Chapter 21: Corporate Stocks Definitions, examples, etc. taken from Contemporary Business Mathematics for Colleges, 14th Edition by Deitz & Southam, Thomson Southwestern Publisher.

Key Terms / Items Corporation: a body that is granted a charter by a state legally recognizing it as a separate entity, having its own rights, privileges, and liabilities distinct from those of its owners. Capital stock: shares of a corporation Charter: the basic approval document issued by a state, under which the corporation operates.

Key Terms / Items (continued) Stock certificate: evidences ownership of stock. Par: value assigned to shares of capital stock. No-par stock: stock issued without par value. Stock exchanges: the formal marketplace set up for the purpose of trading stocks. Include NYSE, AMEX and NASDAQ.

Key Terms / Items (continued) Stockbroker: handles stock transactions; the purchase and sale of stocks for clients. Total cost (purchaser) = the purchase price plus a broker’s commission. Proceeds (seller) = the selling price less the broker’s commission. Round lot: usually the sale of 100 shares of stock.

Key Terms / Items (continued) Odd lot: sale of any number of shares less than 100. Odd-lot differential: commonly added to the round-lot price. See examples D and E on page 429. Board of directors: a group of people elected by shareholders to oversee the operations of the corporation.

Key Terms / Items (continued) Declare a dividend: an action taken by the board of directors to distribute earnings to shareholders. Can be a percent % of the par value or a flat dollar amount per share owned. Rate of yield = Dividend ÷ total cost of the stock.

Key Terms / Items (continued) Common stock: usual type of stock issued by a corporation. Preferred stock: gives holders a right to share in earnings and liquidation before common shareholders do. Cumulative (preferred): if the corporation doesn’t pay the specified percentage, the unpaid amount, called a dividend in arrears, carries over the following years or years. Noncumulative stock doesn’t carry over to the next year.

Key Terms / Items (continued) Convertible preferred stock: gives the owner the option of converting those preferred shares into a stated number of common shares.