CHARLES VIEL CORTEZ BSA I-25

Prof. Marti FINANCE

TERMINOLOGIES: * Indenture- is a legal contract reflecting a debt or purchase obligation, specifically referring to two types of practices: in
historical usage, anindentured servant status, and in modern usage, an instrument used for commercial debt or real estate transaction.

* Debenture- is a document that either creates a debt or acknowledges it, and it is a debt without collateral. In corporate
finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stockor note. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money [1] raised by the debentures becomes a part of the company's capital structure, it does not become share capital. Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories. Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings ofshareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's financial statements.

*Mortgage -a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to
pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front. Over a period of many years, the borrower repays the loan, plus interest, until he/she eventually owns the property free and clear. Mortgages are also known as "liens against property" or "claims on property." If the borrower stops paying the mortgage, the bank can foreclose. Junior Mortgage--A mortgage that is subordinate to a first or prior (senior) mortgage. A junior mortgage often refers to a second mortgage, but it could also be a third or fourth mortgage. In the case of foreclosure, the senior mortgage will be paid down first. Senior Mortgage-A mortgage that is secured by a lien on a property and that has preference to another mortgage on the same property. In general, the senior mortgage is the original mortgage; one takes out a junior mortgage to pay for home repairs or for other reasons. In the event ofdefault or bankruptcy, the senior mortgage must be paid entirely before the junior mortgage is paid at all. As a result, a senior mortgage carries a lower interest rate than a junior mortgage.

Bond Discount-The amount by which the market price of a bond is lower than its principal amount due at maturity. This
amount, called its par value, is often $1,000. As bond prices are quoted as a percent of face value, a price of 98.00 means that the bond is selling for 98% of its face value of $1,000.00 and the bond discount is 2%.

Sinking Fund-A means of repaying funds that were borrowed through a bond issue. The issuer makes periodic
payments to a trustee who retires part of the issue by purchasing the bonds in the open market.

Bond Refunding-The act or practice in which a company repays a bond by making a new issue of another bond. That
is, a company refunds a bond when it borrows more money to repay the money it already owes to bondholders. One may think of refunding as the company refinancing a bond.

Premium Bond-A bond that is trading above its par value. A bond will trade at a premium when it offers a coupon rate
that is higher than prevailing interest rates. This is because investors want a higher yield, and will pay more for it.

Bonds Carrying Value-A bond is a debt instrument. The carrying value of a bond is also known as the book value of
the bond. It can be calculated by taking the face value and subtracting and discount and adding any premium.

Callable Bond-A bond that can be redeemed by the issuer prior to its maturity. Usually a premium is paid to the bond
owner when the bond is called. Also known as a "redeemable bond."

Common Stock-A security that represents ownership in a corporation. Holders of common stock exercise control by
electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders have been paid in full. In the U.K., these are called "ordinary shares."

Preferred Stock-A class of ownership in a corporation that has a higher claim on the assets and earnings than common
stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.The precise details as to the structure of preferred stock is specific to each corporation. However, the best way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known as "preferred shares".

Cumulative Preferred Stock-A type of preferred stock with a provision that stipulates that if any dividends have been
omitted in the past, they must be paid out to preferred shareholders first, before common shareholders can receive dividends.

Non-cumulative preferred stock- is simply a type of stock in which the company is not liable to pay any omitted or
unpaid dividends to the preferred stock holders. If the company chooses not to pay the dividend in a certain year the preferred stock holders cannot sue them to pay.

Stock-A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's
assets and earnings. There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

Stock Split-A corporate action in which a company divides its existing shares into multiple shares. Although the number
of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split did not add any real value. The most common split ratios are 2-for-1 or 3-for-1, which means that the stockholder will have two or three shares for every share held earlier. Also known as a "forward stock split."In the U.K., a stock split is referred to as a "scrip issue," "bonus issue," "capitalization issue" or "free issue."

Stock rights- An issue of rights to a company's existing shareholders that entitles them to buy additional shares directly
from the company in proportion to their existing holdings, within a fixed time period. In a rights offering, the subscription price at which each share may be purchased in generally at a discount to the current market price. Rights are often transferable, allowing the holder to sell them on the open market.

Treasury Stock (Treasury Shares)-The portion of shares that a company keeps in their own treasury. Treasury stock
may have come from a repurchase or buyback from shareholders; or it may have never been issued to the public in the first place. These shares don't pay dividends, have no voting rights, and should not be included in shares outstanding calculations.

Reverse Stock Split-A corporate action in which a company reduces the total number of its outstanding shares. A
reverse stock split involves the company dividing its current shares by a number such as 5 or 10, which would be called a 1-for-5 or 1-for-10 split, respectively. A reverse stock split is the opposite of a conventional (forward) stock split, which increases the number of shares outstanding. Similar to a forward stock split, the reverse split does not add any real value to the company. But since the motivation for a reverse split is very different from that for a forward split, the stocks pri ce moves after a reverse and forward split may be quite divergent. A reverse stock split is also known as a stock consolidation or share rollback.

Participating Preferred Stock-A type of preferred stock that gives the holder the right to receive dividends equal to
the normally specified rate that preferred dividends receive as well as an additional dividend based on some predetermined condition.The additional dividend paid to preferred shareholders is commonly structured to be paid only if the amount of dividends that common shareholders receive exceeds a specified per-share amount.Furthermore, in the event of liquidation, participating preferred shareholders can also have the right to receive the stock's purchasing price back as well as a pro-rata share of any remaining proceeds that the common shareholders receive.

Stock purchase plan- A company-run program in which participating employees can purchase company shares at a
discounted price. Employees contribute to the plan through payroll deductions, which build up between the offering date and the purchase date. At the purchase date, the company uses the accumulated funds to purchase shares in the company on behalf of the participating employees. The amount of the discount depends on the specific plan but can be as much as 15% lower than the market price.

Vertical Integration-When a company expands its business into areas that are at different points on the same
production path, such as when a manufacturer owns its supplier and/or distributor. Vertical integration can help companies reduce costs and improve efficiency by decreasing transportation expenses and reducing turnaround time, among other advantages. However, sometimes it is more effective for a company to rely on the expertise and economies of scale of other vendors rather than be vertically integrated.

Horizontal Integration-The acquisition of additional business activities that are at the same level of the value chain in
similar or different industries. This can be achieved by internal or external expansion. Because the different firms are involved in the same stage of production, horizontal integration allows them to share resources at that level. If the products offered by the companies are the same or similar, it is a merger of competitors. If all of the producers of a particular good or service in a given market were to merge, it would result in the creation of a monopoly. Also called lateral integration.

Synergistic effect-An effect arising between two or more agents, entities, factors, or substances that produces an
effect greater than the sum of their individual effects. It is opposite of antagonism.

Leveraged Buyout LBO-The acquisition of another company using a significant amount of borrowed money (bonds
or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital.

Voluntary insolvencyan insolvent debtor owing debts exceeding in amount in the sum of P1000, may apply to be discharged from his debts and liabilities by petition to the RTC of the province or city in which he has resided for 6 months next preceding the filing of the petition Involuntary insolvencyan adjudication of insolvency may be made by the petition of 3 or more creditors, residents
of the Philippines, whose credits or demands accrued in the Philippines, for the amount of which credits or demands are in the aggregate of not less than P1000.

Receivership-A type of corporate bankruptcy in which a receiver is appointed by bankruptcy courts or creditors to run the company. The receiver may be appointed by a bankruptcy court, as a matter of private proceedings, or by a governing body. In most cases the receiver is given ultimate decision-making powers and has full discretion in deciding how the received assets will be managed. Aggressive Investment Strategy-'A portfolio management strategy that attempts to maximize returns by taking a
relatively higher degree of risk. An aggressive investment strategy emphasizes capital appreciation as a primary investment objective, rather than income or safety of principal. Such a strategy would therefore have an asset allocation with a substantial weighting in stocks, and a much smaller allocation to fixed income and cash. Aggressive investment strategies are especially suitable for young adults because their lengthy investment horizon enables them to ride out market fluctuations better than investors with a short investment horizon. Regardless of the investors age, however, a high tolerance for risk is an absolute prerequisite for an aggressive investment strategy.

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