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Paper Profit
An unrealized profit on a security still held. Paper profits become realized profits only when the security is sold. A paper loss is the opposite to this.

Par Value
The stated face value of a bond or stock (as assigned by the company's charter) expressed as a dollar amount per share. Par value of a common stock usually has little relationship to the current market value and so no par value stock is now more common. Par value of a preferred stock is significant as it indicates the dollar amount of assets each preferred share would be entitled to should the company be liquidated.

Pari Passu
A legal term meaning that all securities within a series have equal rank or claim on earnings and assets. Usually refers to equally ranking issues of a company's preferred shares.

Participating Feature
Preferred shares which, in addition to their fixed rate of prior dividend, share with the common in further dividend distributions and in capital distributions above their par value in liquidation.

Participating Organizations
A firm entitled to trade through the Toronto Stock Exchange or TSX Venture Exchange. The equivalent term on the Bourse de Montréal is Approved Participant.

Participation Rate
The share of the working-age population (15 and older) that is in the labour market, either working or looking for work.

Partnership
A form of business organization that involves two or more people contributing to the business and legislated under the federal Partnership Act.

Past Service Pension Adjusted (PSPA)
An employer may increase a member's pension by the granting of additional past service benefits to an employee in a defined benefit plan. Plan members who incur a PSPA will have their RRSP contribution room reduced by the amount of this adjustment.

Payback Period
The time that it takes for a convertible security to recoup its premium through its higher yield, compared with the dividend that is paid on the stock.

Peer Group
A group of managed products (particularly mutual funds) with a similar investment mandate.

Penny Stocks
Low-priced speculative issues selling at less than $1 a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment calibre issues.

Pension Adjustment (PA)
The amount of contributions made or the value of benefits accrued to a member of an employer-sponsored retirement plan for a calendar year. The PA enables the individual to determine the amount that may be contributed to an RRSP that would be in addition to contributions into a Registered Pension Plan.

Performance Bonds
What is often required upon entry into a futures contract giving the parties to a contract a higher level of assurance that the terms of the contract will eventually be honoured. The performance bond is often referred to as margin.

Permitted Client
An entity sophisticated or large enough that the provisions of National Instrument 33-103 are not required. A permitted client may include a Canadian bank, a trust company, a person or company registered as an adviser or dealer (subject to a few exceptions), a pension fund; any level of government (federal, provincial or municipal), or an investment fund advised by a registered portfolio manager.

Perpetual Bonds
A unique type of debt security that has no maturity date.

Personal Disposable Income
The amount of personal income an individual has after taxes. The income that can be spent on necessities, nonessential goods and services, or that can be saved.

Phillips Curve
A graph showing the relationship between inflation and unemployment. The theory states that unemployment can be reduced in the short run by increasing the price level (inflation) at a faster rate. Conversely, inflation can be lowered at the cost of possibly increased unemployment and slower economic growth.

Piggyback Warrants
A second series of warrants acquired upon exercise of primary warrants sold as part of a unit.

Point
Refers to security prices. In the case of shares, it means $1 per share. In the case of bonds and debentures, it means 1% of the issue's par value, which is almost universally 100. On a $1,000 bond, one point represents 1% of the face value of the bond or $10. See Basic point

Policy-Based Guarantee
A maturity guarantee based on the date when the policy was first issued. This type of guarantee may involve restrictions on the size of and date of subsequent deposits.

Political Risk
The risk associated with a government introducing unfavourable policies making investment in the country less attractive. Political risk also refers to the general instability associated with investing in a particular country.

Pooled Account
A type of managed product structure whereby by investors' funds are gathered into a legal structure, usually a trust or corporation. An investor's claim to the pool's returns is proportional to the number of shares or units the investor owns. The pools are often open-ended, which means units are issued when there are net cash inflows to the fund, or units are redeemed when there are net cash outflows.

Pooling of Interest
Occurs when a company issues treasury shares for the assets of another company so that the latter becomes a division or subsidiary of the acquiring company. Subsequent accounts of the parent company are set up to include the retained earnings and assets at book value (subject to certain adjustments) of the acquired company.

Portfolio
Holdings of securities by an individual or institution. A portfolio may contain debt securities, preferred and common stocks of various types of enterprises and other types of securities.

Potential Output
The maximum amount of output the economy is capable of producing during a given period when all of its available resources are employed to their most efficient use.

Preemptive Rights Clause
A term in a company's charter that states that if a company wishes to issue additional new shares they must give the "right of first refusal" to the existing shareholders. This allows the existing shareholders to maintain their proportionate interest.

Preferred Dividend Coverage Ratio
A type of profitability ratio that measures the amount of money a firm has available to pay dividends to their preferred shareholders.

Preferred Shares
A class of share capital that entitles the owners to a fixed dividend ahead of the company's common shares and to a stated dollar value per share in the event of liquidation. Usually do not have voting rights unless a stated number of dividends have been omitted. Also referred to as preference shares.

Preliminary Prospectus
The initial document released by an underwriter of a new securities issue to prospective investors.

Premium
The amount by which a preferred stock or debt security may sell above its par value. In the case of a new issue of bonds or stocks, the amount the market price rises over the original selling price. Also refers to that part of the redemption price of a bond or preferred share in excess of face value, par value or market price. In the case of options, the price paid by the buyer of an option contract to the seller.

Prepaid Expenses
Payments made by the company for services to be received in the near future. For example, rents, insurance premiums and taxes are sometimes paid in advance. A balance sheet item.

Prepayment Risk
The risk that the issuer of a bond might prepay or redeem early some or all principal outstanding on the loan or mortgage.

Prescribed Rate
A quarterly interest rate set out, or prescribed by Canada Revenue Agency under attribution rules. The rate is based on the Bank of Canada rate.

Present Value
The current worth of a sum of money that will be received sometime in the future.

Price-Earnings (P/E) Ratio
A value ratio that gives investors an idea of how much they are paying for a company's earnings. Calculated as the current price of the stock divided current earnings per share.

Primary Distribution or Primary Offering of a New Issue
The original sale of any issue of a company's securities.

Primary Market
The market for new issues of securities. The proceeds of the sale of securities in a primary market go directly to the company issuing the securities. See also Secondary Market.

Prime Rate
The interest rate chartered banks charge to their most credit-worthy borrowers.

Principal
The person for whom a broker executes an order, or a dealer buying or selling for its own account. The term may also refer to a person's capital or to the face amount of a bond.

Principal Protected Note
A debt-like instrument with a maturity date whereby the issuer agrees to repay investors the amount originally invested (the principal) plus interest. The interest rate is tied to the performance of an underlying asset, such as a portfolio of mutual funds or common stocks, a market index, a hedge fund or a portfolio of hedge funds. PPNs guarantee only the return of the principal.

Private Equity
The financing of firms unwilling or unable to find capital using public means—for example, via the stock or bond markets.

Private Family Office
An extension of the advisor's client servicing approach. In this approach, instead of having only one advisor, a team of professionals handles all of an affluent client's financial affairs within one central location.

Private Placement
The underwriting of a security and its sale to a few buyers, usually institutional, in large amounts.

Pro Forma
A term applied to a document drawn up after giving effect to certain assumptions or contractual commitments not yet completed. For example, an issuer of new securities is required to include in the prospectus a statement of its capitalization on a pro forma basis after giving effect to the new financing.

Pro Rata
In proportion to. For example, a dividend is a pro rata payment because the amount of dividend each shareholder receives is in proportion to the number of shares he or she owns.

Probate
A provincial fee charged for authenticating a will. The fee charged is usually based on the value of the assets in an estate rather than the effort to process the will.

Productivity
The amount of output per worker used as a measure of efficiency with which people and capital are combined in the output of the economy. Productivity gains lead to improvements in the standard of living, because as labour, capital, etc. produce more, they generate greater income.

Profitability Ratios
Financial ratios that illustrate how well management has made use of the company's resources.

Program Trading
A sophisticated computerized trading strategy whereby a portfolio manager attempts to earn a profit from the price spreads between a portfolio of equities similar or identical to those underlying a designated stock index, e.g., the Standard & Poor 500 Index, and the price at which futures contracts (or their options) on the index trade in financial futures markets. Also refers to switching or trading blocks of securities in order to change the asset mix of a portfolio.

Prospectus
A legal document that describes securities being offered for sale to the public. Must be prepared in conformity with requirements of applicable securities commissions. See also Red Herring and Final Prospectus.

Protected Funds
A fund legally structured as a mutual fund trust and not governed by insurance legislation. This type of segregated fund can be sold by registered mutual fund salespeople at bank branches and by individual financial advisors who lack life insurance licenses.

Proxy
Written authorization given by a shareholder to someone else, who need not be a shareholder, to represent him or her and vote his or her shares at a shareholders' meeting.

Prudent Man Rule
An investment standard. In some provinces, the law requires that a fiduciary, such as a trustee, may invest funds only in a list of securities designated by the province or the federal government. In other provinces, the trustee may invest in a security if it is one that an ordinary prudent person would buy if he were investing for the benefit of other people for whom he felt morally bound to provide. Most provinces apply the two standards.

Public Float
That part of the issued shares that are outstanding and available for trading by the public, and not held by company officers, directors, or investors who hold a controlling interest in the company. A company's public fl oat is different from its outstanding shares as it also excludes those shares owned in large blocks by institutions.

Purchase Fund
A fund set up by a company to retire through purchases in the market a specified amount of its outstanding preferred shares or debt if purchases can be made at or below a stipulated price. See also Sinking Fund.

Pure Insurance
See Term Insurance.

Put Option
A right to sell the stock at a stated price within a given time period. Those who think a stock may go down generally purchase puts. See also Call Option.