Chapter 1

Definition

Initial public offering (IPO)

The act of offering the stock of a company on a public stock exchange
for the first time.

Seasoned equity offering (SEO)

A seasoned equity offering or secondary equity offering (SEO) is a
new equity issue by an already publicly traded company. Secondary
offerings may involve shares sold by existing shareholders (nondilutive), new shares (dilutive) or both

Common stock
Common stock represents ownership interests in corporations.

Preferred stock
Preferred stock generally has a dividend that must be paid out before
dividends to common stockholders and the shares usually do not have
voting rights.

Agency problem
Difference of interest between shareholder and the employee or agent of
company.

Agency cost.
Agency costs arise because of core problems such as conflicts of interest
between shareholders and management.

Internal control.
Internal control, as defined in accounting and auditing, is a process for
assuring achievement of an organization's objectives in operational
effectiveness and efficiency, reliable financial reporting, and compliance
with laws, regulations and policies.

Dividend.
A share of the after-tax profit of a company, distributed to
its shareholders according to the number and class of shares

Treasure.
Wealth or riches stored or accumulated, especially in the form of
precious metals, money, jewels, or plate.

Controller.
A person or thing that directs or regulates something.
A person in charge of an organization's finances.

TRANSCTION.
An agreement between a buyer and a seller to exchange goods, services
or financial instruments.

Accrual basis.
The Accounting method under which revenues are recognized on the
income statement when they are earned. (rather than when the cash is
received).

Cash Basis.
A major accounting method that recognizes revenues and expenses at
the time physical Cash is actually received or paid out.

Risk.
The chance of loss or the danger to the subject matter of an insurance
contract; also: the degree of probability of such of loss

RISK AVERSE.
A description of an investor who, when faced with two investments with
a similar expected return (but different risks), will prefer the one with
the lower risk.

Stakeholder.
A person with an interest or concern in something, especially a business.

Private Placement.
The sale of securities to a relatively small number of select investors as a
way of raising capital. Investors involved in private placements are
usually large banks, mutual funds, insurance companies and pension
funds.

Public offering.
A public offering is the offering of securities of a company or a similar
corporation to the public. Generally, the securities are to be listed on a
stock exchange.

Ordinary income.
Ordinary income can be simply defined as the income earned from
providing services or the sale of goods (inventory). This category
includes income earned from interest, wages, rents, royalties and
similar income streams.

Capital gain.
A profit from the sale of property or an investment

Physical assets.
For most businesses, physical assets usually refer to cash, equipment,
inventory and properties owned by the business. Physical assets are the
opposite of intangible assets, which are non-physical assets such as
leases, computer programs or agreements.

Financial asset.
Financial assets are usually more liquid than tangible assets, such as
land or real estate, and are traded on financial markets.

Money market.
The trade in short-term loans between banks and other financial
institutions.

Capital market.
The part of a financial system concerned with raising capital by dealing
in shares, bonds, and other long-term investments.

Primary market.
The primary market is the part of the capital market that deals with
issuing of new securities. Companies, governments or public sector
institutions can obtain funds through the sale of a new stock or bond
issues through primary market.

Spot market.
The spot market or cash market is a public financial market in which
financial instruments or commodities are traded for immediate delivery.
It contrasts with a futures market, in which delivery is due at a later date.

Futures market.
A futures exchange or futures market is a central financial exchange
where people can trade standardized futures contracts; that is, a contract
to buy specific quantities of a commodity or financial instrument at a
specified price with delivery set at a specified time in the future.