Glossary

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PA (Professional Association)

    A type of corporation that provides most of the benefits of incorporation but do not relieve the participants of professional (malpractice) liability. This type of organization is common among accountants, doctors, and lawyers. Also called Professional Corporation (PC).
P/E Ratio
    Price to earnings ratio. The price of a share of stock divided by earnings per share of stock for a twelve-month period.
PacMan
    The name comes from the video game. It is another takeover repellent devised by management. For example, Bendix Corp. tried to take control of Martin-Marietta by a tender offer. When the takeover effort failed, Martin-Marietta counterattacked by buying Bendix stock in an attempt to take control of Bendix. Thus, Martin-Marietta became the PacMan. To counter, Bendix successfully courted Allied Corporation to come to its rescue. Allied bought Bendix so that Martin-Marietta could not buy enough control. In this case Allied was a White Knight.
Par Value
    (1) A stock's par value is the minimum price at which more shares can be issued. (2) A bond's par value = $1,000 to be paid at maturity.
Partnership
    A form of organization with two or more persons associate to conduct a non-corporate business. Its main disadvantage is unlimited liability. The tax treatment of a partnership is similar to that for a proprietorship, in that the business avoids corporate taxes.
Passive Management
    An investment strategy that does not involve the periodic shuffling of a portfolio's components. A buy-and-hold strategy.
Patient Capital
    Investors interested in long-term value maximization.
Payment Date
    Date on which dividends are paid to registered owners.
Payout Ratio
    Percent of earnings that is paid out as dividends.
Pension Fund
    Assets held in trust to cover the costs of pension benefits to participants.
Pension Plan Sponsor
    A group of employees with a pension plan under management. The California Public Employees' Retirement System (Calipers) is an example.
Pension Plan
    A plan established by a firm, labor union, government, or other organization to provide for the payment of benefits to the plan participants over a period of years after retirement.
Poison Pill
    An anti-takeover plan devised to automatically be activated when the company gets bought over in an unfriendly takeover. A Golden Parachute is one such device. Another might be a plan whereby all the firm's debt becomes due if the current management is removed.
Portfolio
    A combination of assets.
Preemptive Right
    The right of a shareholder to purchase newly issued shares of the company before the general public.
Premium
    (1) This generally refers to extra money an investor is willing to pay to buy something. (2) For a bond, a premium is the amount for which the security sells above its par value.
Primary Market
    Where firms sell new financial assets typically with the assistance of an investment banker.
Principal Orders
    Refers to activity by a broker/dealer when buying or selling for its own account and risk.
Preemptive Right
    Common shareholder's right to subscribe to any new issue of stock so as to maintain, undiminished, their fraction of total number of shares outstanding.
Preferred Stock
    Stock that takes priority over common stock in regard to dividend and liquidation. The dividend is usually fixed at time of issue.
Prime Rate
    The interest rate that banks charge their "best" clients, , i.e., those with the lowest possibility of default.
Principal
    (1) Shareholders; (2) Amount of debt that must be paid at maturity.
Private Placement
    A direct sale, by the issuing firm, of newly issued securities to a small group of investors.
Probability Distribution
    A graph that shows the different possible outcomes of a single variable and the probability of getting the outcome.
Profit Taking
    Selling stock after a period of rising prices to realize the profit. The term is used to explain a downturn in the market.
Pro Forma
    Projected
Promissory Note (PN)
    Promise to pay.
Prospectus
    Summary of the registration statement providing information to investors on an issue of securities.
Protective Covenants
    Clauses in a loan agreement aimed at reducing default risk to the bondholders.
Proxy Statement
    Information provided to stockholders in conjunction with the solicitation of proxies.
Proxy Vote
    Vote cast by one person on behalf of another at the company's annual meeting.
Put
    Option Option to sell an asset at a specified excise price on or before a specified exercise date.