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MGTA02H3 (136)

Chapter 11 Study Guide

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

CHAPTER 11 Stocks and bonds are known as securities because they represent secured or asset based claims on the part of the investor Primary security markets: The sale and purchase of newly issued stocks and bonds by firms or governments. Investment banker: Any financial institution engaged in purchasing and reselling new stocks and bonds. Provide three services: o Advice the company on the timing and financial terms of the new issue o By underwriting (buying) the new securities, investment bankers bear some of the risk of issuing the new security o They create the distribution network that moves the new securities through groups of other banks and brokers into the hands of individual investors Secondary securities market: The sale and purchase of previously issued stocks and bonds. Market value: The current price of one share of a stock in the secondary securities market, the rest value of a share. It reflects the willingness of buyers to invest caused by rumors, investor relations, stockbroker relations Book value: Value of a common stock expressed as total owners equity divided by the number of shares of stock. Market capitalization: The dollar value (market value) of stocks listed on a stock exchange. Computed by multiplying the number of companys shares outstanding by the value of each share Stock exchange: A voluntary organization of individuals formed to provide an institutional setting where members can buy and sell stock for themselves and their clients in accordance with the exchanges rules. Broker: An individual licensed to buy and sell securities for customers in the secondary market; may also provide other financial services. Earns a commission of each trade
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