Equities

Question 1

What is authorized stock?

Answer 1

Total nu.ber if common shares authorized. Includes all issued and unissued shares.

Question 2

How to calculate market capitalization?

Answer 2

Number of outstanding shares multiplied by the current market price

Question 3

What type shares make up issued shares?

Answer 3

Outstanding shares and treasury shares

Question 4

Regular way settlement duration?

Answer 4

T+1
One business day after the Trade date

Question 5

When does stock buyer become the owner of record?

Answer 5

When settlement occurs. One business day after the Trade date

Question 6

What are preemptive rights?

Answer 6

Gives current shareholders the right to buy a certain number of shares at a reduced price prior to the issuance of new shares to the public so they can maintain their proportional ownership of the company.

Question 7

Items that require a shareholder vote?

Answer 7

1. Declare a stock split
2. Declare a reverse stock split
3. Issue convertible bonds or preferred shares
4. Issue stock options to officers on a preferential basis

Question 8

Items that do not require a shareholder vote?

Answer 8

1. Declare a cash dividend
2. Declare a stock dividend
3. Declare a preemptive rights distribution

Question 9

What happens to earnings per share when a company does a stock buyback?

Answer 9

The earnings per share increases because the number of common shares outstanding decreases

Question 10

Statutory voting

Answer 10

Most common method.
Votes must be cast evenly

Question 11

Cumulative voting

Answer 11

The shareholder may divide their total votes in whatever manner they choose.

Question 12

Proxy voting

Answer 12

Shareholders not attending the annual shareholders meeting must recieve ballots from the company. These ballots are called proxies

Question 13

What rights do preferred shares not have?

Answer 13

1. Right to vote
2. Preemptive rights

Question 14

Cumulative preferred stock

Answer 14

If the issuer does not pay, missed payments accumulate and must be paid prior to making any other dividend payments

Question 15

Cumulative preferred stock

Answer 15

If the issuer does not pay, missed payments accumulate and must be paid prior to making any other dividend payments

Question 16

Callable preferred stock

Answer 16

The issuer has the right to redeem the shares after a set date. When stock is called, the shareholder will typically receive the pay value. Issuers may call in shares when interest rates fall, then issue new preferred shares at the current lower rates. Typically pay higher dividends than noncallable issues

Question 17

Convertible preferred stock

Answer 17

Shareholders can exchange their preferred shares for common stock at a predetermined price. Typically pay lower dividends than noncomvertible issues

Question 18

Participating preferred stock

Answer 18

In addition to the fixed dividend rate, participating preferred shareholders may also be given additional dividends if declared by the board of directors

Question 19

How to calculate current yield (CY)?

Answer 19

Annual income from security / market price of security

Question 20

Warrants

Answer 20

Is a long-term option to buy stock at a fixed price. Usually priced quite a bit above market price and become more valuable as stock price rises. Typically attached to a new stock or bond issue as an extra incentive. Although received as part of a packaged unit, a warrant is a separate security that can be traded by itself

Question 21

Perpetual warrants

Answer 21

Warrants usually have a life of 5 years, Perpetual warrants have NO expiration

Question 22

American Depositary Receipts (ADRs)

Answer 22

Purpose is to facilitate the trading of foreign securities in the U.S. without having to go through process to trade on the stock exchange. Although priced in USD, subject to currency exchange rate risk (currency risk)