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Finance Dictionary and Glossary of Investment Terms
Formal written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by mutual funds to describe fund objectives, risks, and other essential information.
A legal document offering securities or mutual fund shares for sale, required by the Securities Act of 1933. It must explain the offer, including the terms, issuer, objectives (if mutual fund) or planned use of the money (if securities), historical financial statements, and other information that could help an individual decide whether the investment is appropriate for him/her. also called offering circular or circular.
A document issued by a company that is about to sell stock to the public. Prepared with the help of lawyers and other high-priced advisers, the prospectus is must-reading for investors. It discloses a wealth of information about the business of a private company, much of it not previously made public. This includes financial data, background on the top executives, information on pending litigation, details of the offering itself (what proportion of ownership is being sold, what will happen to the proceeds), and risk factors to consider before investing (competition in the industry, barriers to entry, etc.).
A formal written offer to sell securities that sets forth the plan for a proposed business enterprise, or the facts concerning an existing one that an investor needs to make an informed decision.
1. A formal legal document describing details of a corporation. The prospectus is generally created for a proposed offering (usually an IPO), but they can still be obtained from existing businesses as well. The prospectus includes company facts that are vitally important to potential investors. 2. In this case of mutual funds, a prospectus describes the fund's objectives, history, manager background, and financial statements.