Financial Management -- Equity and Dividends

Question 1

Private Equity

Answer 1

Ownership assets that aren’t publicly traded

Question 2

Public Equity

Answer 2

Common stock that are publicly traded after a public offering through an “initial public offering” (IPO)

Question 3

Underwriter

Answer 3

A specialized type of bank that buys the shares from the company preparing an IPO and sells them to investors

Question 4

Prospectus

Answer 4

An SEC-required document that discloses required information about the company, its finances, and its plans for using the money it hopes to raise

Question 5

The Shareholders’ Equity section of a firm’s Balance Sheet typically contains these 2 elements:

Answer 5

1. Share Capital, including:
   
   • Preferred Stock
   • Common Stock
2. Retained Earnings (which consists of the firms cumulative net income less any dividends paid out – aka the portion of the firm’s earnings which are reinvested/retained)

Question 6

Price/Earnings Ratio

Answer 6

The market value per share dividend by the earnings per share

found by dividing the stock’s closing price by the earnings per share for the latest four quarters

Question 7

Stock Split

Answer 7

The act of dividing a share into two or more new shares and reducing the market value by the same ratio

Question 8

Debt to Equity ratio (DE) equation:

Answer 8

Book Value of Equity

Question 9

Earnings per Share ratio (EPS) equation:

Answer 9

# Shares Outstanding

Question 10

Price to Earnings per Share ratio (P/E) equation:

Answer 10

Earnings per Share

Question 11

Dividend Yield equation:

Answer 11

Market Price of Stock per Share

Question 12

Net Income Equation:

Answer 12

Sales - Expenses