Cumulative Dividends

This term carries the same meaning as accumulative dividends. If a dividend on a stock is accumulative it implies that all back dividends must be paid in full before current dividends can be paid. In other words, a stock on which the dividends are not cumulative can omit to pay its dividend when the management sees fit and in another year begin to pay a current dividend again without regard to the period which has gone by during which no dividend has been paid. On the other hand, a cumulative stock must sooner or later pay up all back dividends. A least this is the theory, although naturally if a company does not earn the money to make the payments it does not pay them, and the back dividends simply accrue from year to year on the stock. See also accumulative dividends.

Current Assets

This term, as used in connection with the balance sheet of a railroad or other corporation, covers the so-called shifting or changeable assets as distinguished from the capital assets. In the case of the steam railroad, current assets usually include cash on hand, loans and bills receivable, accounts receivable, amounts due from other companies and individuals, amounts due from companies' agents, advances to other companies, etc. The capital assets as distinguished from the current include cost of road and equipment, permanent investments, etc.

Current Liabilities

Current liabilities as distinguished from capital liabilities of a railroad or corporation, include loans and bills payable, accounts payable, payrolls and vouchers, interest and dividends accrued, amounts due to other companies, etc. Capital liabilities, on the other hand, cover capital stock, bonded debt, mortgages assumed, etc.

Cutting A Melon

When a corporation makes a large extra distribution to its stockholders either in the shape of an extra large cash dividend or a stock dividend, it is usually said that the company is "cutting a melon."

Debenture

A debenture, or, as called in this country, a debenture bond, is simply a certificate of indebtedness or promise to pay issued by a corporation. In other words, it is not a mortgage. It usually differs from the average income bond in that it contains a promise to pay a certain amount of interest at stated periods. While an income bond is sometimes a mortgage and not a debenture, yet as it cannot be foreclosed before maturity, which may be 50 years away, the position of the principal of the two classes of bonds is therefore practically the same. In England a debenture bond or stock is sometimes secured by a mortgage, but not usually.

Default

A default on a bond is simply the failure to perform or fulfil the obligation to pay the interest or principal when due. Usually a default furnishes ground for application for a receivership, although in some instances mortgage bonds carry a clause which does not allow the holder to begin foreclosure proceedings until the bond has defaulted over a certain stated period. For instance, in the case of the United States Steel Corporation second mortgage 5s, the holder could not begin foreclosure proceedings until the bond had been in default in the payment of its interest for at least two years.

Discretionary Account

In stock speculation a discretionary account is an account, the handling of which is intrusted to the broker with whom it is open. While there are conditions under which it is necessary for a broker to act on his own discretion, yet most reputable brokerage houses dislike to do this, and many of them refuse to.

Dividend

A dividend is the stockholders' share of the divisible profits of a corporation, usually paid to him in cash at certain stated periods. There are, of course, various conditions under which dividends are paid, and in many cases they are not paid in cash. For instance, a "scrip" dividend is one payable in scrip, or in other words in a small certificate bearing interest at the legal rate and which is usually converted into stock, but has no voting power and is entitled to no dividend until converted into stock. A stock dividend, however, is one payable in the stock of the company, and is large enough to enable the holder of the stock to receive a full certificate and not fractions or scrip. Cash dividends are usually sent by check to the owner of the stock, in whose name the certificate stands. In case the owner of the stock has not had his certificate transferred to his name before the closing of the books, the dividend, of course, is sent to the former owner and he must pass it on to the new owner. When a speculator is short of a stock on which a dividend becomes due, he is obliged to pay the amount of the dividend to the person from whom he has borrowed the stock certificate to make delivery to the person to whom he has sold the stock.