Business Law Crib Notes

Available for sale securities - are debt and equity securities that are neither held for trading, held to maturity, nor held for strategic reasons.

Business combination - purchase of more than 50% ownership of the investee’s stock.

Consolidated financial statement - Combined financial statements from parent and subsidiary company.

Cost method - Investment of less than 20% of the investee’s outstanding stock.

Debt securities - Notes and bonds that pay interest and have a fixed maturity date.

Dividend yield -measures the rate of return to stockholders, based on cash dividends.

Equity method - Investments between 20%-50% of the outstanding stock.

Equity securities - Are preferred and common stock that represent OWNERSHIP in a company and DO NOT have a fixed maturity Date.

Fair value - market price that a company would receive for a security if it were sold.

Held to maturity securities-are debt investments, such as notes or bonds, that a company intends to hold until their maturity date

Investee - The company whose stock is purchased.

Investments - Investments in debt and equity securities - reported as CURRENT ASSETS on balance sheet.

Investor - Company investing in another company’s stock.

Parent Company - A corporation owning all or a majority of the voting stock of another corporation.

Subsidiary Company - Corporation controlled by parent company.

Trading securities - debt and equity securities that are purchased to earn short term profits from changes on their market prices.

Unrealized gain or loss - Change in the fair value of the portfolio of trading securities is recognized.