THE STOCK MARKET Flashcards
Can participate through voting on specific decisions like board of directors
EQUITY
Does not participate
Debt
Subordinate to debt
Equity
Prioritized over equity
Debt
Least priority in terms of assets and income distribution
Equity
Claim of creditors are satisfied before distributing to shareholders
Debt
Type of Financing: Permanent
Equity
Type of Financing: Temporary
Debt
No Maturity Date
Equity
Maturity date is based on what is stipulated in contract
Debt
Higher risk; investors expect higher returns (through infinite capital appreciation)
Equity
Lesser risk; return is limited to interest stipulated in agreement
Debt
Cannot be claimed as tax-deductible expense by company
Equity
Tax-deductible expense for company
Debt
funds provided by the firm’s owners (investor or stockholder)
Equity
portion in the statement of financial position which is the residual value of the company after deducting the liabilities from the assets
Equity
the maximum amount of shares that is legally allowed to be issued
cannot be issued additional shares until it files amendment
Authorized Capital Stock
the total amount of shares held by the shareholders
Outstanding Shares
shares that are repurchase or bought back by the company from its shareholders
Treasury Shares
shares that were issued by the company, whether outstanding or treasury shares
Issued Shares
the rise in the value of an asset in relation to increase in its market price
since shares can be sold in secondary market, investors may sell shares they originally bought
Capital Appreciation
payments made by corporations to shareholders representing the earning of the company
usually paid in quarterly, and some pays semi or annually
can be in form of cash, property, or own shares
based on current performance of the business
Dividends
have distinct rights to be prioritized in terms of liquidation
Preference Shares
has fixed periodic dividend payments
Preference Shares
treated as quasi-debt where dividends associated with the shares are like interest payments on debt
Preference Shares
dividends in arrears and the current dividend should be paid to preference shareholders before paying the ordinary shareholders
Cumulative
retire or repurchase outstanding shares within a predetermined period of a time at a specified price
Callable
convert the preference shares to a stated number of ordinary shares after a certain date
Convertible
represent the true ownership of the corporation which is called the residual value to be received by the common stock shareholders after all claims of creditors and preference shareholders on the net assets are satisfied
Ordinary Shares
T/F: Dividends are guaranteed unlike preference shareholders.
FALSE, not guaranteed
T/F: Ordinary shareholders have limited liability where their obligation is up to the amount they have invested.
TRUE
T/F: High returns in terms of dividends when the company is earning.
TRUE
T/F: Two share is equivalent to one vote.
FALSE, one share only
T/F: Has pre-emptive rights where ordinary shareholders are not permitted to retain their proportionate share in the company
FALSE, it is permitted
instruments issued by companies to provide shareholders with the opportunity to preserve their fraction of corporate ownership
Stock Rights
financial instrument which permits shareholders to buy additional shares from the company in direct proportion to the shares they own
Stock Rights
long-term instruments that also allow shareholders to purchase additional shares of stock.
Warrants
offered in conjunction with fixed income securities and act as a “sweetener”, or financial enticement to purchase a bond or preferred stock
Warrants
composed of exchanges and over the counters where the shares are issued and traded publicly
Stock Market
________ where shares are purchased and sold face to face in a trading floor is called a __________
physical site, stock exchange
refers to the market wherein shares can be traded by dealers that are connected electronically by computers
over the counter market
T/F: The overall performance of stock market is measured through stock market indexes which represents the average of stock prices currently being traded.
TRUE
T/F: Investors use stock market indexes to gain some insight on how a group of stocks could have performed in the market.
TRUE
