Charter

The charter or certificate of incorporation of a company is the authority conferred upon it by act of legislature which allows it to do business along certain lines as specified in the charter, which usually defines the general purposes and limits the privileges of the corporation.

Close Corporation

An incorporated company, the stock of which is held by the managers or a very limited number of persons and is not in the hands of the public, is usually known as a close corporation. It is sometimes assumed that only small companies carrying on limited kinds of business as successors to former partnerships in many cases are close corporations. This idea, however, is quite erroneous, as there are a good many corporations, the capitalization of which runs into the millions, which are in every essential respect close corporations. Usually in a close corporation there is an agreement or understanding among the few stockholders whereby each is prohibited from disposing of or selling his interest without the consent of the others.

Commercial Paper

As generally understood, commercial paper means acceptances and promissory notes. Acceptances are drafts or bills of exchange which have been accepted. In large cities like New York there is a great deal of business done at all times in the buying and selling of commercial paper. Individual dealers buy from makers at one rate of discount and sell to banks and other dealers at a lower rate. Good commercial paper represents a high class of investment.

Common Stock

Common stock is distinguished from preferred stock in that it has no preference as to dividends or assets. It is sometimes called general or ordinary stock.

When a corporation has an issue of preferred stock it is, of course, necessary to give the ordinary stock the title of common to distinguish it from the preferred. If, however, there is no issue of preferred or other stock outstanding, then the ordinary stock is not referred to as "common" but is simply known as plain capital stock. Sometimes there are, however, different kinds of common or ordinary stock, this being particularly true of some English issues. In such cases, a portion of the issue may be called deferred, for the reason that it may receive no dividend until a prior portion has received a dividend at a fixed rate. Often it is the custom to designate a portion of the issue as A stock and a portion as B stock to distinguish the two classes. This employment of A and B is also often used in connection with different classes of preferred stock. See Preferred Stock.

Consol

This term is really an abbreviation or contraction of the word consolidated. In England, however, it is specifically used in connection with the funded debt of Great Britain. The debt of this country is in the form of stock which represents a consolidation of various loans, and is therefore commonly known in modern times as English Consols.

This public debt, representing nine different loans, was consolidated in 1851 into 3% stocks or, as Americans would say, bonds. In 1888 the 3%s were converted into 2 3/4%, and in 1903 the rate was reduced to 2 1/2%. The official name of English consols is Consolidated Annuities.

Contango

This is a London Stock Exchange term referring to the charge paid by a buyer for the privilege of continuing a contract to the next fortnightly settlement. For instance, 1/8 to 1/4 contango means that the bull (who is long) pays to the jobber 1/4% for the accommodation and the bear (who is short) receives from the jobber 1/8%. One-eighth contango to 1/8 back (abbreviation for "back wardation") means that the bull pays 1/8% and the bear pays 1/8%. One-sixteenth to even means that the bull pays 1-16% and the bear carries over "at even," or in other words, pays nothing. Contango day means the first day of settlement on the London Stock Exchange, when arrangements are made to continue bargains or contracts. The same as continuation day or making-up day.

Corner

A corner in a stock is created by the purchase of all the floating or purchasable supply of a given stock, after which the price can be advanced by the operators of the corner at will. Speculators who are short of the stock and are unable to buy or borrow to make delivery to buyers, or to return stock which they have borrowed, are generally said to be "squeezed." In other words, they must settle with the buyers at the buyers' terms. Corners are created in grain, cotton, coffee and other commodities as well as in stocks.

Coupon Bond

A coupon bond is a bond which is payable to bearer without registration of the owner's name, and carries a coupon covering the interest on the bonds, which is clipped at each interest period and deposited for collection, the same as a check, or presented for payment at the office of the corporation issuing the bond or the corporation's agent. The great majority of bonds issued by steam railroads and other corporations for sale to investors are coupon bonds. Coupon bonds are much more available for speculative dealings and for selling generally. While they are, of course, no better secured and intrinsically worth no more than registered bonds, yet they usually are quoted at a fractionally higher price than the latter, for the simple reason that a change in ownership involves no formal transfer beyond the mere delivery of the bond itself. In many cases coupon bonds are convertible at the option of the holder into registered bonds, and in some instances the registered bond can be converted back at will of the owner into a coupon bond. This is not, however, true in all cases. Many coupon bonds can be registered as to principal but not as to interest.