One Flashcards
What are retained earnings?
Profits retained by a company are often used to expand. and reinforce business operations.
Earnings not paid to investors by dividends
Three things that impact the market price of common stock
- Demand for stock in the market
- Future expectations of the company
- Future dividend payments
Three ways profits are utilized?
- Retain profit
- Pay profit to shareholders
- Both
Four actions BODs can take to guide the company?
- Hiring and/or firing senior-level employees
- Managing senior level employee compensation
- Creating and implementing general company policies
- Approving dividend payouts to investors
What positions do common stockholders have the right to vote for?
Only BOD
What are two ongoing reports. companies must file?
- 10 - K annual audited financial report
- 10-Q unaudited financial report
What are 5 types of securities?
- stocks
- bonds
- mutual funds
- options
- ETFs
What is a preemptive right?
The ability to buy newly-issued shares before they’re publicly offered
What do rights allow investors to do?
Purchase new shares at a lower price than its market value
What are the three paths an investor can take with rights?
- Exercise
- Sell
- Expire
What is a benefit to a company of offering rights?
They don’t need to hire an underwriter
Three paths investor can take with warrants?
- Exercise
- Trade
- Expire
Four characteristics of Rights
- Right to purchase new shares at fixed price
- Intrinsic value at issuance
- Little time value
- Short term
Four characteristics of warrants?
- Right to purchase new shares at fixed price
- No intrinsic value at issuance
- Long term
- Time value exists
What is a bond?
A. bond is a debt security that allows investors to loan funds to organizations in return for interest
What must companies do before performing dilutive actions?
Get majority of shareholder approval
Why is issuing convertible securities a dilutive action?
Because you are giving new common shares to only some stockholders
What are three types of dilutive actions?
- Private placements
- Issuing Convertible stock
- Options to employees
What type of investor are pre-emptive rights issued to?
Common stockholders
When would a company do a forward stock split?
When they feel their stock price is too expensive for the average investor
What is a legal method for issuers to manipulate stock prices?
Stock splits
What requires approval from the BOD but not shareholders?
Dividends of any form