SIE chapter 2 Flashcards
common stockholders have the right to
vote for corporate directors
Proxy
an absentee ballot made available for shareholders who want to vote but can’t attend the meeting
preempt means
to put oneself in front of another
growth(capital gains )
an increase in the market price of securities is capital appreciation
income
this is in relation to dividends which can be a significant source of income for invests
limited liability
in the event of the corporation bankruptcy, personal assets are not at risk
market risk
the chance that a stock will decline in price
decreased or no dividend income
a risk of stock ownership is that dividend income could decrease or ceasing entirely if the company loses money
low priority at dissolution
if a company enters bankruptcy, the holders of its bonds and preferred stock have priority over common stockholders
in owning common equity
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
bankruptcy
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
reorganization vs liquidation
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
in corporate liquidation priority who is paid last
common shareholders
preferred shareholders generally have
no voting rights nor do they have preemptive rights
all corporations issue____ but not all issue ___
common stock
preferred stock
dividend preference
when the board of directors declares dividends, owners of preferred shares must be paid prior to any payment to common shareholders
priority at dissolution over common stock
if a corporation goes bankrupt, preferred stockholders have a priority over common stockholders on the assets remaining after creditors have been paid
(risk of owning preferred stock) purchase power risk
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
(risk of owning preferred stock) interest rate sensitivity
when interest rates rise, the value of preferred shares declines
(risk of owning preferred stock) decreased or no dividend income
possibility of decreased or no dividend income
(risk of owning preferred stock) priority at dissolution
even though preferred stock holders have priority over common stockholders, they are still behind creditors
straight(non cumulative)
has no special features beyond the states dividend payment, missed dividends are not paid to the holder
cumulative preferred stock
accrues payments due to its shareholders in the event dividends are reduced or suspended.
callable preferred
(redeemable) corporations issue this which a company can buy back from investors at a stated price at a specified date.
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
adjustable rate preferred
some preferred stocks are issued with adjustable dividend rates
participating preferred
offers its owners a share of corporate profits that remain after all dividends and interest due other securities are paid
control securities
those owned by directors, officers, or persons who own or control 10% of more of the issuers voting stock
