Equity Securities; Common Stock

Question 1

COMMON STOCK

Answer 1

BASIC TYPE OF EQUITY
SHARE = UNIT OF OWNERSHIP
ONCE ISSUED, IT CAN BE BOUGHT AND SOLD AMONG PEOPLE
TO ISSUE, A COMPANY MUST HIRE AN UNDERWRITER (INVESTMENT BANKING FIRM)

Question 2

UNDERWRITER (INVESTMENT BANKING FIRM)

Answer 2

AGREES TO BUY ALL SHARES OF STOCK THAT ARE ISSUED, THEN RESELLS THEM TO THE PUBLIC

HELPS ISSUER REGISTER STOCK WITH THE SEC

Question 3

TRANSFER AGENT

Answer 3

THE BANK OR INSTITUTION THAT TRANSFERS SHARES FROM ONE OWNER TO ANOTHER

IF SOMEONE LOSES A CERTIFICATE THEY REISSUE IT

Question 4

REGISTRAR

Answer 4

RECORDS NAMES, ADDRESS, TAX ID# OF OWNERS

KEEPS TRACK OF THE NUMBER OF OUTSTANDING SHARES

Question 5

TYPES OF COMMON STOCK

Answer 5

AUTHORIZED

ISSUED

TREASURY

OUTSTANDING

Question 6

AUTHORIZED STOCK

Answer 6

SHARES AUTHORIZED TO BE ISSUED IN THE FUTURE

Question 7

ISSUED STOCK

Answer 7

SHARES ISSUED IN A PUBLIC OFFERING

Question 8

TREASURY STOCK

Answer 8

SHARES REPURCHASED BY COMPANY

Question 9

OUTSTANDING STOCK

Answer 9

SHARES AVAILABLE ON SECONDARY MARKET

EXAMPLE;

5,000,000 ISSUED SHARES
- 500,000 TREASURY SHARES
—————-
=4,500,000 OUTSTANDING SHARES

Question 10

ADVANTAGE WITH COMMON STOCK

Answer 10

UNLIMITED POTENTIAL GAIN

LIMITED LIABILITY, CAN ONLY LOSE WHAT YOU INVEST

Question 11

DISADVANTAGE WITH COMMON STOCK

Answer 11

LOWEST IN LIQUIDATION PRIORITY