Topic 7- Stock Valuation: Understanding Equity Flashcards
Stock Valuation is also known as
Equity Valuation
Equity
Equity=Stock=Ownership in a firm
Residual Claim
The right of a stockholder to the earnings and assets of company after the company has paid all prior obligations
Equity
Equity=Stock=Ownership in a Firm
Stock
Ownership in an asset such as a company; also called equity
Equity
Ownership in an asset such as a company; also called Stock
Residual Claim
the right of a stockholder to the earnings and assets of a company after the company has paid all prior obligations
Stockholders have a residual _____ claim on firm earnings and assets.
Residual-
First, stockholders have a residual claim on the earnings and the assets of the company. This means that each year after the company pays for its operations and pays its creditors, any residual or remaining earnings belong to the shareholders
A right that common stock shareholders have is the right to vote on company management (T/F)
TRUE
Another right that accompanies some types of stock is the right to vote on company management and policies in regular stockholder meetings.
Knowing about equity is only important if you want to become a Wall Street Banker (T/F)
FALSE
Equity often is a big part of individual investment portfolios. (T/F)
TRUE
Equity (usually common stock) will likely constitute a large portion of an individual’s investment portfolio and retirement fund. In order to best choose and understand the changes in individual stocks or funds, investors need to understand the sources of stock value.
Two main types of stock
common stock & preferred stock
Common Stock
A variable-return security that represents equity in a firm and confers the right to vote at shareholder meetings.
Preferred Stock
A hybrid security that has no fixed maturity, has fixed payments, and does not confer voting rights on bondholders.
Variable-Return Securities
(broader term for equity in general)
Securities that provide investors with a rate of return determined by market forces and management discretion
What was the new countries first stock market called?
The Buttonwood Agreement (eventually became the New York Stock Exchange)
Dividends in Arrears
A characteristic of preferred stock where common stock dividends cannot be paid until the preferred dividends are paid.
Angel investors
an individual who invests his or her own money in start-up firms in exchange for equity in those firms
Venture capitalists
A firm that invests money in start-up firms with high growth potential in exchange for equity in those firms.
Accredited investors
A wealthy investor who meets the actual net worth and income qualifications set by the SEC and its given special status conferring additional investment opportunities
Which of the following securities represents ownership in the firm?
Preferred stock
