Equity Securities Quiz

Question 1

An American investor that would like to purchase the shares of a foreign company’s stock with the same regulatory protection given a domestic security could

Answer 1

Purchase American depositary receipts on the foreign company

Question 2

A corporation has issued 10 million shares of common stock that are currently trading for $5 per share. There are 2 million shares of treasury stock. What is the total value of outstanding common stock shares?

Answer 2

$40 million

Question 3

A shareholder owns 200 shares of stock with cumulative voting rights. If there are five vacancies being voted upon what is the maximum number of votes the shareholder may cast for any one vacancy?

Answer 3

1,000

Question 4

The equation for outstanding stock is

Answer 4

Issued shares minus treasury stock

Question 5

Which type of preferred stock would potentially pay dividends in addition to the stated dividend of a company has excess earnings?

Answer 5

Participating preferred

Question 6

The term for active stock that represents the number of shares owned by the public is

Answer 6

Outstanding stock

Question 7

If a corporation wishes to retain the right to buy back their preferred stock at a future date they will issue which type of stock?

Answer 7

Callable preferred

Question 8

Which of the following is true of preferred stock?

Answer 8

It’s gives its owner the right to be paid dividends before common stockholders

Question 9

All of the following are true concerning preferred stock?

Answer 9

Preferred stock dividends are always paid prior to common stock dividend being paid
Bond interest payments are considered senior to preferred stock dividend payments
Preferred stock certificates can be callable for a period of time throughout their ownership

Question 10

Jack received a notification that Wee R Dun inc has declared bankruptcy and is in Chapter 11 at this time. Jack owns 1000 share of preferred stock in the company. On the letter jack received the company stated it will be liquidating all company assets and that investors will be paid according to the seniority of their claim.

Answer 10

The order of liquidation will be bonds preferred stock and then commons stock of assets are available

Question 11

Which of the following best defines treasury stock?

Answer 11

Issued shares minus outstanding shares

Question 12

Corporations generally issue warrants in connection with which if the following?

Answer 12

Bonds in order to secure a lower interest rate

Question 13

A company has been in arrears on dividend payments for 3 quarters. Which of the following must get paid before common shareholders can receive a dividend?

Answer 13

Callable preferred convertible preferred and cumulative preferred

Question 14

ADRs are used to facilitate which of the following?

Answer 14

Domestic trading of foreign securities

Question 15

If a US corporation was looking for maximum tax relief which of the following investments should the registered representative recommend?

Answer 15

Common stock issued by another US corporation

Question 16

If a company decides to liquidate its assets which of the following is correct regarding the order of the liquidation?

Answer 16

Bond holders are paid first then preferred stockholders and finally common stockholders

Question 17

All of the following apply to preferred stock?

Answer 17

Preferred shares are senior to common shares
Preferred shares receive dividends prior to common stock when dividends are declared
Preferred stock is often convertible to common shares

Question 18

If a common stockholder received a dividend this year which of the following would also be paid a dividend?

Answer 18

Cumulative preferred
Convertible preferred
Participating preferred

Question 19

Which of the following is true regarding warrants?

Answer 19

Warrants can trade separately from the common stock
Warrants have a longer life than rights
warrants typically have a long life perhaps even the subscription price is above the stocks current market value

Question 20

Warrants are issued along with a bond offering. The principal reason is

Answer 20

To improve marketability

Question 21

Tim is an investor in Ajax corporation a publicly traded corporation. As an owner of common stock atom has the right to

Answer 21

Inspect the financial market of Ajax corporation

Question 22

James owns 300 shares of LYPA stock which is currently trading at $60 per share. The company announces a 1:3 reverse split. what will James own after the split?

Answer 22

100 shares at $180 per share

Question 23

Which of the following statements about conventional convertible securities financing is true?

Answer 23

The conversion formula is usually fixed

Question 24

XYZ corporation has been experiencing some financial difficulty in the last few years. However they are confident that the company will be profitable again in the next few years. XYZ would like to borrow some money from investors by sorting issuing bonds but they are concerned that the interest rate they will have to pay will be too high based on their most recent financial report. If XYZ would like to reduce the interest rate on the bonds and increase the marketability of their bonds which of the following could XYZ do?

Answer 24

Attach warrants to the bond

Question 25

Joe received a certificate from a commercial bank that represents his interest in shares of a foreign company on a foreign exchange. What is this certificate called?

Answer 25

American depositary receipt

Question 26

The equation for outstanding stock is

Answer 26

Issued shares minus treasury stock

Question 27

Shares of stock that have actually been sold to the public are known as

Answer 27

Issued stock

Question 28

ABC corporation shares are currently trading at $50 per share. ABC is about to performa two for one stock split. After the split an investor who currently owns 100 shares of ABC stock would own.

Answer 28

200 shares at $25

Question 29

Once the dividend is declared by a corporation which of following will occur?

Answer 29

Retained earnings will decrease

Question 30

ABC corporation originally authorized 1 million shares and has issued 600,000 shares. ABC corporation has decided to buy 50,000 of their shares back and place them in treasury. How many shares are currently outstanding?

Answer 30

550,000 shares

Question 31

The amount of stock that a corporation is allowed to issue is called

Answer 31

Authorized stock

Question 32

Individuals holding shares of common stock have the right to participate in the underlying corporations earnings. Which of the following statements is true?

Answer 32

Lower earnings yields lower dividends

Question 33

In the event of a company’s liquidation who has the sensor claim over the assets?

Answer 33

The bond holders

Question 34

Which type of preferred stock may be exchanged for shares of common stock?

Answer 34

Convertible preferred

Question 35

The board of directors declares a dividend on Wednesday Oct 5 to shareholders of record as of Thursday October 20. If an investor purchased the stock on Thursday Oct 20 in a cash transaction which of the following statements would be true?

Answer 35

The investor would be entitled to receive the dividend because stock was purchased using cash settlement

Question 36

An American corporation receiving which of the following is entitled to a 50% exclusion?

Answer 36

Dividends from common and preferred stock of another domestic corporation

Question 37

The ex-dividend date is

Answer 37

The first date on which the stock trades without the dividend

Question 38

When current stockholders have preemptive rights they are entitled to

Answer 38

The opportunity to purchase new shares before the shares are offered to the public

Question 39

Preemptive rights allow a stockholder to

Answer 39

Maintain proportionate interest in the company

Question 40

Which of the following has the greatest risk in the event of a company liquidation?

Answer 40

Common stock

Question 41

A convertible preferred is convertible at $20 per share. The stock is currently selling on the market at $120. Which of the following are correct statements is correct?

Answer 41

The common stock must be selling at $24 to be at a parity with the preferred stock

Question 42

Which of the following is true about treasury stock?

Answer 42

It has been issued and repurchased by the company