Glossary of Business, Corporate Finance and Investment Terms
A series of stock trades among market manipulators to create the appearance of high trading volume. The purpose is to increase the price of the stock so the manipulators can sell at a profit. After the manipulators sell their stock, the price usually returns to the previously lower price.
Debt to Equity Ratios
There are three common debt to equity ratio calculations used to evaluate a firm's financial statement:
Total liabilities divided by total shareholders' equity. This ratio indicates to what extent shareholders' equity is available to cover creditors' claims if there is a liquidation.
Total long term debt and preferred stock divided by common stock equity. This measures securities with fixed charges to those without any fixed charges.
Total long term debt divided by shareholders' equity. This ratio indicates the extent of leverage. Leverage is the use of borrowed funds for the purpose of increasing the return on the equity of the common shareholders.
See Virtual Bank.
The annual rate of return earned by an investor based on dividends only.
Division of Labor
The Division of Labor or Specialization of Labor refers to breaking down the production process into a sequence of stages where employees specialize and focus their efforts on a single stage. The division of labor increases productivity, increases profits, and results in higher wages and benefits. The division of labor encourages trade. See Comparative Advantage.
A corporation doing business in the state in which it was incorporated.
See Price/Earnings Ration (P/E Ratio).
Effective Control or Working Control by a stockholder owning less than a majority of the stock is possible, and even common, when the balance of the stock is widely dispersed. Sometimes stockholders with as little as 10% of the stock have Effective Control.
Bonds that were investment grade when issued that have declined below investment grade. Fallen Angels become the equivalent of junk bonds.
A firm that lends money to individuals and businesses. Unlike commercial banks, Finance Companies do not take in deposits. Their funds generally come from their own capital, bank lines of credit, insurance companies, and sometimes Commercial Paper. Finance Companies usually charge slightly higher rates than commercial banks, but generally offer loans that many banks will not make. Most well capitalized Finance Companies can borrow from their banks at the lowest rates available in the market.
This is a general term for a business. It could be a corporation, partnership or other entity.
Foreign Corporation or Out of State Corporation
A corporation incorporated under the laws of a state other than the one in which it is conducting business. Out of State Corporation is preferred since it is less likely to be confused with Alien Corporation.
A merger or acquisition made with the support of the management and board of directors. It exists where the board recommends the proposed transaction to the shareholders because they believe it is in the best interest of the stockholders to accept it. Compare to Hostile Takeover.