Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 7 > Equities > Flashcards

Equities Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 7 Top-off Exam flashcards
1
Q

Name six types of equity securities.

6 things

A
  1. Common stock
  2. Preferred stock
  3. Rights offerings
  4. Warrants
  5. American Depository Receipts
  6. Direct Participation Programs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Term for when a company makes no claims about the intrinsic worth of their stock and defers to the market value.

A

No Par Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Worth of no par stock as assigned by issuing companies directors - strictly for accounting purposes.

A

Stated Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Arbitrary value the company gives the stock in their articles of incorporation.

A

Par Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Formal document stating you own a certain block of shares in a company.

A

Stock certificate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Firm retained by a corporation or mutual fund to maintain records about shareholders. Also ensures that stock certificates presented for transfer are properly cancelled and new ones issued to the new owner.

A

Transfer agent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Documents names of all shareholders and number of shares they own.

A

Registrar

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

The means by which ownership of a security is passed from one party to another.

A

Transfer procedures

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Signature used to legally transfer a security, whether interest rate option or personal check.

A

Endorsement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Bank guarantee that an options writer has the options underlying securities on deposit and that they are ready for delivery if the option is exercised.

A

Escrow receipt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Simple ownership interest in a publicly traded organization.

A

Common stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

The four rights of common stock holders.

A
  1. Transfer ownership by sale or gift.
  2. Inspect company books, records, and shareholder meeting minutes.
  3. Preemptive rights (Maintain proportionate share of ownership by purchasing proportionate share of new stock)
  4. Vote on company affairs themselves or by proxy
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Order in which funds are distributed in case of liquidation of the company

A
  1. Bondholders
  2. Preferred shareholders
  3. Common stockholders
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Type of stock that is strong, stable, mature, and has a history of consecutive quarterly dividends and good credit history.

A

Blue Chip stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Type of stock that has a strong potential for improving profits faster than it has to pay back debts.

A

Growth stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Stock of young firms that are new in the industry but have good growth prospects. May be high risk.

A

Emerging growth stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Mature company with high dividend yield and few prospects for growth or diversification.

A

Income stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Stocks that move with the broader market, and are often more volatile. They may outpace market in expansion but whipsaw during contraction.

A

Cyclical stock

Example- automotive industry

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

These stocks do better in bear markets where investors are looking for safe investments.

A

Countercyclical/Defensive

Example- Food, healthcare, defense industries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Stocks that an investor believes will rise quickly in the market.

A

Speculative

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Taxable payment declared by companies directors and paid to shareholders.

A

Dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Type of stocks most likely to pay dividends.

A

Blue chip and defensive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

True/False

Dividends may be paid as more stock.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Security that no longer carries the right to receive the most recently declared dividend.

A

Ex-dividend

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Ex-dividend date

A

Two business days before the record date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is a stock split?

A

When the company believes the price is too high, they will split the stocks.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is a reverse stock split?

A

When the company believes the price is too low, they will consolidate the stocks.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Class of ownership that has a higher claim on the assets and earnings than common stock.

A

Preferred stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Characteristics of preferred stock

3 things

A
  1. Dividend must be paid before those to common stockholders
  2. Usually there are no voting rights.
  3. Have priority over common stockholders in liquidation event.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Name the five types of preferred stock

A
  1. Cumulative
  2. Participating
  3. Convertible
  4. Callable
  5. Adjustable rate
31
Q

What is cumulative stock?

A

If dividends are suspended, current and arrears dividends will be paid upon resumption prior to common stock dividends.

32
Q

Offers a share of profits in addition to dividends after all dividends and interest due are paid.

A

Participating preferred stock

33
Q

What is convertible preferred stock?

A

Gives the holder the option to exchange for share of common stock. Will have a lower stated dividend due to this option.

34
Q

What is callable preferred stock?

A

Can be repurchased by the issuer at an agreed upon price and after a certain date.

35
Q

What is adjustable rate preferred stock?

A

The dividends will vary with some benchmark, typically the T-bill rate. They can be adjusted as often as semi-annually.

36
Q

Right to purchase security at a specified price from the issuer. Lower interest will be paid due to this right.

A

Warrants

37
Q

American Depository Receipts

A

Issued by US banks and represent a share of foreign stock in the US exchange.

38
Q

Enable investors to have an immediate claim on an enterprises cash flow and tax benefits, typically as a passive investment.

A

Direct Participation Programs

39
Q

Three main benefits of limited liability corporations

A
  1. Pass through taxation
  2. Liability is generally limited to amount invested
  3. Management structure and ownership is flexible
40
Q

Three drawbacks of limited liability corporations

A
  1. Often require more paperwork
  2. Organizational structure is not as familiar to the public
  3. Some states require dissolution date; death/dissolution of a member can cause total dissolution
41
Q

What is the main purpose of structuring an enterprise as an LLC?

A

To tax revenue at individual investor level and not at corporate level.

42
Q

How are corporate earnings double taxed?

A

Once when it is realized as income, and again when it is passed to shareholders as dividends.

43
Q

Over the Count (OTC) Definition

A

Stocks and bonds purchased and sold virtually.

44
Q

Designated Market Maker

A

Specialist maintaining orderly market for a particular set of stocks.

45
Q

Class B Stock

A

Non-voting common stock

46
Q

Class A Stock

A

Voting common stock

47
Q

Statutory voting

A

One vote per share for each ballot item. (This benefits large shareholders.)

48
Q

Cumulative voting

A

Allocate total votes in any manner. (This benefits small shareholders.)

49
Q

Proxy

A

Form of absentee ballot.

50
Q

Proxy Solicitation

A

When the company sends proxies to shareholders for a specific meeting.

51
Q

Proxy Contest

A

Vote to change control of the company.

52
Q

Requirement to offer the sale of additional common stock to current stockholders prior to the public.

A

Anti-dilution Provision

53
Q

Current stockholder has the right to purchase newly issues shares to maintain proportionate ownership.

A

Pre-emptive Rights

54
Q

Stockholder cannot lose more than the amount paid for a stock to cover corporation debt in bankruptcy.

A

Limited Liability.

55
Q

Stockholder can receive annual financial statement and list of stockholders.

A

Inspection Rights.

56
Q

Common stockholder has this claim after debts and other securities.

A

Residual Claim to Assets.

57
Q

Long Position

A

Investor intends to buy stock low and sell high.

58
Q

Risk of Long Position

A

Limited to Investment.

59
Q

Short Sale

A

Investor sells shares high and buys low later.

60
Q

Risk of Short Sale Position

A

Unlimited if the price continues to rise.

61
Q

Capital Gain

A

Investor buys low and sells high.

62
Q

Combination of dividend income and price appreciation or decline over a given period.

A

Return on Investment.

63
Q

Reset Date

A

Date of dividend adjustment for Adjustable Rate Preferred.

64
Q

Current Yield or Dividend Yield

A

Annual dividend/Current Market Value

65
Q

Round lot

A

Share amounts divisible by 100.

66
Q

Odd lot

A

Transactions of shares fewer than 100.

67
Q

Point

A

Whole dollar portion of stock’s market price quote.

68
Q

Issuer offers unsold rights to investment banker for resale to general public.

A

Standby Underwriting

69
Q

Short term (30-45 days) privilege to buy additional shares of corporation.

A

Subscription Right

70
Q

Terms of Rights Include

3 things

A
  1. Shares eligible to buy
  2. Date of new issue
  3. Final date to exercise rights
71
Q

When a company sells stock, this is the money received exceeding par value.

A

Capital In Excess of Par

72
Q

Current liquidation value.

A

Book Value

73
Q

Book Value Calculation

A

Tangible Assets-Liabilities/Shares Outstanding

74
Q

Under which two exceptions will preferred shareholders be given the right to vote?

A
  1. If a corporation defaults on its dividends so many times

2. If the corporation wants to issue a new class of preferred stock equal to or senior to the existing preferred stock.

Series 7 (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions