Test#4 | AHRM 2304 - Family Financial Management, Quizzes of Financial Management

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TERM 1 investing DEFINITION 1 putting saved money to work so that it makes you even more money TERM 2 securities DEFINITION 2 assets suitable for investment, including stocks bonds and mutal funds TERM 3 stocks DEFINITION 3 shares of ownership in a corporation TERM 4 portfolio DEFINITION 4 collection of investments assembled to met your investment goals TERM 5 financial risk DEFINITION 5 possibility that an investment will fail to pay a return to the investor TERM 6 total return DEFINITION 6 income an investment generates from current income and capital gains TERM 7 current income DEFINITION 7 money received while you own an investment usually received regularly as interest rent or dividends TERM 8 interest DEFINITION 8 charge for borrowing money; investors in bonds earn interest TERM 9 capital gain DEFINITION 9 increase in the value of an initial investment realized upon the scale of the investment TERM 10 capital loss DEFINITION 10 decrease in paper value of an initial investment only realized if sold TERM 21 passive investor DEFINITION 21 an investor who does not actively engage in trading securities or monitoring his or her investments seeks to match the market return via mutual funds or other managed investments in the longer term. TERM 22 debts DEFINITION 22 lending investments that typically offer both a fixed maturity and a fixed income TERM 23 fixed maturity DEFINITION 23 specific date on which borrower agrees to repay the principle to the investor TERM 24 fixed income DEFINITION 24 specific rate of return that borrower agrees to pay the investor for use of the principal TERM 25 equities DEFINITION 25 ownership equities such as common or preferred stocks equity mutual funds real estate and so on that focus on capital gains more than on income TERM 26 random/unsystematic risk DEFINITION 26 risk associated with owning only on investment of a particular type that by chance may do very poorly in the future due to uncontrollable or random factors that do not affect the rest of the market TERM 27 diversification DEFINITION 27 process of reducing risk by spreading investment money among several investment opportunities TERM 28 market risk/systematic risk/undiversifiable risk DEFINITION 28 risk that the value of an investment may drop due to influences and events that affect all similar TERM 29 commissions DEFINITION 29 fees or percentages of the selling price paid to salespeople agents and companies for their services in buying or selling an investment TERM 30 leverage DEFINITION 30 using borrowed funds to invest with the goal of earning a rate of return in excess of the after-tax costs of borrowing TERM 31 real rate of return DEFINITION 31 return on an investment after subtracting the effects of inflation and income taxes TERM 32 securities markets DEFINITION 32 places where stocks and bonds are traded TERM 33 bear market DEFINITION 33 market in which securities prices have declined in value by 20% or more from previous highs often over the course of several weeks or months TERM 34 bull market DEFINITION 34 market in which securities prices have risen 20% or more over time TERM 35 market volatility DEFINITION 35 the likelihood of large price swings in securities due to a company's success TERM 46 Monte Carlo analysis DEFINITION 46 technique that performs a large number of trial runs of a particular portfolio mix of investments called simulations to find an optimal allocation for a particular investor's goals and risk tolerance TERM 47 investment plan DEFINITION 47 an explanation of your investment philosophy and your logic on investing to reach specific goals TERM 48 privately held corporation DEFINITION 48 one that issues stock purchased by a relatively small number of people and is not traded on a public stock exchange TERM 49 start-up capital DEFINITION 49 funds initially invested in a business enterprise TERM 50 securities DEFINITION 50 negotiable instruments of ownership or debt including common stock, preferred stock, and bonds TERM 51 stock DEFINITION 51 shares of ownership in a business corporation's assets and earnings TERM 52 common stock DEFINITION 52 most basic form of ownership of a corporation TERM 53 cash dividend DEFINITION 53 cash profits that a firm distributes to stockholders TERM 54 market price DEFINITION 54 the current price of a share of a company's stock that a buyer is willing to pay a willing seller TERM 55 stockholder/shareholder DEFINITION 55 each person who owns a share of a company's stock holds a proportionate interest in firm ownership ( a very small slice) and therefore in the assets and income of the corporation TERM 56 residual claim DEFINITION 56 common stockholders have a right to share in the income and assets of a corporation after higher-priority claims are satisfied TERM 57 voting rights DEFINITION 57 proportionate authority to express an opinion or choice in matters affecting the company TERM 58 preferred stock DEFINITION 58 type of fixed-income ownership security in a corporation that pays fixed dividend TERM 59 cumulative preferred stock DEFINITION 59 preferred stock for which dividends must be paid including any skipped dividends before dividends go to common stockholders TERM 60 convertible preferred stock DEFINITION 60 can be exchanged at the option of the stockholder for a specified number of shares of common stock TERM 71 cyclical stock DEFINITION 71 the stock of a company whose profits are greatly influenced by changes in the economic business cycle TERM 72 countercyclical stock DEFINITION 72 a stock that exhibits price changes contrary to movements in the business cycle TERM 73 income stock DEFINITION 73 a stock that may not grow too quickly but year after year it pays a cash dividend higher than that offered by most companies TERM 74 growth stock DEFINITION 74 the stock of a company that offers the promise of much higher profits tomorrow and has a consistent record of relatively rapid growth in earnings in all economic conditions TERM 75 well-known growth stocks DEFINITION 75 stocks of companies that are leaders in their fields that dominate their markets and that have several consecutive years of above industry average earnings TERM 76 value stock DEFINITION 76 a stock that tends to trade at a low price relative to its company fundamentals (dividends, earnings, sales, and so on) and thus is considered undervalued by a value investor TERM 77 speculative stock DEFINITION 77 a company that has a potential for substantial earnings at some time in the future although those earnings may never be realized TERM 78 Tech stocks DEFINITION 78 stocks in the technology sector that offer technology-based products and services, biotechnology, Internet services, network services, wireless communications, and more TERM 79 blue-chip stocks DEFINITION 79 a public corporation that has been around for a long time, has a well-regarded reputation dominates its industry and is known for being a solid relatively safe investment TERM 80 large-cap stock DEFINITION 80 those public corporations that are capitalized by issuing $3 billion to $4 billion of stocks; most are considered blue-chip companies TERM 81 fundamental analysis DEFINITION 81 school of thought in market analysis that assumes each stock has an intrinsic value based on its expected stream of future earnings TERM 82 technical analysis DEFINITION 82 method of evaluating securities that uses statistics generated by market activity, such as past prices and volume, over time to determine when to buy or sell a stock TERM 83 corporate earnings DEFINITION 83 the profits a company makes during a specific time period indicate to many analysts whether to buy or sell a stock TERM 84 earnings per share DEFINITION 84 a firm's profit divided by the number of outstanding shares TERM 85 price/sales ration DEFINITION 85 tells the number of dollars it takes to buy dollar's worth of a company's annual revenues; calculated by dividing company's total market capitalization by its sales for the past four quarters TERM 96 approximate compound yield DEFINITION 96 a measure of the annualized compound growth of any long- term investment stated as a percentage TERM 97 stock-screening tools DEFINITION 97 enable you to quickly sift through vast databases of hundreds of companies to find those that best suit your investment objectives TERM 98 10-K report DEFINITION 98 a firm's financial statements and activity details for any publicly traded company appear in this mandatory report sent to the SEC annually TERM 99 annual report DEFINITION 99 legally required yearly report about financial performance, activities and prospects sent to major stockholders and made available to the general public TERM 100 prospectus DEFINITION 100 highly legalistic information presented by a firm to the SEC and to the public with any new issue of stock TERM 101 securities market index DEFINITION 101 measure the average value of a number of securities chosen as a sample to reflect the behavior of a more general market TERM 102 Dow Jones Industrial Average DEFINITION 102 the most widely reported of all stock market indexes that tracks prices of only 30 actively traded blue-chip stocks including well known companies such as American Express and AT&T TERM 103 mutual fund DEFINITION 103 investment company that pools funds by selling shares to investors and makes diversified investments to achieve financial goals of income or growth or both TERM 104 net asset value DEFINITION 104 per-share value of a mutual fund TERM 105 mutual fund dividend DEFINITION 105 income paid to investors out of profits earned by the mutual fund from its investments TERM 106 ordinary income dividend distributions DEFINITION 106 distributions that occur when the fund pays out dividend income and interest it has received from securities held in the fund TERM 107 capital gain distribution DEFINITION 107 distributions representing the net gains that a fund realizes when it sells securities that were held in the fund's portfolio TERM 108 open-end mutual fund DEFINITION 108 investment that issues redeemable shares that investors purchase directly from the fund TERM 109 fund investment advisers DEFINITION 109 money managers, securities analyst, and traders of a mutual fund that have access to the best research; they select buy, sell, and monitor the performance of the securities purchased; thus they oversee the portfolio TERM 110 redeems DEFINITION 110 when an investor sells shares TERM 121 aggressive growth funds DEFINITION 121 Funds that invest in speculative stocks with volatile price swings, seeking the greatest long-term capital appreciation possible. Also known as maximum capital gains funds and capital appreciation funds TERM 122 growth funds DEFINITION 122 Funds that seek long-term capital appreciation by investing in common stocks of companies with higher-than-average revenue and earnings growth, often the larger and well- established firms. TERM 123 growth and income funds DEFINITION 123 Funds that invest in companies that have a high likelihood of both dividend income and price appreciation; less risk- oriented than aggressive growth funds or growth funds TERM 124 value funds DEFINITION 124 Funds specializing in stocks that are fundamentally sound whose prices appear to be low (low P/E ratios) based on the logic that such stocks are currently out of favor and undervalued by the market. TERM 125 socially conscious funds DEFINITION 125 Funds that invest in companies that meet some predefined standard of moral and ethical behavior. TERM 126 balanced funds DEFINITION 126 Funds that keep a set mix of stocks and bonds, often 60% stocks and 40% bonds, in order to earn a well-balanced return of income and long-term capital gains. TERM 127 target-date retirement funds/life-cycle funds DEFINITION 127 Asset allocation funds that offer investors premixed portfolios of stocks, bonds, and cash that investors of a certain age and risk tolerance might prefer. TERM 128 unmanaged fund DEFINITION 128 Fund with very low management fees since managers do not evaluate or select individual securities; ETF'S and index funds are examples. TERM 129 shareholder fees DEFINITION 129 Fees charged directly to investors for specific transactions, such as purchases, redemptions, or exchanges TERM 130 annual fund operating expenses DEFINITION 130 Normal operating costs of the business that are deducted from fund assets before shareholders receive earnings TERM 131 load funds DEFINITION 131 Mutual funds that always charge a "load" or sales charge upon purchase; the load is the commission used to compensate brokers. TERM 132 front-end load DEFINITION 132 A sales charge paid when an individual buys an investment, reducing the amount available to purchase fund shares. TERM 133 stated commission DEFINITION 133 The sales charge as a percentage of the amount invested. TERM 134 low-load funds DEFINITION 134 Funds carrying sales charges of perhaps 1 to 3%; sold by brokers, via mail, sometimes through mutual fund retailers located in shopping centers. TERM 135 no-load funds DEFINITION 135 Funds that allow investors to purchase shares directly at the net asset value without the addition of sales charges