Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

SLAMCI Reviewer > Module 1: Fundamentals of Equity Securities > Flashcards

Module 1: Fundamentals of Equity Securities Flashcards

1
Q

The simplest and most common form of business ownership, _________ is a business owned and run by someone for their own benefit. The business’ existence is entirely dependent on the owner’s decisions, so when the owner dies, so does the business.

A

Sole Proprietorship

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

________ both owners invest their money, property, labor, etc. to the business and are both 100% liable for business debts. ________ do not require a formal agreement—partnerships can be verbal or even implied between the two business owners.

A

General partnerships

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

_________ require a formal agreement between the partners. They must also file a certificate of partnership with the state. _________ allow partners to limit their own liability for business debts according to their portion of ownership or investment.

A

Limited partnerships

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

_________ are, for tax purposes, separate entities and are considered a juridical person created by operation of law and registered with the Securities and Exchange Commission (SEC)

  • Governed by the Corporation Code
  • Life span of fifty (50) years
  • Must file with the SEC a charter or Articles of Incorporation
A

Corporations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

_________ are the individual persons originally forming the corporation and are the signatories of the Articles of Incorporation (AOI)

  • Must be a natural persons of legal age
  • Must be at least 5 but not more than 15
  • Must be a subscriber of at least 1 share
  • Majority should be residents of the Philippines
  • Can be foreigners provided that all requirements are complied with, and business activity of the corporation is not fully reserved for Filipino ownership.
A

Incorporators

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

_________ are set of formal documents filed with a government body to legally document the creation of a corporation. Includes:

  1. Name of corporation
  2. Location of corporate headquarters
  3. Names and addresses of incorporators – cannot be amended
  4. Purposes and nature of corporation
  5. Authorized capital stock
  6. Names and addresses of BOD
  7. Rights of stockholder
A

Articles of Incorporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

A corporation with authorized capital stock divided into shares of stock either with or without par value. A _________ is engaged in income generating activities and is authorized to declare dividends.

A

Stock Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

A corporation with no authorized capital stock. It is organized for charitable, religious, educational, professional, cultural, fraternal. literary, scientific, social service, or similar purposes, like trade, industry, agricultural and like chambers or any combinations thereof.

A

Non-stock corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Defectively created but there is an exercise of corporate rights and franchise resulting from an attempt in good faith to incorporate.

A

De Facto Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

All the corporation’s issued stocks of all classes shall be held of record by not more than a specified number of persons not exceeding 20.

  • All the issued stocks of all classes shall be subject to one or more specified restrictions on transfer permitted by the corporation code
  • Not listed on any stock exchange or make any public offering of any of its stock of any class
A

Closed Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q
  • Listed on an exchange
  • With assets in excess of PHP 50,000,000.00
  • Has at least 200 shareholders which are holding at least 100 shares of a class of its equity securities.
A

Public/Listed Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

The “separate and distinct personality” of a corporation from that of the stockholders is a basic attribute attached to a corporation which gives rise to following fundamental principles in corporation law:

  • Stockholders/members of a corporation are not the same as the corporation itself
  • The property belonging to a corporation cannot be attached nor held answerable for the debt of the stockholders
  • Personal transactions, obligations, and liabilities of a stockholder should not in any way affect the operations of the corporation
A

Doctrine of Corporate Entity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

The principle on separate identity of a corporation from its stockholders may be disregarded under the following conditions:

  • Used to defeat public convenience
  • Justify wrong
  • Protect or cover fraud
  • Defend crime or work an injustice
A

Doctrine of Piercing the Corporate Veil

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

A corporation has a continuity of corporate life during its term of existence stated in the articles of incorporation

A

Right of Succession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Corporations under the Corporation Code possessing or exercising any corporate powers beyond the Code

A

Ultra Vires Acts of a Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Corporations under the Corporation Code possessing or exercising any corporate powers within the Code

A

Intra Vires Acts of a Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

When a director acquires for himself a business opportunity which should belong to the corporation, he must account for all such profits derived by him from the said business opportunity by refunding the profits to the corporation

A

Doctrine of Corporate Opportunity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

The capital stock and assets of the corporation are held in trust for the creditors. Accordingly, there shall be no distribution of assets to shareholders until the claims of creditors have been paid

A

Trust Fund Doctrine

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

The maximum amount of capital stock that the corporation has the power to issue.

Classification of Shares of Stock in Corporate books

A

Authorized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Capital stock that has been sold to shareholders.

Classification of Shares of Stock in Corporate books

A

Issued

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Issued capital stock that has been subsequently reacquired by the corporation.

Classification of Shares of Stock in Corporate books

A

Treasury Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Issued capital stock that is held by shareholders. This therefore represents the total issued capital stock less any treasury stock.

Classification of Shares of Stock in Corporate books

A

Outstanding

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

An arbitrary value given to the stock at the time of issuance and is used to record the value of shares on the books of the corporation.

Valuation of Shares of stock

A

Par Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

The value at which no-par stock is entered on the corporate books.

Valuation of Shares of stock

A

Stated Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

The tangible net asset value per share. If the corporation were to be liquidated, this would be the approximate amount that the stockholders would receive for each share he owns.

Valuation of Shares of stock

A

Book Value

24
Q

The price at which someone is willing to pay for each share of stock.

Valuation of Shares of stock

A

Market Value

25
Q

The ordinary stock of a corporation which entitles the holder to a pro rata division of the dividends, without any preference or advantage over any other stockholders

A

Common Stock

26
Q

One which entitles the holder to certain preferences over other shareholders.

  • Preferred stock as to asset, Preferred as to dividends.
A

Preferred Stock

27
Q

One the nominal value of which appears on the articles of incorporation and on the stock certificate.

Common Stock

A

PAR VALUE

28
Q

One without any nominal or par value appearing in the articles of incorporation or on the stock certificate.

Preferred Stock

A

NO PAR VALUE

29
Q

Those entitled to vote in the meetings of the corporation. Example – mergers, increase in Authorized Capital Stock, Remuneration of Board of Directors.

Common Stock

A

VOTING SHARES

30
Q

This is the right of current stockholders to maintain their proportionate share in the company by giving them the first option to purchase any additional shares that the corporation may issue. A common shareholder receives one right for each share owned.

The actual offering will dictate the number of rights needed to purchase a new share, the purchase price, the expiration date for subscribing, and the date the new stock will be issued.

A

Preemptive Right

31
Q

For listed stocks, these dates are set as the 3rd trading day preceding the record date.

A

Ex-Dividend and Ex-Rights Dates

32
Q

_________ is so called because it is senior to or has preference over common stock as to dividends and claim on the assets of the corporation in the event of liquidation. The dividend is set at a fixed rate and unless otherwise specified, the corporation need not pay the dividend if it is not earned, or if the Board of Directors does not elect to pay it.

A

Preferred Stock

33
Q

They are shares which may be purchased by the corporation from the holders of such shares upon the expiration of a fixed period.

A

Callable Preferred (Redeemable Shares)

34
Q

They are shares of stock which have been issued and fully paid for, but subsequently reacquired by the issuing corporation through purchase, redemption, donation or some other lawful means.

A

Treasury Shares

35
Q

The Board of Directors may increase the corporation’s authorized capital with the approval of the stockholders and the SEC

A

Capital Stock

36
Q

_________ are basically stocks that offered to the public far greater than their true value. A stock representing ownership in a corporation that is worth less than the actual invested capital, resulting in problems of low liquidity, inadequate return on investment and low market value. It is accomplished by overstating the firm’s book value.

A

Watered Shares

37
Q

A _______ is a corporate action that increases the number of shares in a company. In effect, par/price is decreased per share.

A

Stock Splits

38
Q

Another way for Investors to profit from equity Investments is through _______.

_______ is simply the difference between the proceeds received from the sale of a security and the original purchase cost of such security.

A

Capital Gains

39
Q

Refers to the total shares of stock issued to subscribers or stockholders whether fully or partially paid.

A

Outstanding Capital Stock

40
Q

______ is a union whereby one or more existing corporations are absorbed by another corporation which survives and continues the combined business.

The surviving corporation acquires all the assets, liabilities, and capital stock of all constituent corporations

No new corporation is created

All of the constituent corporations involved in the merger are dissolved except one

A

Merger

41
Q

________ is the union of two or more existing corporations to form a new corporation called the Consolidated Corporation

All assets, liabilities and capital stock of all consolidated corporations are transferred to the new corporation.

A single new corporation emerges

All consolidated corporations are dissolved without exception

A

Consolidation

42
Q

When a corporation earns profit over and above the amount of its capital, the stockholders are entitled to have a share in such profit in proportion to their shareholdings

A

Dividends

43
Q

The accumulated profits realized out of normal and continuous operations of the business.

Refers to the percentage of net earnings not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt (ie. Expansion, possible future loss, loan agreement, etc.)

A

Retained earnings

44
Q

Dividend Features

Cumulative - Entitle the holder thereof to payment of current dividends as well as dividends in arrears.

Non-cumulative - Entitle the holder thereof only to the payment of current and not past dividends.

Participating Preferred - Entitle the holder thereof to participate with the holders of common shares after their preferred right has been satisfied

Non-Participating Preferred - Entitle the holder thereof to payment of the stipulated preferred dividends and no more.

Cumulative-participating - Entitle the holder thereof to payment of dividends in arrears and also, after receiving his preferred share of dividends, to participate with the holders of common stock in the remaining profits.

A

Dividend Features

Cumulative - Entitle the holder thereof to payment of current dividends as well as dividends in arrears.

Non-cumulative - Entitle the holder thereof only to the payment of current and not past dividends.

Participating Preferred - Entitle the holder thereof to participate with the holders of common shares after their preferred right has been satisfied

Non-Participating Preferred - Entitle the holder thereof to payment of the stipulated preferred dividends and no more.

Cumulative-participating - Entitle the holder thereof to payment of dividends in arrears and also, after receiving his preferred share of dividends, to participate with the holders of common stock in the remaining profits.

45
Q

TYPES OF DIVIDEND

Cash Dividend
* Paid to stockholders in cash

Stock Dividend
* Stockholders are given additional shares of the same company

Property Dividend
* Rarely done
* Dividends are paid out in the form of assets
* Assets can be shares of stock of another corporation owned by the company

A

TYPES OF DIVIDEND

Cash Dividend
* Paid to stockholders in cash

Stock Dividend
* Stockholders are given additional shares of the same company

Property Dividend
* Rarely done
* Dividends are paid out in the form of assets
* Assets can be shares of stock of another corporation owned by the company

46
Q

Declaration of Dividends (D-E-R-P)

  1. Declaration date - the date when the Board of Directors declared the dividend.
  2. Ex-dividend date - usually 2-3 business days prior to the record date.
  3. Record date - dividends are to be paid to shareholders of record as of a specified date.
  4. Payment date - the date when the checks are mailed out.
A

Declaration of Dividends (D-E-R-P)

  1. Declaration date - the date when the Board of Directors declared the dividend.
  2. Ex-dividend date - usually 2-3 business days prior to the record date.
  3. Record date - dividends are to be paid to shareholders of record as of a specified date.
  4. Payment date - the date when the checks are mailed out.
47
Q

Securities shall not be sold or offered for sale or distribution with the Philippines without a registration statement duly filed with and approved by the Commission.

Prior to such sale, information of the securities, in such form and with such substance as the Commission may prescribe, shall be made available to each prospective purchaser.

A

Securities Regulation Code (R.A. 8799) - Section 8

48
Q

Section 10. Exempt Transactions

The requirement of registration under Subsection 8.1 shall not apply to the sale of any security in any of the following transactions:
The sale of securities to any number of the following qualified buyers:

  • Bank;
  • Registered investment House;
  • Insurance company
  • Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or managed by a bank or other persons authorized by the Bangko Sentral ng Pilipinas to engage in trust functions;
  • Investment company; or
  • Such other persons as the Commission may by rule determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amount of assets under management.
A

Section 10. Exempt Transactions

The requirement of registration under Subsection 8.1 shall not apply to the sale of any security in any of the following transactions:
The sale of securities to any number of the following qualified buyers:

  • Bank;
  • Registered investment House;
  • Insurance company
  • Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or managed by a bank or other persons authorized by the Bangko Sentral ng Pilipinas to engage in trust functions;
  • Investment company; or
  • Such other persons as the Commission may by rule determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amount of assets under management.
49
Q

Any person who acts as an intermediary in making deliveries upon payment to effect settlement in securities transactions.

A

Clearing Agency

50
Q

Any person employed full time by the Broker Dealer whose responsibilities include internal control supervision of other employees, agents, salesmen, officers, directors, clerks and stockholders of such Broker Dealer for compliance with the SRC and its IRR.

A

Associated Person

51
Q

agent or employee of an Investment Company Adviser/Fund Manager/Distributor who solicits or procures investments or applications for investment in an Investment Company/Mutual Fund Company

A

Certified Investment Solicitor

52
Q

________________ requirement refers to a rule that establishes minimum regulatory capital for financial institutions. Risk-based capital requirements exist to protect financial firms, their investors, their clients and the economy as a whole. These requirements ensure that each financial institution has enough capital on hand to sustain operating losses while maintaining a safe and efficient market.

Consideration:
* Size
* Complexity
* Business Risk

A

Risk Based Capital Adequacy (RBCA)

53
Q

These are similar to rights except that the corporation does not issue them specifically to a stockholder, but sells them to generate revenue.

Key points to remember:

(1) _______ are longer term (several years to perpetual)
(2) _______ require delivery of the warrant and a fixed subscription price to purchase a specified number of common shares.
(3) At Issue, the subscription price is always higher than the market price. However, they do have a market value based on what investors believe are the prospects of the common stock rising in market value over the lifetime of the _______.

A

Warrants

54
Q

A person or entity engaged in buying and selling of government securities such as Treasury bills, Treasury notes, and Treasury bonds.

A

Government Securities Eligible Dealer (GSED)

55
Q

A corporation which engages in the underwriting of securities of another person, including securities of the government or its instrumentalities.

A

Investment House or Underwriter of Securities

56
Q

To have a system designed to achieve compliance with the SRC, ICA and their IRR, SEC Memorandum Circulars, Corporate Governance Rules, Anti-Money Laundering Act, Data Privacy Act; Oversee the compliance with the requirements of the Commission relative to the closure of the business of an Investment Company and Fund Manager.

A

Compliance Officer

57
Q

Some investors purchase common and preferred stocks as a source of current income. For these investors, _________ is an important measure of return on investment.

_________ is computed by dividing the annual dividend by the current market price of the security.

A

Dividend Yield

58
Q

Another way for Investors to profit from equity Investments is through _________ .

_________ is simply the difference between the proceeds received from the sale of a security and the original purchase cost of such security.

A

Capital Gains

SLAMCI Reviewer (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions