Key Terms You Must Know ]About Stocks

AsknnThe lowest price a seller is willing to accept when selling a security (stock). This is the opposite of bid, which is the price a buyer is willing to pay for a security, and the ask will always be higher than the bid.nnThe terms "bid" and "ask" are used in nearly every financial market in the world covering stocks, bonds, currency and derivatives. An example of an ask in the stock market would be $5 x 1,000 which means that someone is offering to sell 1,000 shares for $5.nnBear nnAn investor who believes the market as a whole or a particular stock will decline. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market. A bear is the opposite of a Bull.nnBidnnAn offer made by a trader to buy a security. The bid will specify both the price at which the buyer is willing to purchase the security and the quantity to be purchased. This is the opposite of the ask, which stipulates the price a seller is willing to accept for a security and the quantity of the security to be sold at that price.nAn example of a bid in the market would be $25 x 1,000, which means that an investor is willing to purchase 1,000 shares at the price of $25. If a seller in the market is willing to sell that amount for that price, then the transaction is completed.nnBook ValuennThe Book Value is simply the company's assets minus its liabilities.nIn other words, if you wanted to close the doors, how much would be left after you settled all the outstanding obligations and sold off all the assets. nnA company that is a viable growing business will always be worth more than its book value for its ability to generate earnings and growth.nnBroker nnA person that buys or sells an investment vehicle for you (securities, bonds, commodities, etc.,) in exchange for a fee, which is called a commissionnnBullnnAn investor who believes the general market or a particular stock is going to increase in price.nnBuy Back nnThe buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.nnCash DividendnnMoney paid to stockholders, normally out of the corporation's current earnings or accumulated profits. All dividends must be declared by the board of directors, and are taxable income to the recipients.nnLong-term investors who want to maximize their gains should consider re-investing the dividends. Most brokers offer a choice as to whether you wish to reinvest or take cash dividends.