SIE chapter 2 Flashcards

1
Q

common stockholders have the right to

A

vote for corporate directors

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2
Q

Proxy

A

an absentee ballot made available for shareholders who want to vote but can’t attend the meeting

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3
Q

preempt means

A

to put oneself in front of another

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4
Q

growth(capital gains )

A

an increase in the market price of securities is capital appreciation

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5
Q

income

A

this is in relation to dividends which can be a significant source of income for invests

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6
Q

limited liability

A

in the event of the corporation bankruptcy, personal assets are not at risk

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7
Q

market risk

A

the chance that a stock will decline in price

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8
Q

decreased or no dividend income

A

a risk of stock ownership is that dividend income could decrease or ceasing entirely if the company loses money

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9
Q

low priority at dissolution

A

if a company enters bankruptcy, the holders of its bonds and preferred stock have priority over common stockholders

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10
Q

in owning common equity

A

the investor stands to lose current income through dividend reduction or suspension, as well as capital loss, should the market price decline. In return however, the shareholder has limited liability; that is the liability is limited to the amount invested

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11
Q

bankruptcy

A

general term for a federal court procedure that allows both individuals and businesses to get relief from their debts or make a plan to repay their creditors

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12
Q

reorganization vs liquidation

A

liquidation would be to liquidate all assets for repayment. Reorganization allows to to retain property and continue doing business and stick to a repayment plan for some time frame

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13
Q

in corporate liquidation priority who is paid last

A

common shareholders

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14
Q

preferred shareholders generally have

A

no voting rights nor do they have preemptive rights

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15
Q

all corporations issue____ but not all issue ___

A

common stock

preferred stock

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16
Q

dividend preference

A

when the board of directors declares dividends, owners of preferred shares must be paid prior to any payment to common shareholders

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17
Q

priority at dissolution over common stock

A

if a corporation goes bankrupt, preferred stockholders have a priority over common stockholders on the assets remaining after creditors have been paid

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18
Q

(risk of owning preferred stock) purchase power risk

A

the risk that inflation will make it so that your money will not be able to buy as much in the future as it does today

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19
Q

(risk of owning preferred stock) interest rate sensitivity

A

when interest rates rise, the value of preferred shares declines

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20
Q

(risk of owning preferred stock) decreased or no dividend income

A

possibility of decreased or no dividend income

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21
Q

(risk of owning preferred stock) priority at dissolution

A

even though preferred stock holders have priority over common stockholders, they are still behind creditors

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22
Q

straight(non cumulative)

A

has no special features beyond the states dividend payment, missed dividends are not paid to the holder

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23
Q

cumulative preferred stock

A

accrues payments due to its shareholders in the event dividends are reduced or suspended.

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24
Q

callable preferred

A

(redeemable) corporations issue this which a company can buy back from investors at a stated price at a specified date.

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25
convertible preferred
a preferred stock is convertible if the owner can exchange shares for a fixed number of shares of the issuing corporations common stock
26
adjustable rate preferred
some preferred stocks are issued with adjustable dividend rates
27
participating preferred
offers its owners a share of corporate profits that remain after all dividends and interest due other securities are paid
28
control securities
those owned by directors, officers, or persons who own or control 10% of more of the issuers voting stock
29
restricted securities
those acquired through some means other than a registered public offering.
30
penny stocks
unlisted security trading for less than $5 per share
31
the provisions of the penny stock rules apply on to
solicited transactions like those that might occur during a cold call. Unsolicited transactions are exempt.
32
established customer
has held an account with a broker dealer for at least one year (and has made a deposit of funds or securities) has made at least 3 penny stock purchases of different issuers on different days
33
debt capital(bonds) represents
money borrowed by corporations, the federal gov, or local governments from investors
34
term bond
principal of whole issue matures at once
35
serial bond issue
schedules portions of the principal to mature at intervals over a period of years until the entire balance has been repaid
36
balloon
issuer repays part of the bonds principal before final maturity but pays off the major portion of the bond at maturity
37
coupon
represents the interest rate the issuer has agreed to pay the investor
38
interest is generally paid on a
semi-annual basis
39
a bonds yield expresses
the cash interest payments in relation to the bonds balue
40
yield to maturity
reflects the annualized return of the bond if held to maturity
41
call feature
allowed the issuer to call in a bond before maturity
42
put feature
an investor can put the back to the issuer before it matures
43
convertible
converting bond into shares of common stock
44
t bills
short term debt obligations of us government (1 year)
45
treasury notes
direct debt obligations of us government (2-10 years)
46
treasury bonds
direct debt obligations of us government(10-30 years)
47
treasury receipts or treasury stripes backed by us gov
stripes are and receipts are not
48
the settlement of agency issued securities occurs regular way-
two business days | generally known as asset-backed or mortgage backed securites
49
farm credit system
national network of lending institutions that provides agricultural financing and debt
50
government national mortgage association
governmental owned corporation that supports the department of housing and urban development
51
federal home mortgage corp
public corporation created to promote the development of a nationwide secondary maket in mortgages by buying residential mortgages from financial institutions and packagings them into mortgage backed securities for sale to investors
52
federal national mortgage association
publicaly held corporation that provides mortgage capital
53
mortgage bond
borrowing money backed by real estate and physical assets of the corporation
54
equipment trust certificates
used by railroads and other transportation companies to financial their equipment
55
collateral trust bonds
when a corporation wants to borrow money and deposits its own securities into a trust to use as collateral
56
debentures
debt obligation of the corporation backed only by its word and general creditworthiness
57
debentures can be safer than secured bonds of less creditworthy companies why
because the credit standing can be so good for issuers
58
guaranteed bonds
backed by a company other than the issuing corporation such as a parent company
59
don't be fooled by the word guaranteed when it comes to guaranteed bonds because
these are unsecured debt securities
60
income bonds used when
used when a company is reorganizing and coming out of bankruptcy not suitable for investor seeking income
61
municipal securities
ether issued by state or local governments, us territories , authorities, and special districts
62
General obligation bonds (full faith/credit issues)
municipal bonds issued for capital improvements that benefit the entire community
63
Ad valorem
a tax whose amount is based on the value of a transaction or of property.
64
revenue bonds
used to finance any municipal facility that generates sufficent income
65
municipal anticipation notes
short term securities that generates funds for a municipality that expects other revenues soon
66
build america bonds
municipal issue thats taxable
67
local government investment pools
states establish these to provide other government entitities with short term investment vehicle to invest funds
68
achieve a better life experience accounts
tax advantaged savings accounts for individuals with disabilities and their families
69
capital market
serves as a source of intermiediate term to long term fiancing usually in the form of equity or debt securities with maturities of more than one year
70
money market
provides very short term funds to corporations, banks, BDS, government municipalites, and us fed gov
71
bankers acceptance
postdated check or line of credit