| A | . .1MTX Glossary: STOCKS... STOCKS Glossary . Abandoned or Unclaimed Accounts All states require financial institutions, including brokerage firms, to report when personal property has been abandoned or unclaimed after a specified period of time. Before a brokerage account can be considered abandoned or unclaimed, the firm must make a diligent effort to try to locate the account owner. ...more (SEC) Abandonment Option A clause written in a contract, granting parties the option of withdrawing from the contract before the fulfillment or completion of all the contractual duties. Abnormal Return When the return on an asset or security is in excess of the expected rate of return. Above the Market An order to buy or sell at a price set higher than the current market price of the security. Above Water The condition of an asset's actual value when it is greater than the asset's book value. Absolute Priority The principle in bankruptcy proceedings that requires senior creditors to be fully paid before junior creditors and stockholders may receive any payment. Also known as liquidation preference. Absorbed 1. In a general business sense, when a cost is treated as an expense instead of being passed on to the customer in the form of higher prices. 2. In underwriting, when an issue has been completely sold to the public. 3. In mergers, when an acquired firm is folded into the acquiring company. Accelerated Cost Recovery System (ACRS) A system of depreciation introduced by the Economic Recovery Tax Act of 1981. ACRS depreciation is based on recovery periods instead of useful life. These periods were predetermined by the IRS. Account 1. A statement of indebtedness for goods or services from one person to another. 2. An account maintained by a bank to preserve a depositor's money or securities. Account Balance The net of debits and credits for an account at the end of a reporting period. Accountant's Opinion A statement signed by an independent accountant outlining his or her opinion regarding the quality of information contained in a company's financial reports and records. Accounting To provide a record such as funds paid or received for a person or business. Accounting summarizes and submits this information in reports and statements. The reports are intended both for the firm itself and outside parties. Accounting Earnings A company's earnings as reported in the income statement. Accounting Period 1. In general, the time period reflected by a set of financial statements. 2. In terms of taxation, it is the 12-month period a taxpayer uses to determine their income tax. Accounting Rate of Return (ARR) ARR provides a quick estimate of a project's worth over its useful life. ARR is derived by finding profits before taxes and interest. Accredited Investor A term used by the SEC under Regulation D to define investors that are financially sophisticated and have no need for the protection provided by certain government filings. Also known as a qualified purchaser. ...more (SEC) Accretion 1. Growth through addition or expansion. 2. In reference to discount bonds, the term is used to specifically describe the accumulation of value until maturity. Accretive Acquisition An acquisition that will increase the acquiring company's EPS (Earnings Per Share). Accrual Accounting An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions happen. Accrued Expense An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection. Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) A 360 day year method, which is used for corporate and municipal bonds. 2) 365 day year method, which is used for government bonds. Accumulated Earnings Tax A tax imposed by the federal government upon companies with retained earnings deemed to be unreasonable and in excess of what is considered ordinary. Accumulation /Distribution A momentum indicator that associates changes in price and volume. It is based on the premise that a price move is more significant with larger volume. Acid-Test Ratio A stringent test that indicates if a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets. Calculated by: (Cash + Accounts Receivable + Short-term Investments) / Current Liabilities Acquisition When one company purchases a majority interest in the acquired. Acquisition Debt Debt incurred to construct, improve, or acquire a principal or secondary residence. Acquisition Fee Charges and commissions paid out for the selection or purchase of property. Some examples are real estate commission, acquisition expense, and development/construction fees. Acquisition Premium The difference between the actual cost for acquiring a target firm versus the estimate made of its value before the acquisition. Active Box A reference to the physical location in a brokerage where securities are kept. Active Income Income for which services have been performed. This includes wages, tips, salaries, commissions, and income from businesses in which there is material participation. Active Investing An investment strategy involving ongoing buying and selling actions of the investor. Active investors will purchase investments and continuously monitor their activity in order to exploit profitable conditions. Active Management An investing strategy that seeks returns in excess of a specified benchmark. Activity Ratio Accounting ratios that measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Actual Return The actual gain or loss of an investor. This can be expressed in the following formula: expected return (ex-ante) plus the effect of firm-specific and economy-wide news. Actuals 1. A term used to describe the underlying in future and forward contracts, dealing with commodities rather than financial instruments. 2. A term used to describe a securities historical volatitity. Actuarial Analysis The analysis of an investment's risk done by an actuary. Actuary A professional statistician working for an insurance company. They evaluate your application and medical records to project how long you will live. Adjusted Balance Method A finance/accounting method where costs are based on the amount(s) owing at the end of the current time period (once credits and payments are posted). Adjusted Basis The proportionate value of an asset or security that reflects any deductions taken on, or capital improvements to the asset or security. Adjusted Cost Base (ACB) An income tax term that refers to the change in an asset's book value resulting from improvements, new purchases, sales, payouts, or other factors. Adjusted Debit Balance The amount of money owed by a customer to his/her broker after paper profits and losses are taken into consideration. Adjusted Exercise Price 1. An option's strike price after adjustments have been made for stock splits to its underlying security. 2. A term used to describe the strike prices for options written on Ginnie Mae pass through certificates. Adjusted Gross Income (AGI) Used to determine how much of your income is taxable. AGI consists of gross income from taxable sources minus your maximum allowable adjustments. Adjusted Present Value (APV) The Net Present Value (NPV) of a project if financed solely by equity plus the Present Value (PV) of any financing benefits (the additional effects of debt). Adjustment in Conversion Terms A term used to describe the adjustment made to a convertible securities' conversion factor when the exchangeable stock underlying the convertible undergoes a split. Administrator 1. A person empowered by a court to act for another person who is deemed incapable of acting for himself/herself. 2. A court-appointed person or bank who takes charge of an estate if the deceased failed to leave a will. ADV Form A form that is kept on file with the SEC that contains critical financial information about a registered investment advisor. Advance Directive A document expressing a person's wishes about critical care when he or she is unable to decide for him or herself. However, it does not authorize anyone to act on a person's behalf or make decisions the way a power of attorney would. Advance / Decline Line - A/D A technical analysis tool representing the total of differences between advances and declines of security prices. The advance/decline line is considered the best indicator of market movement as a whole. Stock indexes such as the DJIA only tell us the strength of 30 stocks where as the A/D line provides much more insight. Adverse Opinion A professional opinion made by an auditor indicating that a company's financial statements are misrepresented, misstated, and do not accurately reflect its financial performance and health. Advisor A person or company responsible for making investments on behalf of and/or giving advice to investors. Affiliated Companies A situation that occurs when one company owns a minority interest (less than 50%) in another company. Affiliated Person An individual who is in a position to influence the actions of a corporation. This includes people such as directors, executives, and owners. Affirmative Obligation An obligation of NYSE specialists to enter the market on a particular security (either by posting or bidding and ask) when there is not sufficient market demand and supply to efficiently match orders. After Hours Trading (AHT) Trading after regular trading hours on the major exchanges. ...more (SEC) After Tax Operating Income ( ATOI) A company's total operating income after taxes. Calculated by deducting taxes from total operating income. After The Bell After the close of the stock market. ...After-Hours Trading: Understanding the Risks (SEC) After- Acquired Clause A provision included in legal contracts ensuring that subsequent acquisitions of assets will be included in the debtors liability to the lender. After-Tax Profit Margin A ratio calculated by dividing net income after taxes by net sales. Against Actual A transaction generally used by two hedgers who want to exchange futures for cash positions. Aged Fail A fail that has occurred between two or more parties to a securities transactions and has lasted for over 30 days. Agency Costs The costs resulting from an agent performing services for a principal. Agency Cross A trade that has only one agent acting for the buyer and seller. Agency Problem When conflicts of interest rise between creditors, shareholders, and management, because of differing goals. Agency Theory A theory concerning the relationship between a principal (shareholder) and an agent of the principal (company's managers). Agent 1. An individual or firm that places securities transactions for clients. 2. A person licensed by a state to sell insurance. 3. A securities salesperson who represents a broker-dealer or issuer when selling or trying to sell securities to the investing public. Aggregate Exercise Price The strike price of a put or call option multiplied by its contract size. Aggregate exercise prices are used to determine the dollar amount required should the option be exercised. Aggregation 1. Used in corporate financial planning, aggregation is a process whereby a number of a firm's smaller projects are combined and treated as an individual project. 2. Used in futures markets, aggregation is a principal involving the combination of all future positions owned or controlled by a single trader or group of traders. Aggressive Accounting The practice of inappropriately misconstruing income statements for the purpose of pleasing investors and inflating stock prices. Aggressive Investment Strategy A method of portfolio management that attempts to achieve maximum return. Air Pocket Stock When the price of a stock plunges unexpectedly, similar to an airplane when it hits an air pocket. Alan Greenspan Alan Greenspan Dr. Greenspan was the Chairman of the Board of Governors of the Federal Reserve System from 1987 to 2006. Dr. Greenspan also served as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. All or None - AON Used on a buy or sell order to instruct the broker to fill the order completely or not at all. Alligator Spread A term referring to an unprofitable spread regardless of favorable market movements. This loss is due entirely to large commissions charged upon the transactions. Allotment During an IPO, this is the number of shares granted to each participating underwriting firm that they are permitted to sell. Remaining surpluses are then given to other firms which have won the bid for the right to sell the IPO. Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Alternative Minimum Tax (AMT) A tax calculation that adds certain tax preference items back into adjusted gross income. If AMT is higher than the regular tax liability for the year, the regular tax and the amount by which the AMT exceeds the regular tax are paid. Alternative Order A combination order whereby two separate orders are entered on the same security. The execution of one order cancels the other. Alternext (NYSE Alternext) ...see American Stock Exchange (AMEX) Altman Z-Score A predictive model created by Edward Altman in the 1960s. This model combines five different financial ratios to determine the likelihood of bankruptcy amongst companies. ...website Amended Return A return filed in order to make corrections to a tax return from a previous year. It can be used to correct errors and claim a more advantageous filing. American Depository Receipt (ADR) A stock representing a specified number of shares in a foreign corporation. ADRs are bought and sold in the American markets just like regular stocks. An ADR is issued by a U.S. bank, consisting of a bundle of shares of a foreign corporation that are being held in custody overseas. The foreign entity must provide financial information to the sponsor bank. ADRs do not eliminate the currency and economic risks for the underlying shares in another country. ADRs are listed on either the NYSE, AMEX, or Nasdaq. ...more (SEC) American Depository Share (ADS) A share issued under deposit agreement that represents an underlying security in the issuer's home country. American Option An option that can be exercised anytime during its life. American Stock Exchange (AMEX) The American Stock Exchange - 86 Trinity Place, Lower Manhattan, New York City The American Stock Exchange (AMEX) -located in New York- had been the third largest stock exchange in the United States. AMEX handled approximately 10% of all securities traded in the States. AMEX was a mutual organization, owned by its members. Until 1929 it was known as the New York Curb Exchange. AMEX's core business has shifted over the years from stocks to options and Exchange-traded funds, although it continues to trade small to mid-size stocks. The AMEX also produced stock market indices; perhaps the most notable of these is an index of stocks of internet companies known as the Inter@ctive Week Internet Index. The AMEX has also developed a unique set of indices known as Intellidexes, which attempt to gain alpha by creating indices weighted on fundamental factors. In 2008 NYSE Euronext completed the acquisition of the American Stock Exchange. NYSE Euronext announced that the Exchange will be integrated with Alternext European small-cap exchange and renamed NYSE Alternext U.S ...more (History, Market; wikipedia) ...Amex.com Website Integration ( NYSE.com) ...NYSE Arca | AMEX Indices (NYSE.com) ...AMEX.com / AMEXTrader ( @ NYSE Euronext) Amortization 1. The paying off of debt in regular installments over a period of time. 2. The deduction of capital expenses over a specific period of time. Similar to depreciation, it is a method of measuring the consumption of the value of long-term assets like equipment or buildings. Analyst A financial professional who has expertise in evaluating investments and puts together buy, sell, and hold recommendations on securities. Also known as a financial analyst or security analyst. ...Analyst Recommendations (SEC) Angel Investor A financial backer providing venture capital funds for small start-ups or entrepreneurs. Ankle Biter Stock issues that are worth less than $500 million in terms of market capitalization. They are known as "small cap" stocks. Annual Equivalent Rate (AER) Interest calculated under the assumption that interest is paid and compounded per year. Annual General Meeting (AGM) A mandatory yearly meeting of shareholders that allows stakeholders to stay informed and involved with company decisions and workings. Annual Percentage Rate (APR) The one year rate that is charged for borrowing (or made by investing). By law, credit card companies and loan issuers must show customers the APR. Annual Percentage Yield (APY) The effective annual rate of return taking into account the effect of compounding interest. Annual Report A corporation's annual statement of financial operations. Annual reports include a balance sheet, income statement, auditor's report, and a description of the company's operations. ...more (SEC) Anonymous Trading Visible bids and offers on the market without the identity of the bidder and seller being revealed. Anti-Dilution Provision A provision in an option or a convertible security. It protects an investor from dilution resulting from later issues of stock at a lower price than the investor originally paid. Anti- Greenmail Provision A special clause located within a firm's corporate charter that acts as a deterrence against the board of directors passing a share buy-back. Anti- Martingale System A system of position sizing that correlates the levels of investment with the risk and portfolio size. Anti-Takeover Measure Measures taken on a continual or sporadic basis by a firm's management in order to prevent or deter unwanted takeovers. Anti-Takeover Statute A set of state regulations that prevent or deter companies from attempting hostile takeovers. These regulations vary across state lines and typically affect only the companies incorporated within the state Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. Any-and-All Bid A bid made to purchase all stock being offered at a specific price. APICS Business Outlook Index A national manufacturing index that surveys several manufacturing firms on a monthly basis. If the index is above 50 it signals expansion, if it dips below 50 it indicates contraction. Appraisal A valuation of property (e.g. real estate, a business, an antique) by the estimate of an authorized person. Appraisal Ratio A ratio between the Alpha and "Residual Standard Deviation" of a product. This is mainly used by analysts. Appraisal Right The right of shareholders to demand the fair payment of securities undergoing a merger by a third party valuator. Appreciation The increase in value of an asset. Approved Delivery Facility An exchange authorized facility used as a location for the delivery of commodities tendered upon future contracts. Arbitrage The simultaneous purchase and selling of a security in order to profit from a differential in the price. This usually takes place on different exchanges or marketplaces. Arbitrage Pricing Theory (APT) An alternative to the CAPM, APT differs in its assumptions and explanation of risk factors associated with the risk of an asset. Arbitrage Trading Program (ATP) A program used to place simultaneous orders for stock index futures and the underlying stocks. Arbitration An informal hearing regarding a dispute. The dispute is judged by a group of people (generally three) who have been selected by an impartial panel. Once a decision has been reached, there is no further appeal process. ...more (SEC) Arithmetic Mean Average The average return from a series of returns over a period of time. Calculated by dividing the sum of the series by the number of observations. Arms Index TRIN A short-term technical analysis breadth indicator calculated as the following: TRIN = (Advancing Issues/Declining Issues) / (Volume of Advancing Issues/Volume of Declining Issues) Arm's Length Transaction A transaction in which the buyers and sellers of a product act independently of each other and have no relationship to each other. Arrearage An amount on a loan, cumulative preferred stock, or any credit instrument that is overdue. Articles of Incorporation A set of documents filed with a U.S. state for the purpose of legally documenting the creation of a corporation. Ascending Tops This refers to a series of peaks, each peak higher than the previous one on the stock's chart pattern. A-Share In a family of multi-class mutual funds, this is the class that is characterized by a front load structure. Not all fund companies follow this class structure, however it is the prominent method of distinction. Asian Option An option whose payoff depends on the average price of the underlying asset over a certain period of time as opposed to at maturity. Also known as an average option. Asian Tail An option feature whereby a reference price is activated at the end of an option should the underlying fall below a specified average before option expiry. Ask The price a seller is willing to accept for a security, also known as the offer price. Ask Price In the context of the over-the-counter market, the term "ask" refers to the lowest price at which a market maker will sell a specified number of shares of a stock at any given time. The term "bid" refers to the highest price a market maker will pay to purchase the stock. The ask price (also known as the "offer" price) will almost always be higher than the bid price. Market makers make money on the difference between the bid price and the ask price. That difference is called the "spread". Ask Size The number of shares a seller is selling at a quoted ask price. Aspirin Count Theory A market theory that states stock prices and aspirin production are inversely (opposite) related. Assessed Value Dollar value assigned to property for purposes of assessing taxes. Asset Anything that an individual or a corporation owns that has economic value to its owner. Asset is also a balance sheet item showing what a firm owns. Asset Allocation The process of dividing a portfolio among major asset categories, such as bonds, stocks, or cash. The purpose of asset allocation is to reduce risk by diversifying the portfolio. Asset Based Finance A business loan in which the borrower uses assets to secure the loan. Asset Based Lending Extending a business loan or line of credit to companies (usually customers) secured by inventory, accounts receivable, or other balance sheet assets. Asset Class A specific category of assets or investments. Asset Conversion Loan A short term loan that is typically repaid by converting an asset into cash. Asset Coverage Ratio A test that determines a company's ability to cover debt obligations with its assets after all liabilities have been satisfied. It is calculated as the following: (Book Value of Total Assets - Intangible Assets) - (Current Liabilities - Short Term of Debt Obligations) / Total Debt Outstanding Asset Financing Using balance sheet assets (such as accounts receivable, short term investments, or inventory) to secure a loan or borrow money. Asset Management 1. The management of the financial assets of a company in order to maximize return. 2. An account at a financial institution that includes checking services, credit cards, debit cards, margin loans, the automatic sweep of cash balances into a money market fund, as well as brokerage services. Asset Play An incorrectly valued stock that is attractive because its combined asset value is greater than its market capitalization. Asset Redeployment The strategic relocation of company assets in order to increase profitability. Asset Stripper An individual who determines if the value of a company is worth more purchased as a whole or divided into separate assets which are sold off. This is usually done in order to fulfill debt agreements. Asset Swap Similar in structure to a plain vanilla swap, the key difference is the underlying of the swap contract. Rather than regular fixed and floating loan interest rates being swapped, fixed and floating investments are being exchanged. Asset Turnover The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in dollars by assets in dollars. Asset Valuation The process of determining the current worth of a portfolio, company, investment, or balance sheet item. Asset / Liability Management A technique companies employ in coordinating the management of assets and liabilities so that an adequate return may be earned. Also known as "surplus management." Asset-or- Nothing Call Option An option payoff that is equal to the asset's price if the asset is above the strike price, otherwise the payoff is zero. Asset-or- Nothing Put Option An option payoff that is equal to the asset's price if the asset is below the strike price, otherwise the payoff is zero. Assets Under Management . Glossary Glossary Glossary ADVERTISEMENT ^ top 1MTX 2007
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