Equity Securities

Question 1

Outstanding Stock

Answer 1

issued shares minus repurchased shares

Question 2

Treasury Stock

Answer 2

stock repurchased by firm (increases

Question 3

Issued Stock

Answer 3

Authorized and distributed to investors

Question 4

Par Value

Answer 4

assigned by firm in articles of incorporation, can be found on stock certificate, meaningless value no impact on market value

Question 5

Book Value

Answer 5

liquidation value (Assets-Liabilities)/# of outstanding shares

Question 6

Market Value

Answer 6

investor price (Supply and demand)

Question 7

Preemptive Rights

Answer 7

right to purchase enough newly issued shares to maintain proportionate ownership, if firm issuing new shares

Question 8

Limited liability

Answer 8

Protects stockholders from having to pay a corporation’s debts in bankruptcy

Question 9

Residual Rights

Answer 9

right to claim remaining assets after everyone else has collected if liquidated

Question 10

5:4 (forward or revverse split?)

Answer 10

Forward

Question 11

1:2 (forward or reverse split?)

Answer 11

Reverse

Question 12

Preferred Stock Fixed Rate of Return

Answer 12

fixed dividend (income oriented investors)

Question 13

Adjusted- Rate Preferred

Answer 13

Variable dividend rates, usually tied to other interest rates (T-Bill, money markets)

Question 14

Straight Preferred

Answer 14

missed dividends are not paid

Question 15

Cumulative Preferred

Answer 15

receives accumulated dividends from missed dates before any dividend can be distributed to common shareholders

Question 16

Convertible Preferred

Answer 16

Can exchange for common stock

Question 17

Participating Preferred

Answer 17

Offers owners share of excess profits after all dividends and interest have been paid

Question 18

Callable Preferred

Answer 18

Company can buy back at stated price after specified date

Question 19

Which type of preferred has highest stated rate of dividend? (Straight, Cum, Convert, Part., Callable)

Answer 19

Callable

Question 20

Stock Certificate

Answer 20

Shares of firm that the investor owns (includes: company name, # of shares, investor’s name, and CUSIP)

Question 21

Round Lot under $175/share

Answer 21

If # of Shares are divisible by 100

Question 22

Odd Lot under $175/share

Answer 22

1-99 shares

Question 23

Round Lot over $175

Answer 23

1 share

Question 24

CUSIP

Answer 24

security identification number

Question 25

Transfer Agent

Answer 25

ensures issued in owner’s name, canceling old certificates, maintaining records of ownership, and problems related to lost certificates

Question 26

Registrar

Answer 26

tracks outstanding shares, audits transfer agent,

Question 27

Ex- Dividend

Answer 27

stock selling ex-dividend, will not receive the next dividend check

Question 28

Ex-Date

Answer 28

2 days before Record Date

Question 29

Record Date

Answer 29

date receive dividend distribution

Question 30

Payable Date

Answer 30

3-4 weeks after record date, sends dividend checks

Question 31

Warrant

Answer 31

Long-term instrument, 5 yrs
certificate granting owner the right to purchase securities from issuer at a specified date.

Issued as bundle with other securities, as a sweetner
Detachable and trade separately from bond or prefered stock.

At issuance, Warrant’s Exercise Price set much higher than the stock’s market value

Question 32

Right (Subscription Right)

Answer 32

certificate representing short-term privilege to buy additional shares