L06 - Stocks and Legal Funding

Question 1

Stock

Answer 1

An example of an ownership investment

Question 2

Common Stock

Answer 2

Ownership in a corporation

Question 3

Common v Preferred Stock

Answer 3

Pref….

• Greater claim to assets and earnings
• – Dividends paid first
• – Insolvency: Pref stock holders paid first
• Better dividends than common
• – Regular and steady dividends

Common
- Opposite of all that and no guarantee on dividends

Question 4

Employee Stock options

Answer 4

States the three following things…

1) Number of shares being offered for purchase
2) Cost per share
3) When employee can exercise option to buy

Question 5

Vesting Period

Answer 5

Time employee must wait to exercise ESOs

Question 6

Strike Price

Answer 6

Cost per share for ESO

Question 7

Underwater

Answer 7

Strike price > stock price

at time employee is allowed to exercise option

Question 8

Bonds

Answer 8

Form of long term debt in which issuing corp promises to pay the principle amount at a specific date
Low risk, high security (safety)

Question 9

Getting startup started

Answer 9

1) Basement
2) Hub
3) Incubator
4) Accelerator

Question 10

LLC

Answer 10

Limited Liability Corporation

• Simple
• Does not issue stock
• Shields personal assets
• Separation of business and personal finances
• Preferred by outside investors

Question 11

S v C Corp

Answer 11

S Corp (Pass through entity)

• Business itself isnt taxed
• Income reported on owners personal tax returns

C Corp (not pass through)
- Income taxed at corp level

Question 12

DOW Jones

Answer 12

Price weighted average of 30 significant stocks traded on the NYSE and the Nasdaq