chapter 7 financial management theory and practice

proxy
transfer of right to vote to another party
proxy fight
outside group may solicit the proxies in an effort to overthrow management and take control of the business
preemptive right
right to purchase any additional shares sold by the firm
classified stock
used to meet companies special needs, allows generation of funds without depletion of power
founders shares
maintain right to vote but not allowed dividends until certain ratios are met
tracking stock or target stock
classes of stock with dividends tied to a particular part of a company
constant growth model ( Gordon Model)
Myron j. Gordon, a necessary condition for the validity of the gordon model is that Rs be greater that G.
horizon date
terminal date or N
market multiple analysis
taking a metric of a firm and multiplying it against a market determined multiple such as the average p e ration for the s and p 500
entity multiple
multiple based on ebitda average from several similar firms
equilibrium
define as the price at which the expected rate of return is equal to the required rate of return as seen by the marginal investor
efficient market Hyphothesis
says stocks are always in equilibrium and it is impossible for an investor to beat the market and consistently earn a higher rate of return than is justified by the stocks risks
technical analysts
believe that past trends or patterns in stock prices can be used to predict future stock prices
semistrong form
current market prices reflect all publicly available info
strong form of emh
states thatt current market prices reflect all pertinent information