may function, at |
| decline.Bear Market - A declining | | | | different times, either as a broker or |
| market.Bearer Bond - A bond that does not | | | | dealer.Debenture - A promissory note backed |
| have the owner's name registered on the books | | | | by the general credit of a company and |
| of the issuer. Interest and principal, when | | | | usually not secured by a mortgage or lien on |
| due, are payable to the holder.Bid and Asked | | | | any specific property.Debit Balance - In a |
| - Often referred to as a quotation or quote. | | | | customer's margin account, that portion of |
| The bid is the highest price anyone wants to | | | | the purchase price of stock, bonds or |
| pay for a security at a given time, the asked | | | | commodities that is covered by credit |
| is the lowest price anyone will take at the | | | | extended by the broker to the margin |
| same time.Block - A large holding or | | | | customer.Delayed Opening - The postponement |
| transaction of stock - popularly considered | | | | of trading of an issue on a stock exchange |
| to be 10,000 shares or more.Blue Chip - A | | | | beyond the normal opening of a day's trading |
| company known nationally for the quality and | | | | because of market conditions that have been |
| wide acceptance of its products or services, | | | | judged by exchange officials to warrant such |
| and for its ability to make money and pay | | | | a delay. Reasons for the delay might be an |
| dividends.Blue Sky Laws - A popular name for | | | | influx of either buy or sell orders, an |
| laws various states have enacted to protect | | | | imbalance of buyers and sellers, or pending |
| the public against securities frauds. The | | | | corporate news that requires time for |
| term is believed to have originated when a | | | | dissemination.Depository Trust Company (DTC) |
| judge ruled that a particular stock had about | | | | - A central securities certificate depository |
| the same value as a patch of blue sky.Bond - | | | | through which members effect security |
| Basically an IOU or promissory note of a | | | | deliveries between each other via |
| corporation, usually issued in multiples of | | | | computerized bookkeeping entries thereby |
| $1,000 or $5,000, although $100 and $500 | | | | reducing the physical movement of stock |
| denominations are not unknown. A bond is | | | | certificates.Depreciation - Normally, charges |
| evidence of a debt on which the issuing | | | | against earnings to write off the cost, less |
| company usually promises to pay the | | | | salvage value, of an asset over its estimated |
| bondholders a specified amount of interest | | | | useful life. It is a bookkeeping entry and |
| for a specified length of time, and to repay | | | | does not represent any cash outlay nor are |
| the loan on the expiration date. In every | | | | any funds earmarked for the purpose.Director |
| case a bond represents debt - its holder is a | | | | - Person elected by shareholders to serve on |
| creditor of the corporation and not a part | | | | the Board of Directors. The directors appoint |
| owner as is the shareholder.Book Value - An | | | | the president, vice presidents, and all other |
| accounting term. Book value of a stock is | | | | operating officers. Directors decide, among |
| determined from a company's records, by | | | | other matters, if and when dividends shall be |
| adding all assets then deducting all debts | | | | paid.Discount - The amount by which a |
| and other liabilities, plus the liquidation | | | | preferred stock or bond may sell below its |
| price of any preferred issues. The sum | | | | par value. Also used as a verb to mean "takes |
| arrived at is divided by the number of common | | | | into account" as the price of the stock has |
| shares outstanding and the result is book | | | | discounted the expected dividend |
| value per common share. Book value of the | | | | cut.Discretionary Account - An account in |
| assets of a company or a security may have | | | | which the customer gives the broker or |
| little relationship to market value.Broker - | | | | someone else discretion to buy and sell |
| An agent who handles the public's orders to | | | | securities or commodities, including |
| buy and sell securities, commodities or other | | | | selection, timing, amount, and price to be |
| property. For this service a commission is | | | | paid or received.Diversification - Spreading |
| charged.Brokers' Loans - Money borrowed by | | | | investments among different types of |
| brokers from banks or other brokers for a | | | | securities and various companies in different |
| variety of uses. It may be used by | | | | fields.Dividend - The payment designated by |
| specialists to help finance inventories of | | | | the Board of Directors to be distributed pro |
| stock they deal in; by brokerage firms to | | | | rata among the shares outstanding. On |
| finance the underwriting of new issues of | | | | preferred shares, it is generally a fixed |
| corporate and municipal securities; to help | | | | amount. On common shares, the dividend varies |
| finance a firm's own investments; and to help | | | | with the fortunes of the company and the |
| finance the purchase of securities for | | | | amount of cash on hand, and may be omitted if |
| customers who prefer to use the broker's | | | | business is poor or the directors determine |
| credit when they buy securities.Bull - One | | | | to withhold earnings to invest in plant and |
| who believes the market will rise.Bull Market | | | | equipment. Sometimes a company will pay a |
| - An advancing market.Callable - A bond | | | | dividend out of past earnings even if it is |
| issue, all or part of which may be redeemed | | | | not currently operating at a profit.Dollar |
| by the issuing corporation under specified | | | | Cost Averaging - A system of buying |
| conditions before maturity. The term also | | | | securities at regular intervals with a fixed |
| applies to preferred shares that may be | | | | dollar amount. Under this system investors |
| redeemed by the issuing corporation.Capital | | | | buy by the dollars' worth rather than by the |
| Gain or Capital Loss - Profit or loss from | | | | number of shares. If each investment is of |
| the sale of a capital asset. The capital | | | | the same number of dollars, payments buy more |
| gains provisions of the tax law are | | | | shares when the price is low and fewer when |
| complicated. You should consult your tax | | | | it rises. Thus temporary downswings in price |
| advisor for specific information.Capital | | | | benefit investors if they continue periodic |
| Stock - All shares representing ownership of | | | | purchases in both good times and bad and the |
| a business, including preferred and | | | | price at which the shares are sold is more |
| common.Capitalization - Total amount of the | | | | than their average cost.Dow Theory - A theory |
| various securities issued by a corporation. | | | | of market analysis based upon the performance |
| Capitalization may include bonds, debentures, | | | | of the Dow Jones industrial and |
| preferred and common stock and surplus. Bonds | | | | transportation stock price averages. The |
| and debentures are usually carried on the | | | | theory says that the market is in a basic |
| books of the issuing company in terms of | | | | upward trend if one of these averages |
| their par or face value. Preferred and common | | | | advances above a previous important high, |
| shares may be carried in terms of par or | | | | accompanied or followed by a similar advance |
| stated value. Stated value may be an | | | | in the other. When the averages both dip |
| arbitrary figure decided upon by the director | | | | below previous important lows, this is |
| or may represent the amount received by the | | | | regarded as confirmation of a downward trend. |
| company from the sale of the securities at | | | | The Dow Jones is one type of market index. |
| the time of issuance.Cash Flow - Reported net | | | | (See: NYSE Composite Index)Earnings Report - |
| income of a corporation plus amounts charged | | | | A statement - also called an income statement |
| off for depreciation, depletion, | | | | - issued by a company showing its earnings or |
| amortization, and extra-ordinary charges to | | | | losses over a given period. The earnings |
| reserves, which are bookkeeping deductions | | | | report lists the income earned, expenses and |
| and not paid out in actual dollars and | | | | the net result. (See: Balance Sheet)Equipment |
| cents.Cash Sale - A transaction on the floor | | | | Trust Certificate - A type of security, |
| of the Stock Exchange that calls for delivery | | | | generally issued by a railroad, to pay for |
| of the securities the same day. In "regular | | | | new equipment. Title to the equipment, such |
| way" trade, the seller is to deliver on the | | | | as a locomotive, is held by a trustee until |
| third business day, except for bonds, which | | | | the notes are paid off. An equipment trust |
| are the next day.Certificate - The actual | | | | certificate is usually secured by a first |
| piece of paper that is evidence of ownership | | | | claim on the equipment.Equity - The ownership |
| of stock in a corporation. Watermarked paper | | | | interest of common and preferred stockholders |
| is finely engraved with delicate etchings to | | | | in a company. Also refers to excess of value |
| discourage forgery.Certificate of Deposit | | | | of securities over the debit balance in a |
| (CD) - A money market instrument issued by | | | | margin account.Ex-Dividend - A synonym for |
| banks. The time CD is characterized by its | | | | "without dividend." The buyer of a stock |
| set date of maturity and interest rate and | | | | selling ex-dividend does not receive the |
| its wide acceptance among investors, | | | | recently declared dividend. When stocks go |
| companies and institutions as a highly | | | | ex-dividend, the stock tables include the |
| negotiable short-term investment | | | | symbol "x" following the name. (See: Cash |
| vehicle.Certified Funds Specialist (CFS)- | | | | Sale, Net Change, Transfer)Exercise - Action |
| This designation is for financial planners | | | | taken by an option holder that requires the |
| and investment advisors who focus more on | | | | writer to perform the terms of the |
| investments using mutual funds. The CFS | | | | contract.Exercise Prices - The prices at |
| designation indicates advisors who are | | | | which an option may be exercised. Also called |
| qualified to consult with clients on the | | | | strike prices.Expiration Date - The date the |
| advisability and costs of acquiring or | | | | option contract expires.Ex-Rights - Without |
| retaining mutual funds in their investment | | | | the rights. Corporations raising additional |
| portfolio.Christian Financial Planner - A | | | | money may do so by offering their |
| financial planner that follows financial | | | | stockholders the right to subscribe to new or |
| wisdom in the Bible for their clients. The | | | | additional stock, usually at a discount from |
| Bible has over 2000 verses that deal with | | | | the prevailing market price. The buyer of a |
| finances on subjects such as: budgeting, | | | | stock selling ex-rights is not entitled to |
| planning, saving, eliminating debt, investing | | | | the rights.Extra - The short form of "extra |
| and inheritance.CFTC - The Commodity Futures | | | | dividend." A dividend in the form of stock or |
| Trading Commission, created by Congress in | | | | cash in addition to the regular or usual |
| 1974 to regulate exchange trading in | | | | dividend the company has been paying.More |
| futures.Collateral - Securities or other | | | | financial definitions can be found by |
| property pledged by a borrower to secure | | | | visiting SorensenAmerica's Financial Guide |
| repayment of a loan.Commercial Paper - Debt | | | | can be found at ==> Subscribe to Money Basics |
| instruments issued by companies to meet | | | | via - Are you ready for financial freedom? |
| short-term financing needs.Commission - The | | | | |