1.3 Common Stock Flashcards
An equity investor can make money by?
Buying low and selling high
Capital gain / appreciation
A gain in the original capital invested
Dividends
Cash or stock paid to shareholders for each chair that they own
Our company is required to pay dividends yes or no?
No
Companies are not required to pay dividends
Share prices are determined by?
Supply and demand
Most corporations issue what kind of stock?
Common stock
More shares equal more?
Ownership
Treasury shares / Treasury stock
Shares that have been issued but are not owned by investors instead they are owned by the company
Treasury shares have NO _______ rights
And Pay NO ______________
Rights
Dividends
Shares outstanding
Stock remaining in circulation, after an issuer re-purchases shares removing them from circulation
How to find the amount of shares outstanding?
Issued shares - treasury shares
MARKET CAPITALIZATION
Share price x shares outstanding
Treasury shares are not included in…
Shares outstanding
Who buys and sells securities out of its own inventory?
Dealer
What market is it win an investor cells to another investor
Secondary
The first time in issue or sell shares to the public
Initial public offering (IPO)
The investment bank that helps an issue or sell it securities is known as
Underwriter
This person acts as a go-between for a buyer and seller in the secondary market
Broker
Shares that have been re-purchased by the company and removed from public circulation are?
Treasury shares
Common stock shareholders rights
Right to inspect records
Right to vote on relevant matters
Right to receive dividends
Right of limited liability
Transfer right
Preemptive rights
Right to sue for wrongful acts
Par value of common stock
For investors in common stock, the par value of a share is set arbitrarily
Physical certificate
Registered in owners name
Street name registration
Registered on the issuers books in the name of the owners brokerage firm
“ Book entry form”
Beneficial rights to ownership
Belong to the customer not the brokerage firm
Direct registration system (DRS)
Owners get the benefits of direct ownership by receiving reports, dividends and proxies directly from the issuer
The Registrar
Make sure the company always has the proper number of shares outstanding
The registrar monitors and…
audits the transfer agent
Registrars are
usually banks
Penny stocks are
Low priced equity securities that are not actively traded
Usually below $5
Investing in penny stocks can be
RISKY
Penny stocks are usually quoted on one of two over the counter quotation systems which are?
Over the counter bulletin board (OTCBB)
OTC Link
Customers must be given what prior to their first penny stock transaction?
A risk disclosure document
The broker dealer must provide what to the customer for the penny stock?
The current market bid and offer
Before selling a penny stock to a new customer, a broker dealer must conduct a?
Suitability analysis which covers the customers financial situation, investment experience, and financial objectives
The customer must be provided with the amount and source of any ______________ That the broker dealer received in connection with the trade
Compensation
A broker dealer does NOT Have to conduct a suitability analysis if the customer is?
And established customer
Common stock holders are paid
After bondholders and preferred stockholders have been paid
Which is NOT a type of common stock?
A. Re-issued stock
B. Treasury stock
C. Authorized stock
D. Outstanding stock
A. Reissued Stock
In cases where a stock or bond is not endorsed or not endorsed properly, the stockholder can do what?
Send a stock or bond power
If they come in stockholder is unable to attend a meeting he can still vote on any issue presented by?
Submitting a vote by proxy
The right to transfer is what gives the shareholder the right to sell their shares….
To the highest bidder
