Definition of Shares
Certificates or book entries representing ownership in a corporation or similar entity
Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign
issuer. The certificates represent claims to foreign equities.
Number of shares authorized for issuance by a firm's corporate charter.
The number of shares of stock that the company is legally authorized to sell.
Are equity instruments that take no security against assets, have no fixed terms of repayment and pay no fixed dividends.
Earnings per share expressed as if all outstanding convertible securities
and warrants have been exercised.
The number of shares that the company has sold to the public.
shares that have been issued by the company.
Percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.
shares that are currently owned by investors.
The number of shares that are in the hands of the public. The difference between issued shares and outstanding shares is the shares held as treasury stock.
shares that have been issued by the company and are held by investors.
shares of stock given to managers on the basis of performance as measured by earnings
per share and similar criteria. A control device used by shareholders to tie management to the self-interest of
Preferred shares give investors a fixed dividend from the company's earnings. And more
importantly: preferred shareholders get paid before common shareholders. See: preferred stock.
Are equity instruments that take no security against assets, have flexible terms of repayment and pay fixed or floating dividends.
Mutual funds that do not charge an upfront or back-end commission, but instead take out up to
1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an
arrangement allowed by the SEC's Rule 12b-I (passed in 1980).
activity based costing (ABC)
A relatively new method advocated for the
allocation of indirect costs. The key idea is to classify indirect costs,
many of which are fixed in amount for a period of time, into separate
activities and to develop a measure for each activity called a cost driver.
The products or other functions in the business that benefit from the
activity are allocated shares of the total indirect cost for the period based
on their usage as measured by the cost driver.
American Depositary Receipts (ADRs)
Certificates issued by a U.S. depositary bank, representing foreign
shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may
represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's
are "sponsored," the corporation provides financial information and other assistance to the bank and may
subsidize the administration of the ADRs. "Unsponsored" ADRs do not receive such assistance. ADRs carry
the same currency, political and economic risks as the underlying foreign share; the prices of the two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage. American depositary shares(ADSs) are
a similar form of certification.
A clause in a shareholders agreement preventing a company from issuing additional shares, without allowing the current shareholders the opportunity to participate in the offering to avoid dilution of their percentage ownership.
Result of a transaction that increases earnings per common share (e.g. by decreasing the
number of shares outstanding).
A right of shareholders in a merger to demand the payment of a fair price for their shares, as
This is the quoted ask, or the lowest price an investor will accept to sell a stock. Practically speaking, this
is the quoted offer at which an investor can buy shares of stock; also called the offer price.
The weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments.
authorized share capital
Maximum number of shares that the company is permitted to issue, as specified in the firm’s articles of incorporation.
Brokerage house clerical operations that support, but do not include, the trading of stocks and
other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory
Back-end loan fund
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from
4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a
designated time, such as one year. The commission decreases the longer the investor holds the shares. The
formal name for the back-end load is the contingent deferred sales charge, or CDSC.
basic earnings per share (EPS)
This important ratio equals the net
income for a period (usually one year) divided by the number capital
stock shares issued by a business corporation. This ratio is so important
for publicly owned business corporations that it is included in the daily
stock trading tables published by the Wall Street Journal, the New York
Times, and other major newspapers. Despite being a rather straightforward
concept, there are several technical problems in calculating
earnings per share. Actually, two EPS ratios are needed for many businesses—
basic EPS, which uses the actual number of capital shares outstanding,
and diluted EPS, which takes into account additional shares of
stock that may be issued for stock options granted by a business and
other stock shares that a business is obligated to issue in the future.
Also, many businesses report not one but two net income figures—one
before extraordinary gains and losses were recorded in the period and a
second after deducting these nonrecurring gains and losses. Many business
corporations issue more than one class of capital stock, which
makes the calculation of their earnings per share even more complicated.
A method of securities distribution/ underwriting in which the securities firm agrees to sell
as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or
fixed price sale, where the underwriter agrees to sell a specific number of shares (with the securities firm
holding any unsold shares in its own account if necessary).
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
speaking, this is the available price at which an investor can sell shares of stock. Related: Ask , offer.
A large trading order, defined on the New York Stock Exchange as an order that consists of
10,000 shares of a given stock or a total market value of $200,000 or more.
A group of shareholders banding together to vote their shares in a single block.
book value and book value per share
Generally speaking, these terms
refer to the balance sheet value of an asset (or less often of a liability) or
the balance sheet value of owners’ equity per share. Either term emphasizes
that the amount recorded in the accounts or on the books of a business
is the value being used. The total of the amounts reported for
owners’ equity in its balance sheet is divided by the number of stock
shares of a corporation to determine the book value per share of its capital
BOOK VALUE OF COMMON STOCK
The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals:
(Stockholders’ equity) / (Common stock shares outstanding)
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).
Book Value per Share
The book value of a company divided by the number of shares
Buy on margin
A transaction in which an investor borrows to buy additional shares, using the shares
themselves as collateral.
Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buy-out is
done with borrowed money.
An option contract that gives its holder the right (but not the obligation) to purchase a specified
number of shares of the underlying stock at the given strike price, on or before the expiration date of the
Premium in price above the par value of a bond or share of preferred stock that must be paid to
holders to redeem the bond or share of preferred stock before its scheduled maturity date.
The market in which investors buy and sell shares of companies, normally associated with a Stock Exchange.
Ownership shares issued by a business corporation. A business
corporation may issue more than one class of capital stock shares.
One class may give voting privileges in the election of the directors of the
corporation while the other class does not. One class (called preferred
stock) may entitle a certain amount of dividends per share before cash
dividends can be paid on the other class (usually called common stock).
Stock shares may have a minimum value at which they have to be issued
(called the par value), or stock shares can be issued for any amount
(called no-par stock). Stock shares may be traded on public markets such
as the New York Stock Exchange or over the Nasdaq network. There are
about 10,000 stocks traded on public markets (although estimates vary
on this number). In this regard, I find it very interesting that there are
more than 8,000 mutual funds that invest in stocks.
Cash flow per common share
Cash flow from operations minus preferred stock dividends, divided by the
number of common shares outstanding.
An investment company that sells shares like any other corporation and usually does not
redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or
below its net asset value. Related: Open-end fund.
The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or
their dollar value. In 1975, deregulation led to the creation of discount brokers, who charge lower
commissions than full service brokers. Full service brokers offer advice and usually have a full staff of
analysts who follow specific industries. Discount brokers simply execute a client's order -- and usually do not
offer an opinion on a stock. Also known as a round-turn.
These are securities that represent equity ownership in a company. Common shares let an
investor vote on such matters as the election of directors. They also give the holder a share in a company's
profits via dividend payments or the capital appreciation of the security.
shares of ownership sold to the public.
Ownership shares in a publicly held corporation.
Common stock/other equity
Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.
Assets acquired to create money. May include plant, machinery and equipment, shares of another company etc.
The number of shares of common stock that the security holder will receive from
exercising the call option of a convertible security.
Bond that the holder may exchange for a specified number of shares.
Are debt instruments that are convertible into common or preferred shares, take secondary or no security against assets, have flexible terms of repayment and charge fixed or floating interest rates.
The contractually specified price per share at which a convertible security can be
converted into shares of common stock.
Securities (generally bonds or preferred shares) that are exchangeable at the option of the holder for common shares of the issuing firm.
A legal entity, organized under state laws, whose investors purchase
shares of stock as evidence of ownership in it. A corporation is a legal entity, which
eliminates much of the liability for the corporation’s actions from its investors.
A short call option position in which the writer owns the number of shares of the underlying
stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the
stock does not have to be bought at the market price, if the holder of that option decides to exercise it.
One corporation holds shares in another firm.
A system of voting for directors of a corporation in which shareholder's total number of
votes is equal to his number of shares held times the number of candidates.
Total par value (number of shares issued, multiplied by the par value of each share). Also
called dedicated value.
A common term for convertible bonds because of their equity component and the
expectation that the bond will ultimately be converted into shares of common stock.
A warrant entitles the holder to buy a given number of shares of stock at a stipulated
price. A detachable warrant is one that may be sold separately from the package it may have originally been
issued with (usually a bond).
diluted earnings per share (EPS)
This measure of earnings per share
recognizes additional stock shares that may be issued in the future for
stock options and as may be required by other contracts a business has
entered into, such as convertible features in its debt securities and preferred
stock. Both basic earnings per share and, if applicable, diluted
earnings per share are reported by publicly owned business corporations.
Often the two EPS figures are not far apart, but in some cases the
gap is significant. Privately owned businesses do not have to report earnings
per share. See also basic earnings per share.
Payments from fund or corporate cash flow. May include dividends from earnings, capital
gains from sale of portfolio holdings and return of capital. Fund distributions can be made by check or by
investing in additional shares. Funds are required to distribute capital gains (if any) to shareholders at least
once per year. Some Corporations offer Dividend Reinvestment Plans (DRP).
A payment made to shareholders that is proportional to the number of shares
owned. It is authorized by the Board of Directors.
As the term dividend relates to a corporation's earnings, a dividend is an amount paid per share from a corporation's after tax profits. Depending on the type of share, it may or may not have the right to earn any dividends and corporations may reduce or even suspend dividend payments if they are not doing well. Some dividends are paid in the form of additional shares of the corporation. Dividends paid by Canadian corporations qualify for the dividend tax credit and are taxed at lower rates than other income.
As the term dividend relates to a life insurance policy, it means that if that policy is "participating", the policy owner is entitled to participate in an equitable distribution of the surplus earnings of the insurance company which issued the policy. Surpluses arise primarily from three sources:
1) the difference between anticipated and actual operating expenses,
2) the difference between anticipated and actual claims experience, and
3) interest earned on investments over and above the rate required to maintain policy reserves. Having regard to the source of the surplus, the "dividend" so paid can be considered, in part at least, as a refund of part of the premium paid by the policy owner.
Life insurance policy owners of participating policies usually have four and sometimes five dividend options from which to choose:
1) take the dividend in cash,
2) apply the dividend to reduce current premiums,
3) leave the dividends on deposit with the insurance company to accumulate at interest like a savings plan,
4) use the dividends to purchase paid-up whole life insurance to mature at the same time as the original policy,
5) use the dividends to purchase one year term insurance equal to the guaranteed cash value at the end of the policy year, with any portion of the dividend not required for this purpose being applied under one of the other dividend options.
NOTE: It is suggested here that if you have a participating whole life policy and at the time of purchase received a "dividend projection" of incredible future savings, ask for a current projection. Life insurance company's surpluses are not what they used to be.
Dividend reinvestment plan (DRP)
Automatic reinvestment of shareholder dividends in more shares of a
company's stock, often without commissions. Some plans provide for the purchase of additional shares at a
discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the Long
term using dollar cost averaging. The DRP is usually administered by the company without charges to the
Dividends per share
Dividends paid for the past 12 months divided by the number of common shares
outstanding, as reported by a company. The number of shares often is determined by a weighted average of
shares outstanding over the reporting term.
Dow Jones industrial average
This is the best known U.S.index of stocks. It contains 30 stocks that trade on
the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest
U.S.companies are performing. There are thousands of investment indexes around the world for stocks,
bonds, currencies and commodities.
Earnings per Share
A measure of the earnings generated by a company on a per
share basis. It is calculated by dividing income available for
distribution to shareholders by the number of common shares
Earnings per share (EPS)
EPS, as it is called, is a company's profit divided by its number of outstanding
shares. If a company earned $2 million in one year had 2 million shares of stock outstanding, its EPS would
be $1 per share. The company often uses a weighted average of shares outstanding over the reporting term.
The ratio of earnings per share after allowing for tax and interest payments on fixed interest
debt, to the current share price. The inverse of the price/earnings ratio. It's the Total Twelve Months earnings
divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is
shown in percentage.
Employee stock fund
A firm-sponsored program that enables employees to purchase shares of the firm's
common stock on a preferential basis.
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.
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock.
Those holding shares of the firm's equity.
This literally means "without dividend." The buyer of shares when they are quoted ex-dividend
is not entitled to receive a declared dividend.
In connection with a rights offering, shares of stock that are trading without the rights attached.
The marketplace in which shares, options and futures on stocks, bonds, commodities and indices
are traded. Principal US stock exchanges are: New York Stock Exchange (NYSE), American Stock Exchange
(AMEX) and the National Association of Securities Dealers (NASDAQ)
Exchange of stock
Acquisition of another company by purchase of its stock in exchange for cash or shares.
An offer by the firm to give one security, such as a bond or preferred stock, in exchange for
another security, such as shares of common stock.
This is a generic term that refers to the many different forms of financing a business may use. For example - loans, shares, and bonds are all considered financing instruments.
Firm commitment underwriting
An undewriting in which an investment banking firm commits to buy the
entire issue and assumes all financial responsibility for any unsold shares.
Fixed-price tender offer
A one-time offer to purchase a stated number of shares at a stated fixed price,
usually a premium to the current market price.
The number of shares that are actively tradable in the market, excluding shares that are held by officers
and major stakeholders that have agreements not to sell until someone else is offered the stock.
Agreement to buy or sell a set number of shares of a specific stock in a designated future
month at a price agreed upon by the buyer and seller. The contracts themselves are often traded on the futures
market. A futures contract differs from an option because an option is the right to buy or sell, whereas a
futures contract is the promise to actually make a transaction. A future is part of a class of securities called
derivatives, so named because such securities derive their value from the worth of an underlying investment.
The process of offering a company’s shares for sale to the public through an
initial public offering.
Publicly owned stock in a firm is replaced with complete equity ownership by a
private group. The shares are delisted from stock exchanges and can no longer be purchased in the open
Option that allows the underwriter for a new issue to buy and resell additional shares.
Sale of some shares of stock to get cash that would be similar to receiving a cash dividend.
Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can
duplicate the affects of corporate leverage on their own. Thus, if levered firms are priced too high, rational
investors will simply borrow on personal accounts to buy shares in unlevered firms.
Mutual funds that seek regular income. This type of fund invests primarily in government, corporate and other types of bonds, debt securities, and other income producing securities and in certain circumstances can also hold common and preferred shares.
Initial Public Offering
A firms first offering of its shares to the investment public, after registration requirements of the various securities regulators have been met.
These are directors and senior officers of a corporation -- in effect those who have access to inside
information about a company. An insider also is someone who owns more than 10% of the voting shares of a
International Depository Receipt (IDR)
A receipt issued by a bank as evidence of ownership of one or more
shares of the underlying stock of a foreign corporation that the bank holds in trust. The advantage of the IDR
structure is that the corporation does not have to comply with all the regulatory issuing requirements of the
foreign country where the stock is to be traded. The U.S. version of the IDR is the American Depository
A closed-end fund regulated by the Investment Company Act of 1940. These funds have a
fixed number of shares which are traded on the secondary markets similarly to corporate stocks. The market
price may exceed the net asset value per share, in which case it is considered at a "premium." When the
market price falls below the NAV/share, it is at a "discount." Many closed-end funds are of a specialized
nature, with the portfolio representing a particular industry, country, etc. These funds are usually listed on US
and foreign exchanges.
Issued share capital
Total amount of shares that are in issue. Related: outstanding shares.
After a stock split, the number of shares distributed for each share held and the date of the
Value at which a company's shares are recorded in its books.
An order to buy a stock at or below a specified price or to sell a stock at or above a specified
price. For instance, you could tell a broker "Buy me 100 shares of XYZ Corp at $8 or less" or to "sell 100
shares of XYZ at $10 or better." The customer specifies a price and the order can be executed only if the
market reaches or betters that price. A conditional trading order designed to avoid the danger of adverse
unexpected price changes.
A mutual fund with shares sold at a price including a large sales charge -- typically 4% to 8% of
the net amount indicated. Some "no-load" funds have distribution fees permitted by article 12b-1 of the
Investment Company Act; these are typically 0. 25%. A "true no-load" fund has neither a sales charge nor
Freddie Mac program, the aggregation that the fund purchaser receives some investment advice or other
service worthy of the charge.
An options position where a person has executed one or more option trades where the net
result is that they are an "owner" or holder of options (i. e. the number of contracts bought exceeds the
number of contracts sold).
Occurs when an individual owns securities. An owner of 1,000 shares of stock is said to be "Long the stock."
Related: Short position
The total dollar value of all outstanding shares. Computed as shares times current
market price. It is a measure of corporate size.
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