Finance Test 3 Notes

Finance Test 3 Notes - Test 3 Study Sheet Return on...

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Test 3 Study Sheet Return on Investment Received directly from the company or organization in which you’ve invested, usually in the form of dividends or interest payments. Dividends A payment by a corporation to its shareholders. Interest Fee paid for using other people’s money. Retained Earnings Profits generated by a firm that are not distributed to stockholders as dividends but are either reinvested in the business or kept as a reserve for specific objectives Business Risk The risk of fluctuations in security prices resulting from good or bad management decisions or how well or poorly the firm’s products are doing in the marketplace. Financial Risk The risk associated with a company’s use of debt. If a company takes on too much debt and can’t meet its obligations, investors risk the company defaulting or dropping in stock value. Market Risk Risk associated with overall market movements. Primary Market A market in which newly issued as opposed to previously issued, securities are traded. Secondary Market The markets in which previously issued securities are traded. Organized Exchanges An exchange that occupies a physical location where trading occurs, such as the New York Stock Exchange. Over the Counter Market A market in which transactions are conducted over the telephone or via a computer hookup rather than in an organized exchange. Bid Price The price at which an individual is willing to purchase a security. Ask Price The price at which an individual is willing to sell a security.
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Odd lot An order involving between 1 and 99 shares of stock. Round lot A group or lot of 100 shares of common stock. Stocks are traded in round lots on the New York Stock Exchange. Stop Order An order to sell a security if the price drops below a specified level or to buy if the price climbs above a specified level. Market order An order to buy or sell a set number of securities immediately at the best price available. Limit order An order that specifies a securities trade is to be made only at a certain price or better. Short sale Borrowing stock from your broker and selling it with an obligation to replace the stock later. Margin account Securities trading accounts in which the investors borrow a portion of the purchase price from their broker. Street Name Securities registered in the “street name” remain in the brokers’ custody and appear in the broker’s computers as a computer entry in your name; advantage is that they are more convenient to sell b/c the stock certificates or bonds don’t have to delivered to broker since it doesn’t have any.
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This note was uploaded on 02/15/2012 for the course FINA 369 taught by Professor Ms.scull during the Fall '11 term at South Carolina.

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Finance Test 3 Notes - Test 3 Study Sheet Return on...

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