Ch. 10 - The Features Of Stock Flashcards
1
Q
What is common stock?
A
Final claim on firm’s assets and earnings after firm has met its obligations to creditors and preferred stockholders
Dividends are paid out only after obligations to owners of preferred stock and creditors are satisfied
2
Q
What is the agency problem?
A
Conflict of interest between management and owners (shareholders) of a company
3
Q
What is a dividend?
A
Distribution of earnings to shareholders
4
Q
What is the value of an asset?
A
PV of future cash flows
5
Q
How are companies financed?
A
Debt (loans, bonds) and equity (preferred stock, common stock)
6
Q
What is preferred stock?
A
Preference and mandatory payments
Dividend payouts are mandatory and have preference upon liquidation of the firm
