Sei sulla pagina 1di 3

LONG TERM DEBT, PREFERRED STOCK, AND COMMON STOCK

Features of Bond:
1.Par Value: Par value for a bond
represents the amount to be paid the
lender at the bonds maturity. It is also
called face value or principal. Par value is
usually $1,000 per bond (or some
multiple of $1,000). With the major
exception of a zero-coupon bond, most
bonds pay interest that is calculated on the
basis of the bonds par value. (The face
value of a stock or bond).

Subordinated Debenture: Alongterm, unsecured debt instrument with


a lower claim on assets and income
than other classes of dent known as
junior debt.
Income Bond: A bond where the
payment of interest is contingent upon
sufficient earnings of the firm.
Junk Bond: A high-risk, high-yield
(often unsecured) bond rated below
investment grade.

2.Coupon Rate: The stated rate of interest


on a bond is referred to as the coupon
rate. For example, a 13 percent coupon
rate indicates that the issuer will pay
bondholders $130 per annum for every
41,000-par-value bond that they hold.

Mortgage Bond: A bond issue


secured by a mortgage on the issuers
property.
Equipment Trust Certificate: An
intermediate to usually issue by a
transportation company such as a
railroad or airline that is used to
finance new equipment.

3.Maturity: Bonds almost always have a


stated maturity. This is the time when the
company is obligated to pay the
bondholder the par value of the bond.
Trustee: A person or institution
designated by a bond issuer as the official
representative of the bondholders.
Typically, a bank serves as trustee.

Sinking Fund: Fund established to


periodically retire a portion of a
security issue before maturity. The
corporation is required to make
periodic sinking-fund payments to a
trustee.

Indenture: The legal agreement, also


called the deed of trust, between the
corporation issuing bonds and the
bondholders, establishing the terms of the
bond issue and naming the trustee.

Sinking fund of bond can take


two forms:
i) The corporation can make cash
payment to trustee which intern calls
the bond for retention at the sinking
fund call price.

Debenture: A long term, unsecured debt


instrument.

ii) The second option available to issuing


fund is to purchase the bond in the open
market and to deliver the given number of
bonds to the trustee.

Arrearage: A late or overdue


payment, which may be cumulative.
Participating
Preferred
Stock:
Preferred stock where the holder is
allowed to participate in increasing
dividends if the common stockholders
receive increasing dividends.

Balloon Payment: A payment on debt


that is much larger than other payments.
The ultimate balloon payment is the entire
principal at maturity.

Price/Earnings Ratio: the market


price per share of a firms common
stock divided by the most recent 12
months of earnings per share.

(Loan +interest)-fixed amount (at last payment)


--------------------------------------------------------=X+ fixed amount
Periodic payment
= Balloon Payment

Serial Bonds: An issue of bonds with


different maturities, as distinguished from
an issue where all the bonds have
identical maturities (term bonds).

Treasury Stock: Common stock that


has been repurchased and is held by
the issuing company. (Issued Stock
Outstanding Stock = Treasury Stock)

Call Provision: A feature in an indenture


that permits the issuer to repurchase
securities at a fixed price (or a series of
fixed prices) before maturity; also called
call feature.

Assigned (or stated) Value: A


nominal value assigned to a share of
no-par common stock that is usually
far below the actual issuing price.

Call Price: The price at which a security


with a call provision can be repurchased
by the issuer prior to the securitys
maturity.

Additional Paid-In Capital: Funds


received by a company in a sale of
common stock that are in excess of
the par or stated value of the stock.

When Call price>Market price open


market techniques requires.

Listing: Admission of a security for


trading on an organized exchange. A
security so admitted is referred to as a
listed security.

When Call price<Market price call price


techniques requires.

Proxy: A legal document giving one


person the authority to act for another.
In business, it generally refers to the
instructions given by a shareholder
with regards to voting shares of
common stock.

When market interest rate of same debt


fall then call option is require.
Cumulative Dividends Feature: A
requirement that all cumulative unpaid
dividends on the preferred stock be paid
before a dividend may be paid on the
common stock.
8

Majority-Rule Voting: A method of


electing corporate directors, where each
common share held carries one vote for
each director position that is open; also
called statutory voting.

Convertibility:
A
convertibility
feature permits preferred stockholders
to convert their preferred into shares
of common. Preferred stocks that
permit this are called convertible
preferred.

Cumulative Voting: A method of electing


corporate directors, where each common
share held carries as many votes as there
are directors to be elected and each
shareholder may accumulate these votes
and cast them in any fashion for one or
more particular directors.

General Cash Offers: It involves the


sale of securities to all interested
investors; that is, they are public
issues offered to any investor. A
public issue, unless very small, must
be registered with the SEC.

Duel-Class Common Stock: Two classes


of common stock, usually designated
Class A and Class B. Class A is usually
the weaker voting class, and Class B is
usually the stronger. A cumulative feature
will work only three years.

Initial Public Offering (IPO): An


initial public offering (IPO) is the first
public-equity issue made by a firm as
it goes from private ownership to
public ownership. These issues are
referred to as unseasoned new issues
because no previous publicly owned
common stock existed.

Refunding: Replacing an old debt issue


with a new one, usually to lower the
interest cost.

Investment
Bankers:
Financial
intermediaries who perform a variety
of services, including aiding in the
sale of securities, facilitating mergers
and other corporate reorganizations,
acting as brokers to both individual
and institutional clients, and trading
for their own accounts.

Call Premium: The excess of the call


price of a security over its par value. (Call
price Par value).
Cumulative Dividend: Dividend on
preferred stock that takes priority over
dividend payments on common stock.
Dividends may not be paid on the
common stock until all past dividends on
the preferred stock have been paid.

Shelf Registration: SEC regulation


allowing firms to register an issue of
securities and sell them over time as
conditions warrant.