2011
02.08

STOCK TERMS 101

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  1. RECEIVABLES

    An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company’s accountants and reported on the balance sheet, and they include all debts owed to the company, even if the debts are not currently due.
    Receivables are recorded as an asset by the company because it expects to receive payment for the outstanding amounts soon. Long-term receivables, which do not come due for a significant length of time, are recorded as long-term assets on the balance sheet; most short-term receivables are considered part of a company’s current assets.

  2. REAFFIRMATION

    An agreement made between a debtor and a creditor to repay some or all of a debt. Reaffirmations are made on a purely voluntary basis by the debtor. The bankruptcy code stipulates that the debtor’s attorney must file a statement with the court affirming that he or she can repay the debt without incurring further personal financial harm.

  3. ONE-CANCELS-THE-OTHER ORDER – OCO

    An order stipulating that if one part of the order is executed, then the other part is automatically canceled.
    “An investor with limited funds may place an order to buy both stocks and bonds and specify that it’s a “one-cancels-the-other-order.” In other words, if the market favors stocks and they are bought, the order to buy bonds will be canceled. Conversely, if the market suggests bonds are the way to go, the order will be to buy bonds and the order to buy stocks will be canceled.”

  4. TARGET FIRM

    A company which is the subject of a merger or acquisition attempt. A takeover attempt can take on many different flavors, depending on the attitude of the target firm toward the acquirer. If management and shareholders are in favor of the transaction, then a friendly and orderly transaction can take place. When there is opposition to the transaction, the target firm may attempt a variety of hostile actions hoping to thwart the takeover attempt.

  5. MACRO MANAGER

    A boss or supervisor who lets employees do their jobs with minimal supervision. Macro managers are thought of by some employees as superiors who do not give them enough support or feedback to do their jobs effectively, while others may be glad to be trusted and left alone. A macro manager is the opposite of a micro manager, a supervisor who constantly looks over employees’ shoulders and is often perceived as controlling and overly critical.

  6. BACK DOOR LISTING

    An uncommon type of takeover that occurs when the acquiring company becomes a subsidiary of the acquired company.

  7. BACKFLIP TAKEOVER

    An uncommon type of takeover that occurs when the acquiring company becomes a subsidiary of the acquired company.

    This is the rarest form of takeover. Backflip takeovers usually occur when the target company is either larger or better established within the international market than the acquiring company.

  8. STYLE DRIFT

    An intentional or unintentional departure from the original way a mutual fund was being managed, and a change to a new way of managing of the fund. At their inception, all funds have an objective or specific style of investing, usually determined by the management of that fund. Style drift indicates a change in the investment style, which could occur for many reasons, such as a change in the management team, or a decision made by the team because of a change of circumstance in the market.

  9. CANCEL ORDER

    An instruction by a customer to his/her broker to not carry out an order that he or she had placed earlier. A cancel order can only be placed in cases where the earlier order has not been executed. Further, if the broker has already submitted the order to a specialist or market maker at an exchange, then there might be a time lag (usually very small) in reaching the cancel order to the specialist or market maker, and the order might be executed before the customer’s instruction to cancel is received by the specialist or market maker.

  10. OPTIONS BACKDATING

    Setting the date of an employee stock option to an earlier time than when the option was actually granted. This can allow for a more favorable strike price. Backdating the option is not illegal, but the improper disclosure of the activity to the Securities and Exchange Commission is considered illegal.

  11. MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVE

    MFID. A set of guidelines created by the European Union that created common regulations across the various investment services in each member state. MFID authorizes member states to regulate their own financial firms, requires that firms offer sufficient transaction transparency, and requires that firms offer the best trade execution for clients.

  12. STRATEGIC BUYOUT

    An acquisition that is made because of operational benefits that will result from the two companies working as one, thereby leading to greater profits than the two would earn separately.

  13. STREET SWEEP

    Investment strategy where a large portion of a company’s shares are bought at one time. Most commonly, this occurs when an individual, group, or company is trying to takeover or gain control of another company. also called market sweep.

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