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Investment And Portfolio Management > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

is made up of a combination of borrowing and the money invested by its owners

A

capital of a company

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2
Q

the long term borrowing, or debt, of a company is usually referred to as

A

bonds

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3
Q

are the equity capital of a company, hence the reason they are referred to as equities

A

shares

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4
Q

shares may comprise

A

ordinary shares
preference shares

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5
Q

shares can be issued in either

A

registered
bearer form

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6
Q

holding shares in this involves the investor having their name recorded on the share register and sometimes being issued with a share certificate to reflect the persons ownership

A

registered form

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7
Q

the alternative to holding shares in registered form is to hold

A

bearer shares

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8
Q

equity capital may be known as

A

ordinary shares
ordinary stock
common stock

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9
Q

shareholders share in the profits of the company by receiving

A

dividends

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10
Q

are hybrid security with elements of both debt and equity

A

preference shares

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11
Q

have legal priority over ordinary shares in respect of earnings and in the event of bankruptcy, in respect of assets

A

preference shares

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12
Q

also tends to have a credit ratings and ranks above equities in the capital structure

A

preferred stock

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13
Q

preference shares are

A

non-voting
pay a fixed dividend each year
rank ahead of ordinary shares

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14
Q

preference shares may be

A

cumulative
non-cumulative
participating
convertible
redeemable

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15
Q

carry an option to convert into the ordinary shares of the company at set intervals and on preset terms

A

convertible preference shares

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16
Q

it has a date at which they may be redeemed

A

redeemable shares

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17
Q

the benefits of owning shares

A

dividends
capital gains
pre-emptive rights:right to subscribe for new shares
right to vote

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18
Q

is the return that an investor gets for providing the risk capital for a business

A

dividend

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19
Q

companies pay dividends out of their profits and these are

A

post-tax profits

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20
Q

can be made on shares if their prices increase over time

A

capital gains

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21
Q

is one method by which a company can raise additional capital, complying with pre-emptive rights

A

rights issue

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22
Q

the votes are cast in one of two ways

A

the individual shareholder can attend the company meeting and vote
voting by proxy

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23
Q

the individual shareholder can appoint someone else to vote on his behalf

A

voting by proxy

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24
Q

Risk of owning shares

A

price risk and market risk
liquidity risk
issuer risk
foreign exchange risk

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25
Q

is the risk that share prices in general might fall

A

price risk

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26
Q

is the risk that shares may be difficult to sell at a reasonable price

A

liquidity risk

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27
Q

this is the risk that the issuer collapses and the ordinary shares become worthless

A

issuer risk

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28
Q

this is the risk that currency price movements will have a negative effect on the value of an investment

A

Foreign exchange risk

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29
Q

the 3 corporate actions

A

mandatory corporate action
mandatory corporate action with options
voluntary corporate action

30
Q

is one mandated by the company, not requiring any intervention from the shareholders or bondholders

A

mandatory corporate action

31
Q

is an action that has some sort of default option that will occur if the shareholder does not intervene

A

mandatory corporate action with options

32
Q

is an action that requires the shareholder to make a decision

A

voluntary corporate action

33
Q

give examples in each corporate action

A

payment of a dividend
rights issue
takeover bid

34
Q

types of corporate action

A

securities ratios
rights issues
open offers
bonus issues
stock splits and reverse stock splits
dividends
takeovers and mergers

35
Q

can be defines as an offer of new shares to existing shareholders, pro rata to their initial holdings,

A

right issue

36
Q

is made to existing shareholders and gives the holders the opportunity to subscribe for additional shares in the company of for other securities

A

open offer

37
Q

bonus issue is also known as

A

scrip or capitalization issue

38
Q

is a corporate action when the company gives existing shareholders extra shares without them having to subscribe any further funds

A

bonus issue

39
Q

is the opposite of a split:shares are combined or consolidated

A

reverse split or consolidation

40
Q

are an example of a mandatory corporate action and represent the part of a compqnys profit that is passed to its shareholders

A

dividends

41
Q

takeover may be

A

friendly or hostile

42
Q

is a similar transaction when the two companies are of similar size and agree to merge their interest

A

merger

43
Q

must hold annual general meetings at which shareholders are given the opportunity to question the directors about the company strategy and operations

A

public companies

44
Q

when a company decides to seek a listings for its shares, the process is described in a number of ways

A

becoming listed or quoted
floating on the stock market
going public
making an initial public offering

45
Q

refers to the marketing of new shares in a company to investors for the first time

A

primary market

46
Q

once they have acquired shares, the investors may at some point wish to dispose of some os all their shares and will generally do this through a stock exchange

A

sexondary market

47
Q

exist to raise capital and enable surplus funds to be matched with investment opportunities

A

primary markets

48
Q

allow the primary market to function efficiently by facilitating two way trade in issued securities

A

secondary markets

49
Q

is an organized marketplace for issuing and trading securities by members of that exchange

A

stock exchange

50
Q

originally designed to enable US investors to hold overseas shares without the high dealing costs and settlement delays associated with overseas ewuity transactions

A

american depositary receipts ADR

51
Q

is a dollar denominated and issued in bearer form, with a depositary bank as the registered shareholder

A

ADR

52
Q

makes arrangements for issues such as the payment of dividends, also denominated in US dollars and voting via a proxy at shareholder meetings

A

depositary bank

53
Q

depository receipts

A

ADR
Indian depository receipts
Philippine depository receipts

54
Q

is an organized marketplace for the issuing and trading of securities by members of that exchange

A

stock exchange

55
Q

trading categorized as

A

quote-driven
order driven

56
Q

employ market makers to provide continuous two way ot bid anf offer prices during the trading day

A

quote driven

57
Q

example of quote driveb

A

NASDAQ

58
Q

is one that employs either in electronic order book

A

order driven

59
Q

useful tool for investors, as they provide a realistic benchmark against which the performance of a portfolio can be judged

A

stock market indices

60
Q

stock market indices have four uses

A

to act as a market barometer
to assist in performance measurement
to act as the basis for index tracker funds
to support portfolio management research

61
Q

is the final phase of the trading process

A

settlement

62
Q

are used to achieve this by a process known as book entry transfer which involves charging electronic records of ownership rather than issuing new share certificates

A

electronic system

63
Q

if dividends cannot paid in a particular year, perhaps because the company has insufficient profits, this share would get no dividend

A

ordinary preference share

64
Q

However, if this is the share then the dividend entitlement accumulates

A

cumulative preference shares

65
Q

is this is the share the dividend from the first year would be lost

A

non cumulative

66
Q

the first dividend being declared by the directors and paid approximately halfway through the year

A

interim dividend

67
Q

the second dividend is paid after approval by shareholders at the companys annual general meeting

A

final dividend for the year

68
Q

shares are bought and sold with the right to receive the next declared dividend uo to the date when the declaration is actually made

A

cum dividend

69
Q

if the shares are purchase in this dividend, the purchase will receive the declared dividend

A

cum dividend

70
Q

for the period between declaration and the dividend payment date, the shares go

A

ex dividend

71
Q

buying of shares when they are this dividend are not entitled to the declared dividend

A

ex dividend

Investment And Portfolio Management (6 decks)

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