Hypothecation

This implies the pledging of securities or other property as collateral for loans. When securities are pledged for a loan the title to them is surrendered for the time being to the bank or lender with which or with whom they are pledged. On the London Stock Exchange stock or securities pledged as collateral are said to be pawned.

Income Account

This is the revenue account, and in the case of most corporations it embraces such items as gross earnings, operating expenses, net earnings, income from other sources, fixed charges and other deductions for dividends, dividend charges and surplus.

Income Basis

The income basis of an investment is the percentage of return on the price. As for example, the percentage that the interest on a bond or the dividend on a stock equals when calculated on the cost of the bond or stock. A stock paying 6% which is bought at 120 yields 5%, therefore, this stock at 120 is on a 5% basis.

Income Bond

A bond that is presumably a lien on the net income or earnings of a corporation after all prior charges have been paid. It receives interest only when earned, and is somewhat similar in character and position to a preferred stock, with the exception that a preferred stock usually has voting power. An income bond is not usually a mortgage, and even when it is, it cannot be foreclosed before maturity, provided the provisions regarding interest payments on earnings are technically adhered to.

Irredeemable Bond

A bond which cannot be redeemed or paid off, but the interest on which goes on forever. There have been many such issues made by European governments and municipalities, but very few have been issued in this country.

A bond in which the payment of the principal and interest is assumed by two or more parties or corporations who are jointly bound. There are many such issues among railroad bonds. The most frequent instances are where two or more railroads use the same station or terminal property at a given point, and jointly issue a mortgage for the purpose of expanding or improving the said property. The bond is usually issued by the terminal company itself, and then jointly guaranteed as to both principal and interest by the railroad companies which use the property.

Kaffirs

This is the London Stock Exchange name for all shares of South African mining, land, industrial and other companies.

Kangaroos

This is the London Stock Exchange name for shares of all West Australian mining, land, industrial and other companies.

Kiting

Kiting is, simply stated, the incurring of a fresh obligation to discharge an old one. The commonest form of kiting is by means of checks. For example, a depositor in a bank has issued a check which overdraws his account. He makes out another check, obtains cash for it elsewhere than at the bank, and deposits the cash in the bank in time to meet the first check. Two or three days may elapse before the second check reaches the bank, and before its arrival another check has been made out and the cash obtained for it and deposited. So the process may continue.

A person engaged in kiting may arrange to exchange checks with one or more persons, and thus enlarge the circle of operations to greater and greater degrees. He may also gain time by sending his checks to other places which are remote from his bank. It is unnecessary to say that check kiting is illegal.

Listed Stocks

Stocks which have been placed on the regular list of the New York Stock Exchange or other stock exchanges, and are thereby admitted to dealings on the exchanges, are commonly known as listed stocks. In the case of the New York Stock Exchange there are two classes of stocks; those known as listed securities and those known as unlisted securities. In order that a security may be listed certain rules must be conformed to by the company making the application, these rules bearing particularly upon the financial statement submitted by the company. With the unlisted securities, however, the case is somewhat different. The latter are not obliged to submit details regarding their earnings or financial condition. In the method or scope of dealings on the floor of the exchange there is, however, no difference between listed and unlisted securities.

Lombard Street

A street in London, located in the financial district. The name Lombard Street, however, applies to the whole banking center of London. The name was probably originally given to the street for the reason that some of the Lombard Jews, who began banking in Italy in the Ninth Century, afterwards went to London and settled in this particular locality.

London Quotations

A quotation on the London Stock Exchange means the price at which the jobber or dealer will either buy or sell. Thus, when a jobber quotes 99 3/4 - 100 1/4 it means that he will buy at 99 3/4 or will sell at 100 1/4. When, in giving a quotation the "middle price" is named, it means the price midway between the jobber's buying and selling price. In the above quotation the middle price would be 100. On the New York Stock Exchange, on the other hand, the quotations (except "bid" and "asked") are the prices at which actual transactions take place.