ch 4

Question 1

Corporation

Answer 1

type of business organization that is a legal entity separate from its owners

Question 2

shares

Answer 2

units used to measure common stock ownership

Question 3

proxy ballot

Answer 3

a ballot cast on behalf of an absent shareholder on certain corporate matters

Question 4

proxy statement

Answer 4

an informational document describing the issues to be voted upon

Question 5

voting class

Answer 5

a class of stock that carries voting as ownernship rights (popular)

Question 6

non-voting class

Answer 6

a class of stock that varries very little of no voting rihgts, but provides ownership (unpopular)

Question 7

hostile takeover

Answer 7

an attempt by one company to take over another company without the approval if the targets company board of directors

Question 8

Stock Splits

Answer 8

a corporate action in which a company divides its existing shares into multiple shares

Question 9

What does a stock split do to the stocks individual price per share?

Answer 9

it drops

Question 10

Is a stock split a good or bad sign for investors

Answer 10

Good. firm is successful and has faith in gowth prospects

Question 11

Reverse Stock Split

Answer 11

corporate action in which a company combins its existing shares into fewer shares

Question 12

Round Lot

Answer 12

100 shares of stock

Question 13

Is a reverse stock split a good sign?

Answer 13

NO

Question 14

Capital Gains

Answer 14

the profit earned by selling an asset for an amount greater than what it was paid for

Question 15

dividends

Answer 15

company profit distributed to shareholders

Question 16

declaration

Answer 16

date that a firms board of directors announces that a dividend will be paid to shareholders

Question 17

ex-dividend (ex date)

Answer 17

date at which the security will trade without the divident

Question 18

Record

Answer 18

date on which the company looks at its records to determine the shareholder

Question 19

Payable

Answer 19

date on which the dividend is sent to the holders

Question 20

Preferred Stock

Answer 20

investment with a corporation that entitles ownership to a fixed dividend priority over common shares and no ownership interest

Question 21

Cumulative Preferred

Answer 21

issuer may not make any common share dividends untill paying all preferred dividends in arrears

Question 22

Callable Preferred

Answer 22

issuer retains the right to buy back shares after a set date

Question 23

Convertible Perferred

Answer 23

Shareholder has the opportunity to conver preferred shares into common shares

Question 24

Participating Preferred

Answer 24

shareholder is entitled to receive extra dividends (usually reserved for only common shareholders)

Question 25

Capitalization

Answer 25

Number of shares outstanding times the market price per share

Question 26

Large Cap

Answer 26

firms with a market cap over approximatley $10 billion

Question 27

Mid Cap

Answer 27

firms with a market cap approximatley $2-10 Billion

Question 28

Small Cap

Answer 28

firms with a market cap under approximatley $2 billion

Question 29

Growth Stocks

Answer 29

have higher P/E ratios. Their earnings cost the investor more – because investors anticipate those earnings to grow

Question 30

Value Stocks

Answer 30

are considered to be a “good deal”. Their earnings do not cost the investor very much – as exemplified by a low Price-to-earnings (P/E) ratio.

Question 31

American Depository Receipt (ADR)

Answer 31

is an international firm’s stock that trades in the United States using U.S. dollars.

Question 32

Cyclical Stock

Answer 32

stock follows the business cycle advances and declines in the economy
Example: Industrials, consumer discretionary, materials

Question 33

Defensive Stock

Answer 33

stock remains stable during economic declines and have a history of stable earnings
Example: Healthcare, consumer staples, and utility stocks

Question 34

Stock Index

Answer 34

refers to a formal measurement of the value of a portion of the stock market. Tracking an index provides insight into market performance.