Depository Receipt - ADR A stock
representing a specified number of shares in a foreign corporation. ADR's
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. ADR's do
not eliminate the currency and economic risks for the underlying shares in
ADR's are listed on either the NYSE, AMEX, or NASDAQ.
Depository Share - ADS A share issued
under deposit agreement that represents an underlying security in the
issuers home country.
financial statement showing the nature and amount of a company's assets,
liabilities and capital on a given date. In dollar amounts the balance
sheet shows that the company owned, what it owed, and the ownership
interest in the company of its stockholders.
A term to
describe a market of declining prices
bulls and bears on Wall Street have referred to two decidedly different
types of investors - the bulls being those who expect stock prices to
rise, the bears being those who believe prices are about to decline.
that does not have the owner's name registered on the books of the
issuer. Interest and prin-cipal, when due, are payable to the owner.
A company known
nationally for the quality of its products or services, its reliability, and its
ability to operate profitably in good and bad economic times.
Term to describe a bond
issue all or part of which may be redeemed by the issuing corporation under
specified conditions before maturity. The term also applies to preferred shares
that may be redeemed by the issuing corporation.
A contract that gives
the holder the right to buy the underlying stock at a specified price (the strike
price) within a fixed period of time.
Profit earned on the
sale of securities, either through dividends
or by selling the securities at a higher price than they originally cost.
All shares representing
ownership of a business, including common
Total amount of various
securities issued bya corporation. Capitalization may include bonds, debentures,
stock, and surplus .
The actual piece of
paper that is evidence of ownership of stock in a corporation. Watermarked paper
is finely engraved with delicate etchings to discourage forgery.
An agreement with a bank
that you will leave your money on deposit for a specified period of time in
return for a specific amount of interest.
Very short term IOUs
written by reputable blue
chip companies in need of short-term financing.
A corporation that has
diversified in operations usually by acquiring enterprises in widely varied
A bond, debenture
share that may be exchanged by the owner for a fixed number of common shares of
other securities usually of the same company, in accordance with the terms of
issued by a corporation.
with interest coupons attached. The coupons are clipped as they come due and
presented by the holder for payment of interest. Currently, while the term
"coupon" is still sometimes used to refer to the interest payments on
a bond, the physical possession of securities has been made obsolete by
A stock having a
provision that if one or more dividends
are omitted, the omitted dividends must be paid before dividends may be paid on
the company's common stock.
CUSIP is the trademark
for a system that uniquely identifies securities trading in the United States.
It was developed in the late 1960's by The American Bankers Association as a way
to standardize the identification and tracking of securities. The CUSIP number
consists of nine digits -- the first six identify the issuer and 7-9 identify
the issue. Please note that CUSIP numbers are a trademark of the American
Bankers Association and, as such, cannot be posted on our website.
Trust Company (DTC)
Trust Company (DTC) is the world's largest securities depository with
more than $10 trillion worth of securities in custody. In 1995, DTC
processed $41 trillion of securities through its book-entry settlement
system. DTC is a national clearing house for the settlement of trade in
corporate and municipal securities and performs securities
custody-related services for its participating banks and broker-dealers.
DTC is owned by members of the financial industry and by their
representatives who are its users. DTC is 35.1% owned by the New York
Stock Exchange on behalf of the Exchange's members. It is operated by a
separate management and has an independent board of directors. It is a
limited purpose trust company and is a member of the Federal Reserve.
Industrial Average (DJIA)
designated by the Board of Directors to be distributed pro rata among
the shares out-standing. For preferred shares, the dividend is usually a
fixed amount. For common shares, the dividend varies with the fortunes
of the company and the amount of cash on hand, and may be omitted if
business is poor or if the directors determine to withhold earnings to
invest in plants and equip-ment. Sometimes a company will pay a dividend
out of past earnings even if it is not currently operating at a profit.
The Dow Jones
Industrial Average (DJIA) is an index used to measure the performance of
the U.S. financial markets. Introduced on May 26, 1896 by Charles H.
Dow, it is the oldest stock price measure in continuous use. Over the
past century "the Dow" has become the most widely recognized
stock market indication in the U.S. and probably in the entire world.
The 30 stocks included in today's Dow are listed on the New York Stock
Exchange, except for Microsoft and Intel, and are all large blue-chip
companies that reflect the health of the U.S. economy. All but a handful
of these have major business operations throughout the rest of the
world, thus providing some insight into the economic well-being of the
The Dow has been repeatedly updated over the decades to reflect
changes in Corporate America. From the original 12 stocks used in 1896
it was increased to 20 stocks in 1916 and then 30 stocks in 1928. The
most recent modification occurred on November 1, 1999 when Home Depot,
Intel, Microsoft, SBC replaced Chevron, Goodyear, Sears, Union Carbide,
respectively. Intel and Microsoft, which both trade on the Nasdaq stock
market, are the first Dow 30 components that are not listed on the New
York Stock Exchange since the Dow Jones Industrial Average was created
Though it is only the unweighted average of 30 stock prices, over the
long run the DJIA's tracking of market movements has closely paralleled
more broadly based capitalization-weighted indexes like the New York
Stock Exchange Composite, the Standard & Poor's 500 and the Wilshire
5000. In 1896 the Dow was computed as the sum of the prices of 12 stocks
divided by the number of stocks. Since then the divisor has been
adjusted to compensate for stock splits and other distributions that
would create distortions in the average that did not reflect a change in
value of the stocks. The value of the adjusted divisor as of November 1,
1999 was 0.20435952. Its current value is printed in the Wall Street
Journal every day.
The following are the companies that make up the Dow:
Company Name(Ticker Symbol)
AlliedSignal Inc. (ALD)
American Express Co.(AXP)
Boeing Co. (BA)
Eastman Kodak Co.(EK)
General Electric Co.(GE)
General Motors Corp.(GM)
Hewlett Packard Co.(HWP)
Home Depot (HD)
International Business Machines Corp.(IBM)
International Paper Co.(IP)
JP Morgan & Co.(JPM)
Johnson & Johnson(JNJ)
McDonalds Corp. (MCD)
Merck & Co.(MRK)
Minnesota Mining & Manufacturing Co. (MMM)
Phillip Morris Co.(MO)
Procter & Gamble Co.(PG)
SBC Communications, Inc. (SBC)
United Technologies Corp.(UTX)
Walt Disney Co. (DIS)
A type of security,
generally issued by a railroad, to pay for new equipment. Title to the
equipment, such as a airplane, is held by a trustee until the notes are paid
off. An equipment trust certificate is usually secured by a first claim on the
A corporation that owns
a large number of shares in other companies. Holding companies use the voting
rights that come with their shares to exert influence over the companies under
A report on a company's
financial status over a period of time. It totals profits, subtracts expenses
and pinpoints how much money the company can reinvest.
stocks that pay large dividends that an investor could use as income.
A written agreement
under which bonds and debentures
are issued, setting forth maturity date, interest rate, and other terms
Member on the floor of
the NYSE who executes orders for other brokers who are too busy to handle all of
their orders, or for firms who do not have their Exchange member on the floor.
Independents are still sometimes referred to as "two dollar brokers"
because they originally received $2 for every hundred shares they traded. Now
their fees are paid by the commission brokers.
An issue of new stock by
a once private company to transform itself into a publicly held one. IPOs are
usually done to raise cash for growing young companies that need larger sources
of capital than the private sector can provide. The new shares are sold to one
or more investment
banks, which then sell them to the public. Also known as
"going public", its the first sale of stock by a company
inviting the public to subscribe in its shares. IPOs are often smaller,
newer companies seeking equity capital to expand their businesses.
Also known as
underwriters, investment banks serve as middlemen between corporations issuing
new securities and the buying public. Normally one or more investment banks buy
the new issue of securities from the issuing company for a negotiated price. The
company walks away with this new supply of capital, while the investment banks
form a syndicate and resell the issue to their customer base and the investing
public. Investment banks perform a variety of other financial services, such as
merger and acquisition advice and market analysis.
All claims against the
assets of a corporation. Liabilities can include accounts, wages and salaries
payable; dividends declared; accrued taxes; and fixed or long-term debt such as
bonds and bank loans.
A demand upon a
customer to put up money or securities with the broker. The call is made
when a purchase is made; also if a customer's equity in a margin account
declines below a minimum standard set by the Exchange or by the firm.
A bond secured by a
mortgage on a property. The value of the property may or may not equal the value
of the bond issued against it.
A bond issued by a
county, city, district or authority.
A portfolio of
stocks, bonds, or other securities administered by a team of one or more
managers from an investment
company who make buy and sell decisions on component securities.
Capital is contributed by smaller investors who buy shares in the mutual
fund rather than the individual stocks and bonds in its portfolio. The
return on the fund's holdings is distributed back to its contributors,
or shareholders, minus various fees and commissions. This system allows
small investors to participate in the reduced risk of a large and
diverse portfolio that they could not otherwise build themselves. They
also have the benefit of professional managers overseeing their money
who have the time and expertise to analyze and pick securities.
There are two types of mutual funds, open and closed ended. Shares in
closed-end funds, some of which are listed on the New York Stock
Exchange, are readily transferable in the open market and are bought and
sold like other stock. These funds do not accept new contributions from
investors, but only reinvest the return on the existing portfolio.
Open-end funds sell their own new shares to investors, stand ready to
buy back their old shares, and are not listed on exchanges. Open-end
funds are so called because their capitalization is not fixed; they
issue more shares as people want them. Many open ended funds allow
contributors extra perks, such as the ability to write checks with their
The National Association
of Securities Dealers Automated Quotation is a global intranet providing brokers
and dealers with price quotations on traded over-the-counter. Unlike the NYSE
auction market where orders meet on a trading floor, NASDAQ orders are paired
and executed on a computer network. Level I service provides the best bid and
offer (BBO) in a given security without identifying the market maker. Level II
service provides the BBO and identifies the market maker. Level III service
allows registered market makers to compete and trade by entering their own bids
The National Association
of Securities Dealers is an industry association of broker/dealers in the
over-the-counter securities business. The NASD is self-regulatory body and
administers the NASDAQ stock market.
Stock Exchange (NYSE)
marketplace blends public pricing with assigned dealer responsibilities.
Aided by advanced technology, public orders meet and interact on the
trading floor with a minimum of dealer interference. The result is
competitive price discovery at the point of sale. Liquidity in the NYSE
auction market system is provided by individual and institutional
investors, member firms trading for their own accounts, and assigned
specialists. The NYSE is linked with other markets trading listed
securities through the Intermarket Trading System (ITS).
NYSE-assigned dealers, known as specialists, are responsible for
maintaining a fair and orderly market in the securities assigned to
them. Most trading, however, is conducted by brokers acting on behalf of
customers, rather than by dealers trading for their own account. For
this reason, the NYSE is often described as an agency auction market.
The interaction of natural buyers and sellers determines the price of an
A type of
preferred stock on which unpaid dividends do not accrue. Omitted
dividends are, as a rule, gone forever.
A preferred stock, that
is entitled to its stated dividend, and, also, to additional dividends on a
specific basis upon payment of dividends on the common stock.
A business relationship
in which two or more people agree to share the risks and profits of running a
A stock that typically sells for less than $1 a share, although it may
rise to as much as $10/share as a result of heavy promotion. All are
traded OTC, many of them in the local markets of Denver, Canadian Venture
Exchange, or Salt Lake City.
A type of stock
that pays a fixed dividend regardless of corporate earnings, and which
has priority over common stock in the payment of dividends. However, it
carries no voting rights, and should earnings rise significantly the
preferred holder is stuck with the same fixed dividend while common
holders collect more. The fixed income stream of preferred stock makes
it similar in many ways to bonds.
A contract that gives
the holder the right to sell the underlying stock, to the writer of the put, at
a specified price (the strike
price) within a fixed period of time.
A bond that is
registered on the books of the issuing company in the name of the owner. It can
be transferred only when endorsed by the registered owner.
Usually a trust company
or bank charged with the responsibility of keeping a record of the owners of a
corporation's securities and preventing the issuance of more than the authorized
Split A reduction in
the number of a corporation's shares outstanding that increases the par
value of its stock or its earnings per share. The market value of the
total number of shares remains the same.
Exchange Commission (SEC)
A watch-dog agency
created by the U.S. Congress to monitor the securities industry and enforce
punishments of those that violate the industry's regulations.
Stock options, or
futures contracts sold short and not covered as of a particular date. On the
NYSE, a tabulation is issued once a month listing all issues on the Exchange in
which there was a short position of 5,000 or more shares and issues in which the
short position had changed by 2,000 or more shares in the preceding month. Short
position also means the total amount of stock an individual has sold short and
has not covered, as of a particular date.
A dividend paid
in securities rather than cash. The dividend may be additional shares of
the issuing company, or in shares of another company (usually a
subsidiary) held by the company.
split An increase in
the number of a corporation's outstanding shares that decreases the par
value of its stock. The market value of the total number of shares remains
the same. The division of a company's existing stock into more shares. In
a 2-for-1 split, each stockholder would receive an additional share for
each share formerly held.
weighted index of 500 stocks. Standard and Poor's 500 index represents the price
trend movements of the major common stock of U.S. public companies. It is used
to measure the performance of the entire U.S. domestic stock market.
A public offer to buy
shares from existing stockholders of a company, usually made byanother company
attempting an acquisition.
So-called because stockholders are asked to "tender" (surrender) their
holdings for a premium above the current market price.
A three or four letter
abbreviation used to identify a security whether on the floor, a TV screen, or a
newspaper page. Ticker symbols are part of the lore of Wall Street. They were
originally developed in the 1800s by telegraph operators to save bandwidth.
One-letter symbols were therefore assigned to the most active stocks. Railroads
were the dominant issues at the time, so they retain a majority of the
Ticker symbols today are assigned on a first-come, first-served basis. Each
marketplace -- the NYSE, the American Stock Exchange, and others -- allocates
symbols for companies within its purview, working closely to avoid duplication.
A symbol used for one company cannot be used forany other, even in a different
outstanding, that were repurchased by the issuing company. Companies often
repurchase stock to benefit existing shareholders. Those who sell receive a
premium price from the company for their shares, thus substituting a large
capital gain for future dividends. This ploy is used when dividend taxes are
higher than capital gains taxes. Remaining investors who keep their shares
benefit from a tightened supply which raises the share price. Companies may
later resell treasury stock, or retire it according to a shareholder vote.
The common stockholders' right to vote their stock in the affairs of a company. Preferred
stock usually has the right to vote when preferred dividends are in default for
a specified period. The right to vote may be delegated by the stockholder to
Warrant A security
that gives the holder the right to purchase securities from the issuer of
the warrant at a specific price. Warrants are usually considered long-term
instruments, expiration dates are typically years in the future.
In stocks and bonds, the
amount of money returned to investors on their investments. Also known as rate
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