Equities Flashcards
Equity
can defined as ownership
to raise capital you can: (2 things)
borrow money
issue common shares
benefits of common share ownership
the potential to earn unlimited dividends
potential for capital appreciation
favourable tax treatment (dividend tax credit)
quarterly and annual reports
right to examine certain company documents
right to attend shareholder meetings, ask q’s, and vote
limited liability
risks of common share ownership
no obligation to pay dividends
very little influence on day-to-day operations of the company
common share prices can be volatile
in event of liquidation, common gets paid last
3 choices to declaring a dividend
1) retain the capital
2) share the earnings
3) any combo of #1 or #2
stock dividends
companies issue you stock in lieu of cash
application on the exam
a cash dividend WILL impact the company’s bank account. in turn, it will decrease the companies working capital.
application on the exam
a stock dividend will NOT impact the companies bank account or its working capital b/c it is not paid in cash.
working capital
current assets minus current liabilities
Market capitalization
= # of shares outstanding * share price
Value Weighted (Market-Weighted) Index
the overall index is based on the market capitalization of each listed stock
Price-Weighted Stock Market Average
it’s only the price (and not the # of shares as well) that determines how much of the overall value comes from each stock.
Non-Callable
preferred shares do not have a maturity date; therefore do not have a call feature (or the call date has come and gave without the share being called), it freezes the capital structure of the firm forever.
voting privileges
preferred share usually non-voting
International Indexes
Nikkei: Japan Dax: Germany CAC: France SMI: Switzerland FTSE: United Kingdom
