1: Financial restructuring of a corporation in bankruptcy.
2: A department within a brokerage firm that handles client's securities that are merging, being taken over, etc. The department is usually just called "Reorg".
Required Rate Of Return
Return that an investor requires before they are willing to earmark money for an investment that has a certain risk level. The expected return must be greater than the required return for the investment to be acceptable.
See: Rate of Return; Return; Risk; Risk/Reward Ratio
A department within a brokerage firm, or other institutional investing organization, that analyzes securities and markets using both fundamental analysis and technical analysis. The analyst makes trading recommendations for firm accounts, institutions and retail clients (provided by their broker). If followed by many investors, an analyst's recommendations can have an impact on security prices.
See: Fundamental Analysis; Market Analysis; Technical Analysis
The upper limit of a security's trading range in which selling pressure tends to cause the price of a stock to decline. For example, if ABC's stock ranges between a low of $24 and a high of $36 per share, $24 is the support level and $36 is the resistance level. When a security breaks through the resistance level, technical analysts believe the security will reach new high prices.
See: Breakout; Overbought; Range; Support Level; Technical Analysis
Stock that is not registered under the Securities Exchange Act of 1933. Restricted stock is either purchased through a company's stock option plan, or a private placement. The investor is required to sign a letter agreeing that the purchase is for investment and not short term profit. The investor is required to hold the stock for two years before it can be sold. Sale of restricted stock is governed by SEC Rule 144.
See: Letter Security; Rule 144; Securities Exchange Act of 1933
A brokerage firm that provides services to individual clients as opposed to institutions.
See: Institutional Investor; Research Department; Retail Investor; Wire House
An investor who buys and sells securities for their own behalf--not for an organization. Retail investors typically trade in much smaller quantities than institutional investors.
See: Institutional Investor; Retail House
Net profits that have been reinvested back to the business after dividends are paid to stockholders--also called "earned surplus". Retained earnings are customarily an important component of stockholders' equity.
See: Stockholders' Equity
In the securities industry, the term refers to the repayment of a debt obligation or the cancellation of securities that have been redeemed.
See: Callable; Debt Security; Redemption
Realized profit on capital investments or securities stated as an annual percentage rate.
See: Rate Of Return; Realized Profit (Loss); Required Rate Of ReturnReturn On Equity; Total Return
Return On Equity (ROE)
An amount, stated as a percentage, that informs common shareholders how effectively the funds invested are being utilized during a specific period. Trends can be found if current and prior periods are compared and if compared with industry composites, it shows whether or not the company is keeping up with its competitors. The rate is calculated by dividing net earnings by average stockholders' equity.
See: Equity; Return
As charted by technical analysts, a sustained change in direction of stock or commodity markets. This may either be a change from a rising market to a declining market or vice versa.
See: Bear Market; Bull Market; Chartist; Commodities; Technical Analysis
Procedure whereby a corporation reduces the number of outstanding shares. The total market value of the shares remains the same after the reverse split, however, a share is worth more. A company, for example, executes a 1 for 2 split. An investor owning 1000 shares will deliver them to the issuer and they will receive half as many new shares--but the shares will have double the value of the original shares. Thus, the investor now has 500 shares with a value of $8, instead of 1000 at $4--that is, the investor shares are worth the same amount as before the split.
Reverse splits may be used by corporations whose shares are selling at very low market prices. They believe that if the security's price is raised, it will attract more investors.
See: Common Stock; Outstanding Stock; Par; Split
A trust in which any of its provisions can be changed, or the trust itself can be canceled at any time by the grantor. The grantor receives income from the assets. This contrasts with an irrevocable trust in which the trust cannot be amended or canceled and the assets are not subject to estate taxes.
See: Beneficiary; Probate