Glossary – Letter P


A short-term negotiable debt security or promise to pay.

Paper profit

A profit on a security which has not been taken. Paper profits become realized profits only when the security is sold. A paper loss is the opposite to this. An example of a paper profit would be the purchase of ABC at $25. It is now trading at $27, so the paper profit is $2 per share.

Par value

The stated face value of a bond or, in the case of stock, an amount assigned by the company’s charter and expressed as a dollar amount per share. Par value of common stock usually has no relationship to the current market value and so no par value stock is issued. Par value of preferred stock is significant, however, as it indicates the dollar amount of assets each preferred share would be entitled to in the event of liquidation of the company.

Pari Passu

This means “in equal proportion.” It usually refers to equally ranking issues of a company’s preferred shares.

Participating feature

This applies to some preferred stocks which, in addition to a fixed rate of dividend, also share in the earnings of the company and may receive additional dividends over and above their specified dividend rate.

Penny stocks

Low-priced speculative issues of stock selling at less than $1.00 a share.


A regular payment made to a retired or disabled employee, usually from a fund that the employer and employee have contributed to in prior years.

Pension Adjustment (PA)

The estimated value of a member’s pension benefits accruing in a particular year as determined under the Income Tax Act. For defined benefit plans, the PA is determined by a formula. For defined contribution plans, the PA is the total of all employer and employee contributions for the year. A person’s RRSP contribution room is reduced by the value of the previous year’s PA.

Pension Benefits Standards Act, 1985 (PBSA)

The legislation regulating private pension plans of employees employed in areas of included employment in Canada. It sets out minimum standards for funding the plan, member benefits, administration, information to members, and investments.

Pension Benefits Standards Regulations, 1985 (Regulations)

Regulations that support the PBSA and provide additional specifications.

Pension Liabilities

The expected cost of the promised benefits based on actuarial assumptions such as future salary levels, investment returns, when members will retire, when they will die, etc.

Pension plan

A pension plan provides replacement for salary when a person is no longer working. For example, a formal arrangement, usually where the employer and employee contribute to a fund to provide the employee with income for the rest of his or her life. The payment varies according to length of service and salary.

Pensionable Age

The expected cost of the promised benefits based on actuarial assumptions such as future salary levels, investment returns, when members will retire, when they will die, etc.


Piggy Back Warrants

Some warrants entitle the holder to acquire shares plus additional warrants at a later date. The warrants that are received upon the exercise of the initial warrants are known as piggy back warrants.

Pink Sheets

An electronic system published by Pink Sheets LLC, to display bid and ask quotation prices of securities. It is mainly used by stock brokers trading over-the-counter securities in the United States.

Plan termination

Discontinuation of all or part of a pension plan by the employer. This often results from bankruptcy of the employer or from corporate restructuring or downsizing.

Plan wind-up

Distribution of the benefits and assets of a pension plan that has been terminated.


Points apply to security prices. In the case of shares, one point indicates $1.00 per share. For bonds and debentures, one point means 1% of par value. Par value is almost universally 100 for bonds.

Poison pill

A corporate provision to combat hostile takeovers. When triggered, the poison pill allows shareholders to acquire additional shares at below market price, thereby increasing the number of shares outstanding and making the takeover prohibitively expensive. Such plans are relatively new in corporate Canada and are the subject of some controversy regarding whom they are designed to protect.

Ponzi / Pyramids

These swindles promise high returns on group investments. Each participant is encouraged to bring in new investors. There is no actual investment; money from previous investors is used to pay new investors to make it appear as if money is being made. The only people who make money are the people who started them.

Pooling of interest

This 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.

Portability / Transfer options

The options available on cessation of membership, death, marriage breakdown, or plan termination. Members can transfer the commuted value of accumulated pension benefits to a locked-in RRSP, an LIF, an RLIF, another pension plan (if agreed to by the new plan), or the commuted value can be used to purchase an immediate or deferred annuity. A member can forego these options and instead receive a deferred pension from the plan at retirement.


The entire combination of securities or investments an individual or institution holds. A portfolio can contain a variety of government and company bonds, preferred and common stocks from different businesses and other types of securities and assets.

Portfolio Turnover Ratio (PTR)

This is a measure of how frequently an investment portfolio’s individual holdings are bought and sold in a defined time frame – typically 12 months.

The Portfolio Turnover Ratio is calculated by taking either

  • the total amount of new securities purchased or
  • the mount of securities sold (whichever is less)

over a particular time period and divided by the total net asset Value (NAV) of the fund.

The Portfolio Turnover Rate indicates how actively the portfolio manager/investor manages their portfolio investments. A portfolio turnover rate of 100% is equivalent to the manager buying and selling all of the securities in the portfolio once in the course of the year. The higher a portfolio turnover in a year, the greater the trading costs payable by the portfolio in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the investment portfolio. The rate is calculated based on the lesser of purchases or sales of securities by the average weighted market value of the portfolio securities, excluding short-term securities.

The PTR measurement should be considered by investors before deciding to purchase a given mutual fund or similar financial product. A mutual fund with a high turnover rate will incur more transaction costs than a fund with a lower rate. Unless the superior asset selection renders benefits that offset the added transaction costs they cause, a less active trading posture may generate higher fund returns.

In addition, there is no point in adopting a buy & hold investment approach if your mutual fund manager has a high PTR. You may not be buying and selling your investments, but your fund manager is, if the fund has a high PTR!


Post-Secondary Educational Institution

An institution as defined in these terms by the Canada Revenue Agency:

  1. A Designated Educational Institution
  2. An educational institution in Canada that is certified by the Minister of Human Resources and Social Development to be an educational institution providing courses, other than courses designed for university credit, that furnish a person with skills for, or improve a person’s skills in, an occupation
  3. An educational institution outside Canada that is a university, college or other educational institution that provides courses at a post-secondary school level at which a beneficiary was enrolled in a course of not less than 13 consecutive weeks duration, or
  4. Any other educational institution that is included in the definition of this term in subsection 146.1(1) of the Income Tax Act.

Power of Attorney

In general, a written, legal document that authorizes an individual to act on behalf of another person, the individual signing the document. It becomes void upon the death of the signer.

Some financial institutions use their own limited form of a Power of Attorney, which is a legal document that allows assets to be moved from one brokerage or bank account to another. In some circumstances a broker may be given a “limited power of attorney,” where they may buy or sell securities in an account but not remove them. This type of account is called a “discretionary account.”

Preferred shares

Preferred shares are a type of hybrid security, displaying characteristics of both fixed income and equity securities. Preferred shares generally yield a dividend that must be paid prior to any distributions being paid to common shareholders; however, the dividend (just like dividends on common shares) is not an unequivocal obligation of the issuing company and repayment of investor capital to preferred shareholders ranks ahead of common shareholders, but behind bond and senior debtholders, in the event the company is liquidated.

Preliminary prospectus

The first prospectus that is distributed to clients prior to an share offering. It includes essential information about the forthcoming offering but does not include details regarding the underwriting spread, the final public offering price, or the date the shares will be delivered. It is followed by the “final prospectus.”


  1. The amount by which a bond or preferred stock may sell above its par value. In the case of a new issue of bonds or stocks, the premium is the amount the market price rises over the original selling price.
  2. The premium can also refer to the part of the redemption price of a bond or preferred stock that is in excess of face value, par value or market price.
  3. When referring to options, the premium is the price paid by the buyer of an option contract to a seller.


Present value

The current value of an amount to be received in the future, discounted at some appropriate compound interest or discount rate.

This may sound confusing, but it really isn’t. The underlying concept is that receiving $1,000 now is worth more than $1,000 five years from now, because if you got the money now, you could invest it and receive an additional return over the five years.

Price to book

The Price-To-Book Ratio is calculated by dividing the current per share stock price by the book value per share. Book Value is calculated by subtracting total liabilities from total assets. It is also called equity or shareholders equity. It is a rough approximation of the liquidation value of a corporation. Book Value per share is calculated by dividing the Total Book Value by the number of shares outstanding.

Price-earnings ratio (PE Multiple)

This is a common stock’s current market price divided by annual per share earnings. This ratio is a short way of saying that a share is selling at so many times its actual or anticipated annual earnings. A price-earnings ratio is one tool used to compare one share to another.

Price/cash flow ratio

A measure of the market’s expectations regarding a firm’s future financial health. It is calculated by dividing price per share by cash flow per share. This provides an indication of relative value, similar to the price-earnings ratio.

Price/earnings to growth ratio

The PEG, or price/earnings to growth ratio is an extension of the more popular P/E ratio, but it also takes into account a company’s expected earnings growth. A stock’s PEG ratio is equal to its price/earnings ratio divided by its expected annual earnings-per-share growth. However, the earnings component of the PEG is a one-year forward earnings estimate, unlike the trailing one-year earnings used for P/E ratios. The annual earnings growth component is a five-year expected growth projection. As such, the PEG ratio has the advantage of being a more forward-looking measure but has the disadvantage of being heavily reliant on earnings estimates.

The average PEG ratio for a fund is the weighted harmonic average of the underlying Canadian and U.S. equities’ PEG ratios, as at the fund’s most recent holdings date.

PEG ratios are designed to account for the variability in P/E ratios that can be accounted for by differences in companies’ expected earnings growth. Conversely, two stocks that have identical P/E ratios would have divergent PEG ratios to the extent that one’s growth is expected to be superior to that of the other. A PEG ratio of 1 (one) is popularly considered a “normal” PEG level, as it indicates a stock that is priced in the market to fully reflect its earnings growth. PEG ratios of greater/less than one indicate stocks trading at a premium/discount to their growth rates, possibly indicating over/under-valuation. A fund’s average PEG ratio may similarly act as a gauge of the valuation level of its equity holdings.

Like all financial ratios, the PEG ratio should not be used in isolation. To get a proper perspective on a fund’s valuation, the ratio should be compared to an appropriate peer group and the overall market, as well as in relation to the fund’s historical PEG values.

Primary offering / Primary market

The original sale of any new issue of a company’s securities.

Prime rate

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


A dealer buying or selling securities for his or her own account. The term “principal” can also refer to a person’s capital or to the face value of a bond.

Prior preferred

A preferred stock which in the liquidation of the issuing company would rank ahead of other classes of preferred shares as to asset and dividend entitlement.

Private / Employment Plan

An employer- and/or union-sponsored plan that provides a regular income for a retired member’s lifetime and that of his or her spouse or common-law partner. This term includes plans covering both public- and private sector employees, but does not include the Canada Pension Plan or other public programs.

Private company

A company whose securities are not traded or owned by the public.

Private placements

The underwriting of a security and its sale to a few buyers, usually institutional, in large amounts. No formal prospectus is needed to be prepared in this instance as the buyers are considered to be sophisticated.

Pro forma

When a new issue is being planned for distribution, the corporation issuing the security must tell the suppliers of the new capital how they intend on spending the money received from the sale of the securities. The corporation publishes a pro forma balance sheet which integrates the new pool of money into their current operation. This shows the shareholders how the corporation would have spent the money if they had it on the day the pro forma balance sheet was created.

Pro rata

This means “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.

Profit taking

Selling securities to take a profit. The process of converting paper profits into cash.

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’s 500 Index, and the price at which futures contracts (or their options) on the index trade in financial futures markets.


The Promoter/Provider can be any person/organization offering a Registered Education Savings Plan (RESP) to the public (usually a financial institution or foundation that administers the RESP account on behalf of the subscriber).


A legal document which describes the securities being offered for sale to the public. These documents usually disclose pertinent information concerning the company’s operations, securities, management and purpose of the offering. The prospectus must be prepared in accordance with requirements of the applicable provincial securities commissions.


Written authorization given by a shareholder to someone else, who does not necessarily need to be a shareholder, to represent him or her and vote at a shareholders’ meeting.

Prudent Portfolio Rule

In some provinces the law requires that a trustee may only invest in a security if it is one which an ordinary prudent person would buy if he or she were investing for the benefit of other people for whom he or she felt morally bound to provide. Some provinces apply both this rule and the rule under legal investment, where a list of specific securities has been designated.

Public company

A public company, also known as a reporting issuer, is a corporation that has issued securities, under a prospectus, to the investing public and those securities are listed and trade on an organized stock exchange such as the TSX or TSX venture exchanges.

Pump and dump

A scheme where fraudsters heavily promote the purchase of specific company stock that creates high demand and drives up the prices. The individuals behind the promotion then sell their shares at the increased price and stop promoting the stock, which leaves other investors with stock that is worth far less than they paid for it.

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. Purchases are made at or below a stipulated price.


During a stock split, a push-out occurs when new shares are forwarded directly to the registered holders of old share certificates, without the holders having to surrender these old shares. Both old and new shares have equal value.

Put options

An option which gives the holder the right, but not the obligation, to sell a fixed amount of a certain stock at a specified price within a specified time. Puts are purchased by those who think a stock may go down in price.