An order to buy or sell at a price set higher than the current market price of the security. Examples of above the market orders include: a limit order to sell, a stop order to buy, or a stop-limit order to buy. Taobiz explains Above The Market This is a strategy that is often used by momentum traders. For example, a stop order would be placed above the resistance level to buy. Should the security's price break through the resistance level, the investor may be able to participate in the upward trend.
A term used to describe the returns generated by a given security or portfolio over a period of time that is different from the expected rate of return. The expected rate of return is the estimated return based on an asset pricing model, using a long run historical average or multiple valuation. Taobiz explains Abnormal Return An abnormal return can be either a good or bad thing, as it is merely a summary of how the actual returns differ from the predicted return. For example, earning 30% in a mutual fund that is expected to average 10% per year would create a positive abnormal return of 20%. If, on the other hand, the actual return was 5%, this would generate a negative abnormal return of 5%.
Shares in mainland China-based companies that trade on Chinese stock exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange. A-shares are generally only available for purchase by mainland citizens; foreign investment is only allowed through a tightly-regulated structure known as the Qualified Foreign Institutional Investor (QFII) system. Taobiz explains A-Shares Most companies listed on Chinese exchanges will offer two shares classes: A-shares and B-shares. B-shares are quoted in foreign currencies (such as the U.S. dollar) and are open to both domestic and foreign investment (provided that locals set up a foreign currency account), while A-shares are only quoted in Chinese renminbi. A-shares experienced explosive growth in the 2005-2007 period as restrictions preventing investment by Chinese citizens slowly began to peel away. In fact, demand was so high for A-shares that they would trade for much higher valuations than what the same stock could be purchased for on a different exchange. The Peoples’ Republic of China is working to blend the two classes of stock together, and eventually allow direct foreign investment in mainland companies. It is one of many major financial reforms that the advanced economies of the world hope will occur in the next several years; there is a tremendous amount of pent-up demand for Chinese equity, provided that regulations become uniform and reporting requirements are in-line with global standards.
A comprehensive summary report of a company's performance that must be submitted annually to the Securities and Exchange Commission. Typically, the 10-K contains much more detail than the annual report. It includes information such as company history, organizational structure, equity, holdings, earnings per share, subsidiaries, etc. Taobiz explains 10-K The 10-K must be filed within 60 days (it used to be 90 days) after the end of the fiscal year. 10-K = Yearly 10-Q = Quarterly
A rule that stipulates the order of payment - creditors before shareholders - in the event of liquidation. The absolute priority rule is used in bankruptcies to decide what portion of payment will be received by which participants. Debts to creditors will be paid first and shareholders (partial owners) divide what remains. Regarding the estate of a deceased person, the absolute priority rule will ensure payment of outstanding debts before the distribution to beneficiaries. Also known as "liquidation preference". Taobiz explains Absolute Priority Absolute priority specifies the pecking order. Senior creditors always get first grabs at the proceeds from liquidation, and shareholders are the last to get paid. This rule provides a degree of protection to creditors in the event of insolvency or death. The division of benefits (cash) is not always the result of a bankruptcy. It can also occur due to the liquidation of assets in order to pay down a company's liabilities. In estate cases if the resources of the estate are insufficient to pay off the debts, assets will need to be liquidated to handle the obligations.
An accounting term referring to the balance sheet item that accounts for dividends that have been declared but not yet paid to shareholders. Accrued dividends are booked as a liability from the declaration date and remain as such until the dividend payment date. Accrued dividends should not be confused with accumulated dividends, which refer to dividends due to holders of cumulative preferred stock. Taobiz explains Accrued Dividend There are no accounting rules that mandate a time frame in which the accrued dividend entry should be recorded, though most companies usually book it a few weeks before the payment date. After the dividend is declared, it becomes property of the record-date shareholder and is considered separate from the stock. This separation allows the shareholders to become creditors of the company, due their dividend payment, should a merger or some other corporate action occur.
A short-term liquidity measure used to quantify the rate at which a company pays off its suppliers. Accounts payable turnover ratio is calculated by taking the total purchases made from suppliers and dividing it by the average accounts payable amount during the same period. Taobiz explains Accounts Payable Turnover Ratio The measure shows investors how many times per period the company pays its average payable amount. For example, if the company makes $100 million in purchases from suppliers in a year and at any given point holds an average accounts payable of $20 million, the accounts payable turnover ratio for the period is 5 ($100 million/$20 million). If the turnover ratio is falling from one period to another, this is a sign that the company is taking longer to pay off its suppliers than it was before. The opposite is true when the turnover ratio is increasing, which means that the company is paying of suppliers at a faster rate.
A type of trading in which a trader accommodates another by entering into a non-competitive purchase or sale order. An accommodation trade is often executed when two traders are participating in illegal trading. Taobiz explains Accommodation Trading An accommodation trade could occur when two traders agree to exchange a stock for a price well below the market value, allowing the seller to realize a large capital loss on the shares. For example, suppose that Bill purchased stock in Company XYZ at $55 per share. With tax season coming soon, Bill decides to sell the stock to Joe for $45, even though the shares are currently trading at $60. Bill realizes a capital loss of $10 per share, which he can use to lower the taxes paid on any capital gains on other investments. After the taxes are filed, Joe sells the stock back to Bill at $45. This trade, also known as a wash sale, allows Bill to cheat the tax system, while never actually losing any value on the stock.
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