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