Glossary of Business, Corporate Finance and Investment Terms

Retained Earnings

Retained earnings are undistributed profits accumulated in a corporation after dividends are distributed. They are also called Earned Surplus. Retained Earnings are not the same as cash received in exchange for stock.


This is an "investors disease": the fear of having uninvested cash. Some investors believe they can only maximize their portfolio return if they are fully invested at all times.

Say on Pay

Given that corporate directors and officers overpay themselves, the bylaws of some corporations require that compensation for directors and officers be approved by the shareholders of the corporation. Proponents point out that directors and officers owe a fiduciary duty to the corporation and that Say on Pay promotes a stronger relationship between the directors and officers on the one hand, and the shareholders on the other. Corporations listed on an exchange are subject to strict disclosure rules and restrictions under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Self - Directed IRA Account

An IRA that can be actively managed by the account owner who designates a custodian to carry out his or her investment instructions. Many account owners use their IRA accounts to invest in trust deeds and real estate limited partnership interests.

Second Preferred Stock

This is Preferred Stock issued that is ranked below another class of Preferred Stock. For example, Second Preferred Stock might pay dividends only if the Preferred Stockholders receive a dividend payment of a defined amount.

Shelf Corporation

A Shelf Corporation is a corporation created and placed on the "shelf" to "age" and then be sold. Common reasons for buying a shelf corporation include:

  • To save the time necessary to form a new corporation;
  • To create the appearance that the new business has an operating history; and
  • To use the appearance of an operating history to obtain corporate credit and investment capital

Sleeping Beauty

This is a takeover target that has not yet been contacted by an acquirer. Sleeping Beauty corporations usually own undervalued assets and large amounts of cash or marketable securities.

Small Issues Exemption

Refers to issues of securities under $1.5 million that qualify for simplified registration under SEC Regulation A.


A corporation divestiture where a subsidiary or division becomes a separate and independent company. Sometimes the stock of the new corporation is distributed to the shareholders of the former Parent Corporation pro-rata. Other times, the new corporation is sold and the cash used by the former Parent Corporation.

Stockholder Rights Plan

This is one of many Poison Pill defenses against a Hostile Takeover. The target corporation issues rights to existing stockholders (excluding the takeover bidder) to acquire additional voting stock if anyone acquires more than a set amount of the voting stock. This dilutes the percentage of voting stock acquired by the bidder and makes it more costly to acquire control of the target corporation.

Stock Option

The right to purchase or sell stock at a specified price within a stated period of time. Stock Options may be very valuable or worth nothing depending upon the terms of the option agreement and whether the price of the stock is increasing or decreasing.

Stock Purchase Plan

A plan whereby employees of a corporation can purchase stock of the corporation. Sometimes the corporation will contribute to the purchase price as part of its compensation plan.

Stock Repurchase or Buyback

A Stock Repurchase takes place when a corporation pays cash for the stock owned by one or more stockholders. The effect is to reduce the shares outstanding while paying cash (not a taxable dividend) to the stockholder(s). The corporation either retires the stock or keeps it as Treasury Stock.
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