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Definition of Equity Security
An ownership interest in an enterprise, including preferred and common stock.
A type of equity security where holders have a claim on the assets
A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.
Accounting method for an equity security in cases where the investor has sufficient
A debt or equity security for which there is no posted price or bidand-
A debt or equity security bought and held for sale in the near term to generate income on short-term price changes.
The discount rate that reflects only the business risks of a project and abstracts from the
The ratio of total assets to stockholder equity.
A security that is collateralized by loans, leases, receivables, or installment contracts
A management style that de-emphasizes the significance of economic
Value of outstanding common shares at par, plus accumulated retained
A security that can be converted into common stock at the option of the security holder,
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A common term for convertible bonds because of their equity component and the
A financial security, such as an option, or future, whose value is derived in part from the
An international equity placement where the offering is split into two
Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
An agreement in which one party, for an upfront premium, agrees to compensate the other at
Also called a residual claim, a claim to a share of earnings after debt obligation have been
The simultaneous purchase of an equity floor and sale of an equity cap.
Equity contribution agreement
An agreement to contribute equity to a project under certain specified
An agreement in which one party agrees to pay the other at specific time periods if a specific
Used to refer to warrants because they are usually issued attached to privately placed bonds.
Total assets divided by total common stockholders' equity; the amount of total assets per
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
A swap in which the cash flows that are exchanged are based on the total return on some stock
Related: Variable life
Those holding shares of the firm's equity.
Securities sold in the Euromarket. That is, securities initially sold to investors
security that grants the security holder the right to exchange the security for the
A nonnegotiable debt security that can be redeemed at some fixed price or according to
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
The security to which a warrant is attached.
A convertible security whose optioned common stock is trading in a middle range, causing
The balance of a margin account. Related: buying on margin, initial margin requirement.
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
Monthly income preferred security (MIP)
Preferred stock issued by a subsidiary located in a tax haven.
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a
An instrument such as a stock or bond for which payments depend only on the financial
Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12
Piece of paper that proves ownership of stocks, bonds and other investments.
Security characteristic line
A plot of the excess return on a security over the risk-free rate as a function of
Security deposit (initial)
Synonymous with the term margin. A cash amount of funds that must be deposited
Security deposit (maintenance)
Related: Maintenance margin security market line (SML). A description of
Security market line
Line representing the relationship between expected return and market risk.
Security selection decision
Choosing the particular securities to include in a portfolio.
This is a company's total assets minus total liabilities. A company's net worth is the
Balance sheet item that includes the book value of ownership in the corporation. It
The residual claims that stockholders have against a firm's assets, calculated by
Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index
Top-down equity management style
A management style that begins with an assessment of the overall
Total debt to equity ratio
A capitalization ratio comparing current liabilities plus long-term debt to
Options: the security subject to being purchased or sold upon exercise of an option
Variable price security
A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.
RATE OF RETURN ON STOCKHOLDERS’ EQUITY
The percentage return or profit that management made on each dollar stockholders invested in a company. Here’s how you figure it:
RATIO OF DEBT TO STOCKHOLDERS’ EQUITY
A ratio that shows which group—creditors or stockholders—has the biggest stake in or the most control of a company:
STOCKHOLDERS’ (OR OWNERS’) EQUITY
The value of the owners’ interests in a company.
Funds raised from shareholders.
An account that reduces an equity account. An example is Treasury stock.
Amounts contributed to the company by the owners (contributed capital) plus the residual earnings of the business (retained earnings).
The total amount of contributed capital and retained earnings; synonymous with stockholders' equity.
The total amount of contributed capital and retained earnings; synonymous with shareholders’ equity.
A widely used financial statement ratio to assess the
Refers to one of the two basic sources of capital for a business, the
Refers to the capital invested in a business by its shareowners
return on equity (ROE)
This key ratio, expressed as a percent, equals net
stockholders' equity, statement of changes in
Although often considered
Cost of Equity
Same as the cost of common stock. Sometimes viewed as the
Return on Common Equity Ratio
A measure of the percentage return earned on the value of the
Security Market Line
A graph illustrating the equilibrium relationship between the
A security that pays a specified cash flow over a
The difference between the total of all recorded assets and liabilities on the balance
An easily traded investment, such as treasury bills, which is
The total of all capital contributions and retained earnings on a business’s
Either the collateral on a loan, or some type of equity ownership or debt, such
security paying dividends or interest that vary with short-term interest rates.
security market line
Relationship between expected return and beta.
Ownership. Common stock represents equity in a corporation.
Employee Retirement Income Security Act of 1974 (ERISA)
A federal Act that sets minimum operational and funding standards for employee benefit
Social Security Act of 1935
A federal Act establishing Old Age and Survivor’s
A security representing a debt relationship with an enterprise, including a government
A debt security for which the investing entity has both the positive
A share or an interest in a property or an enterprise such as a stock certificate or a bond.
The residual interest or owners' claims on the assets of a corporation
A comparison of debt to equity in a company's capital structure.
The net worth of a business, consisting of capital stock, capital (or paid-in) surplus (or retained earnings), and, occasionally, certain net worth reserves. Common equity is that part of the total net worth belonging to the common shareholders. Total equity includes preferred shareholders. The terms common stock, net worth, and common equity are frequently used interchangeably.
Refers to the investors percentage ownership of a company that can be re-acquired by the company, usually at a pre-determined amount.
Funds, other than paid-up capital and retained earnings, employed in a business and which will remain in a business as permanent capital.
Collateral offered by a borrower to a lender to secure a loan.
The monetary value placed on security by a lender in determining the extent to which it can make loans against such security.
Represents the total assets of a corporation less liabilities.
The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares or stocks are often known as equities.
Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.
Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.
These are securities that represent equity ownership in a company. Common shares let an
Common stock equivalent
A convertible security that is traded like an equity issue because the optioned
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