Financing the Corporation

Question 1

Types of Securites

Answer 1

1. Debt securites
2. Equity securites

Question 2

Types of debt securites

Answer 2

1. Debentures
   
   1. Unsecured obligations of the corp
2. Bonds
   
   1. Secured by mortgage or security interest
3. Notes
   
   1. Short-term debt securites

Question 3

Equity Security

Answer 3

Represents the capital of the corporation which is at risk in the business

Question 4

Common stock

Answer 4

• Represents the residual interest
• Holders of common stock have no right to a dividend, unless declared by the directors after payment of preferred stock dividends

Question 5

Preferred Stock

Answer 5

• Preference
  
  • Liquidation (paid the preference amont before common stock)
  • Dividends (have the right to dividens before common stock

Question 6

Cumulative Dividens

Answer 6

If board doesn’t pay dividends in a given year, it just skips and the value grows

If board decides to pay dividends, they must pay out the years they skipped

Question 7

Restrictions on Transferrability

Answer 7

BCL requires that any such restriction be noted conspicuously on the certificate in order to be enforceable