03. Terminology

Terminology Recap

Here's a summary of the terms you just learned:

Stock : An asset that represents ownership in a company. A claim on part of a corportation's assets and earnings. There are two main types, common and preferred .

Share : A single share represents partial ownership of a company relative to the total number of shares in existence.

Common Stock : One main type of stock; entitles the owner to receive dividends and to vote at shareholder meetings.

Preferred Stock : The other main type of stock; generally does not entail voting rights, but entitles the owner to a higher claim on the assets and earnings of a company.

Dividend : A partial distribution of a company's profits to shareholders.

Capital Gains : Profits that result from the sale of an asset at a price higher than the purchase price.

Security : A tradable financial asset.

Debt Security : Money that is owed and must be repaid, like government or corporate bonds, or certificates of deposit. Also called fixed-income securities.

Derivative Security : A financial instrument whereby its value is derived from other assets.

Equity : The value of an owned asset minus the amount of all debts on that asset.

Equity Security : A security that represents fractional ownership in an entity, such as stock.

Option Contract : A contract which gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or by a specified date

Futures Contract : A contract that obligates the buyer to buy or the seller to sell an asset at a predetermined price at a specified time in the future