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Claritas 2015 > Chapter 9: Equity Securities > Flashcards

Chapter 9: Equity Securities Flashcards

0
Q

What does leveraged mean?

A

Has some debt in its capital structure

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1
Q

What is capital structure?

A

Company’s composition of debt and equity capital

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2
Q

What represents an ownership interest in a company or similar legal entity?

A

Common share

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3
Q

Which kind of shareholder has voting rights?

A

Common

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4
Q

Which kind of owners will receive dividends before common shareholders?

A

Preferred

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5
Q

What is capital structure priority of claims?

A

Debt, preferred, common

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6
Q

What is limited liability?

A

Higher claimants particularly debt investors cannot recover money from personal assets of shareholders of company’s assets are insufficient to fully cover their claims

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7
Q

What is par value?

A

Stated value or face value of equity security

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8
Q

What is main type of equity securities?

A

Common stock

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9
Q

What is a security representing an economic interest in a foreign company that trades like a common stock on a local stock exchange?

A

Global depository receipt

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10
Q

What kind of bond issued by a company that offers the bond holder he right to convert the bond into a pre specified number of common shares?

A

Convertible bond

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11
Q

What is an equity like security that entitles the holder to buy a pre specified amount of common stock of the issuing company at a press specified stock price, called the exercise price or strike price, prior to a pre specified expiration date?

A

Warrant

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12
Q

What is market risk or risk created by general economic conditions that affect all risky investments?

A

Systematic

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13
Q

What is company specific risk associated with investing in a particular company or security?

A

Unsystematic

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14
Q

What is valuation approach that takes into account the time value of money?

A

Discounted cash flow

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15
Q

What approach estimates value of common share by using multiples based on prices and some other measure for publicly traded, comparable equity securities?

A

Relative valuation

16
Q

What is price to earnings ratio?

A

Ratio of company’s stock prices to its earnings per share

17
Q

What approach estimates value of common equity by calculating difference between a company’s total assets and it’s outstanding liabilities?

A

Asset based valuation

18
Q

What is rights offering?

A

Existing shareholders receive preemptive rights to purchase new shares

19
Q

What replaces one existing common share with a specified number of common shares?

A

Stock split

Claritas 2015 (6 decks)

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