Acquisition: The purchase of one company by another.
Balanced Budget: The federal government budget is balanced when receipts are
equal to current expenditure.
Balance Of Payments: The difference between all payments made all payments
made to and from foreign countries over a set period of time. A favorable
balance exists when more payments are coming in than going out and an
unfavorable balance exists when the reverse is true. Payments include gold,
the cost of merchandise and services, interest and dividend payments, money
spent by travelers, and repayment of principal on loans.
Balance Of Trade (trade gap): The difference between exports and imports both
in actual funds and credit. A nation's balance of trade is favorable when
exports exceed imports and unfavorable when the reverse is true.
Bear Market: A market in which prices are falling.
Bearer Bond: A bond issued in bearer from rather than being registered in the
owner's name Ownership is determined by possession.
Bond: A written promise or IOU by the issuer to repay a fixed amount of
borrowed money on a specified date and to pay a set annual rate of interest in
the mean time, usually at semi-annual intervals. Bonds are generally
considered safe because the borrower (whether a company or the government,)
usually must make interest payments before the money is spent on anything else.
Bull Market: A market in which prices are on the rise.
Commercial Paper: An extremely short-term corporate IOU, generally due in 270
days or less. Available in face amounts of $100,000 $250.,000,$500,000,
$1,000,000 and combinations thereof.
Convertible Bond: A corporate bond (see below) which may be converted into a
stated number of shares of common stock. lts price tends to fluctuate along
with fluctuations in the price of the stock and with changes in interest rates.
Corporate Bond: Evidence of debt by a corporation. The bond normally has a
stated life and pays a fixed rate of interest. Considered safer than the
common or preferred stock of the same company.
Cost Of Living: The cost of attaining a standard of living measured in terms
of purchased goods and services. A rise in the cost of living mirrors the rate
of inflation.
Cost-Of-Living Benefits: Benefits that go to those persons whose monthly
receipts increase automatically as prices rise.
Credit Crunch. (liquidity crisis): The period when cash for lending to
business and consumers is in short supply.
Debenture: An unsecured long-term debt obligation backed on:y by the general
credit of the issuing corporation.
Deficit Spending: The practice whereby the government goes into debt to
finance some of its expenditures.
Depression: A long period of economic decline when prices are low unemployment
is high, and there are many business failures.
Devaluation: The official lowering of a nations currency decreasing its its
value in relation to foreign currencies.
Discount Rate: The rate of interest set by the Federal Reserve that member
banks are charged when borrowing money through the federal reserve System.
Disposable Income: Income after taxes which is available to persons for
spending and saving.
Dividend: Payment by a corporation to its shareholders usually in the form of
cash, stock shares or their property.
Economic Growth: The steady.process of increasing productive capacity of the
economy, and hence of increasing national income.
Federal Deposit Insurance Corporation (FDIC): A government sponsored
corporation that insures accounts in national banks and other qualified
institutions.
Federal Reserve System: The entire banking system of the U.S., incorporating
12 Federal Reserve banks (one in each of 12 Federal Reserve districts), and 24
Federal Reserve branch banks, all national banks and state-chartered commercial
banks and trust companies that have been admitted to its membership. The
system greatly influences the nation's monetary credit policies.
Full Employment: The economy is said to be at full employment when only
fractional unemployment exists. That is, everyone who wishes to work at the
going wage-rate for his type of labor is employed. Since it takes time to
switch from one job job to another, there will be at any given time a small
amount of unemployment.
Dow-Jones Industrial Average: A measure of stock market prices, based on 30
leading companies on the New York Stock Exchanger.
Golden Parachute: Provisions in the employment contracts of executives
guarantying substantial severance benefits if they lose their position in a
corporate taken over.
Government Bond: An IOU of the U.S. Treasury, considered the safest security
in the investment world. They are divided into two categories, those that are
not marketable and those that are. Savings Bonds. cannot be bought and sold
once the original purchase is made. These include the familiar Series EE
bonds, you buy them at 50 percent of their face value and when they mature, 5
years later, they will pay you back 100 percent of face value if vou cash them
in. Another type, Series, H are not discounted, but issued in amounts of $500,
$l,000, $5,000. and $10,000 and pay their interest in semiannual checks.
Marketable bonds fall into 3 categories. Treasury Bills are short-term U.S.
obligations, maturing in 3, 6, or 12 months. They are sold at a discount of
the face value, and the minimum denomination is $10,000. Treasury Bonds mature in up to to 10 years. Denominations range from $500,
$1,000 to $5.000. $10,000 and up. Treasury Bonds mature in 10 to 20 years.
The minimum investment is $l,000.
Green.Mail: A company buys back its own shares from a suitor for more then
the going market price to avoid a hostile takeover.
Gross National Product (GNP): The market value of all goods and services that
have been bought for final use during a year. The GNP is generally considered
to be the most comprehensive measure of a nation's economic activity. The Real
GNP is the GNP adjusted for inflation.
Individual Retirement Account (IRA): A self funded retirement plan that allows
employed individuals to contribute a maximum yearly sum toward their
retirement. Interest earned in the account is tax deferred.
Inflation: An increase in the average level of prices: double-digit inflation
occurs when the percent increase rises above 9.9%.
Insider Information: Important facts about the condition or plans of a
corporation that have not been released to the general public.
Junk Bonds: Debt securities that sell at relatively low prices, because of the
low credit rating of their issuers They pay significantly higher yields than
top.grade bonds to reflect their added risk. In the 1980s, they have been used
to finance hostile takeovers.
Key Leading Indicators: A series of a dozen indicators from different segments
of the economy used by the Commerce Department to foretell what will happen in
the economy in the near future.
Leveraged Buy-Out: An acquisition of a public company by a small group, often
including the company's management. which takes the company private. Much of
the purchase price is borrowed with the debt repaid from company profits by
selling company assets.
Liquid Assets: Assets that include cash or those items that me easily
converted into cash.
Margin Account: A brokerage account that allows a person to trade securities
on credit.
Money Supply: The currency held by the public plus checking accounts in
commercial banks and savings institutions.
Mortgage Backed Securities: Created when a bank, builder or government agency
gathers together a group of mortgages and then sells bonds to other
institutions and the public investors receive their proportionate share of the
interest payments on the loans as well as the principal payments. Usually,
these mortgages are guaranteed by the government making these a fairly safe
investment despite the fact that their market value does fluctuate.
Municipal Bond: Issued by governmental units such as states cities, local
taxing authorities and other agencies. Interest is exempt from U.S. and
sometimes state and local income tax. Municipal Bond Unit Investment Trusts
allow you to invest with us little as $l,000 in a portfolio of mainly different
municipal bonds chosen by professionals. The income is exempt from federal
income taxes.
Mutual Fund: A portfolio, or selection, of professionally bought and managed
stocks in which you pool your money along with thousands of other people. A
share price is based on net asset value, or the value of all the investments
owned by the funds, less any debt, and divided by the total number of shares
The major advantage is less risk unit is spread out over many stocks and, if
one or two do badly the remainder may shield you from the losses.
Bond Funds are mutual funds that deal in the bond market exclusively.
Money Market Mutual Funds buy in the so called Money market institutions that
need to borrow large sums of money for short terms. Usually the individual
investor cannot afford the denominations required in the .Money Market.(i.e.
treasury bills, commercial paper, certificates of deposit) but through a money
market mutual fund he can take advantage of these instruments when interest
rates are high. These funds offer special checking account advantages. The
minimum investment is generally $1,000.
National Debt: The debt of the national government as distinguished from the
debts of the political subdivisions of the nation and private business and
individuals. National debt ceiling limit set by Congress beyond which the
national debt cannot rise This limit is periodically raised by congressional
vote.
Option: A contractual agreement between a buyer and a seller to buy or sell
shares of a security. A Call option contract gives the right to purchase
shares of a specific stock at a stated price within a given period of time. A
Put option contract gives the buyer the right to sell shares of a specific
stock at a stated price within a given period of time.
Per Capita Income: The nations total income divided by the number of people in
the nation.
Prime Interest Rate: the rate charged by banks on short-term loans to large
commercial customers with the highest credit rating.
Producer Price Index: A statistical measure of the change in the price of
wholesale goods lt is reported for different stages of the production chain,
crude, intermediate and finished goods.
Program Trading: A term used for trading techniques involving large numbers
and large blocks of stocks' usually used in conjunction with computer programs
techniques include Index Arbitrage in which traders profit from price
differences between stocks and futures contracts on stock indexes' and
Portfolio Insurance which is the use of stock index futures to protect stock
investors from large losses when the market drops.
Public Debt: The total of the nations debts owed by state, local and national
government. This is considered a good measure of how much of the nations
spending is financed by borrowing rather than taxation.
Recession: A mild decrease in economic activity marked by a decline in real
GNP, employment, and trade, usually lasting 6 months to a year and marked by
widespread decline in many sectors of the economy.
Seasonal Adjustment: Statistical changes made to compensate for regular
fluctuations in data that are so great they tend to distort the statistics and
make comparisons meaningless. For instance, seasonal adjustments are made in
midwinter for a slowdown in housing construction and for the rise in farm
income in the fall after the summer crops are harvested.
Stagnation: A period of economic slowdown in which there is little growth in
GNP, capital investment and real income.
Stock: Common Stocks are shares of ownership in a corporation they are the
most direct way to participate in the fortunes of a company. There can he wide
swings in the prices of this kind of stock.
Preferred Stock is a type of stock on which a fixed dividend must he paid before holders of common stock are issued their share of the issuing corporations earnings. Prices are higher and yields lower than comparable bonds. However, they are attractive to corporate investors because 95 percent of preferred dividends are tax exempt to corporations. Convertible Preferred Stock can be converted into the common stock of the company that issued the preferred. This stock has the advantage of producing a higher yield than common stock and it also has appreciation potential.
Over-The-Counter Stock is not traded on the major or regional exchanges, but rather through dealers from whom you buy directly. These stocks tend to belong to smaller companies. Prices of OTC stocks are based on the dealers supply and demand.
Blue Chip stocks are so called because they have been leading stocks for a long time. Growth stocks are stocks whose earnings have grown over several years.
Stock-Index Futures: A futures contract is an agreement to buy or sell a
specific amount of a commodity or financial instrument at a particular price at
a set date. Futures on a stock index (such as the Standard & Poor's 500) are
bets on the future price of that group of stocks.
Supply.Side Economies: The school of economic thinking which stresses the
importance of the costs of production as a means of revitalizing the economy.
Advocates policies that raise capital and labor output by increasing the
incentives to produce.
Takeover: The passing of control of one company by another company or group by
sale or merger. A favorable takeover occurs when the acquired company's
management is agreeable to merger when management is opposed to the merger it
is an unfriendly takeover. Takeover arbitrage is the purchase and or selling
of the securities of companies involved in takeover situations in order to
realize a profit.
Tender Offer: A public offer to buy a company's stock; usually priced at
premium above the market.
Unit Investment Trust: A portfolio of many different corporate bonds,
preferred stocks' government-backed securities or utility common stocks in
which you can invest with as little as $1,000. Professional managers choose
the securities, arrange for safekeeping and collect the income you reserve pro
rata share of income every month.
Zero Coupon Bond: A corporate or .government bond that is issued at a deep
discount from the maturity value and pays no interest during the life of the
