Chapter 3 - Equity Securities Flashcards
(True or False) ADRs are securities that are priced in dollars.
True
(True or False) ADRs price reflects the value of the underlying stock and currency fluctuations of the underlying issuer’s host country.
True
(True or False) ADRs increased trading value and enhanced liquidity in the US markets lead to prices that are virtually identical to those of the underlying stock in the issuers host country.
False
(True or False) ADRs may be listed on an exchange and may be sponsored by the company.
True
Which shares of preferred stock may increase the most if the value of the company’s common stock appreciates?
Convertible preferred stock
Preemptive rights give existing stockholders the right to:
maintain their proportionate interest in a corporation.
During a period of stable interest rates, which type of preferred stock tends to be the most volatile?
Convertible preferred stock
(True or False) The number of outstanding shares is always equal to the number of shares issued.
False
(True or False) Treasury stock is previously issued shares that are no longer outstanding.
True
(True or False) Shareholders vote to authorize the payment of dividends.
False
(True or False) Cumulative voting is most beneficial for small shareholders.
True
Securities may be sold over _____ days through unsolicited broker’s trades or to a dealer that is acting as principal.
90
(True or False) Filing Form 144 is required if selling no more than 5,000 shares and $50,000 of securities.
False
What type of securities are acquired through a private placement?
Restricted securities
What is the holding period for restricted stock?
Six months
What is the holding period for control stock?
There is no holding period.
How many shares can be sold when filing Form 144?
1% or the average weekly trading volume of the past 4 weeks. Whichever is greatest.
Stock of companies whose value fluctuates with the business cycle (household appliances, automobiles, etc.)
Cyclical
Stock of companies that are resistant to recession (utilities, tobacco, etc.)
Defensive
Stock of strong, well-established, dividend paying companies.
Blue Chip
Stock of companies that pay higher than average dividends in relation to market price.
Income
Facilitates the trading of foreign stock in U.S markets.
American Depository Receipts
Stock of companies with sales and earnings that are expanding faster than the economy. Pay little to no dividends.
Growth
Conversion Ratio =
Par / Conversion Price
Preferred stock that allows stockholders to share in dividends paid to common stockholders.
Participating preferred stock
Preferred stock that permits the issuer to remove the stock from the market.
Callable preferred stock
Preferred stock that makes up for dividends that were not paid in previous years.
Cumulative preferred stock
Preferred stock that can be exchanged for common stock.
Convertible preferred stock
