Unit 1 Topic 7 Flashcards
If a company distributes 25% of its profits what would the dividend cover be? A 4 B 8 C 10 D 25
A 4
Which one of the following is NOT a feature of ordinary shares? The
shareholder:
A has the right to vote at annual general meetings.
B has the right to receive a share of the profits.
C is liable for the debts of the company.
D ranks after preference shareholders.
C is liable for the debts of the company.
When considering investing in residential property, which one of the
following characteristics is UNTRUE?
A Costs associated with property investment are generally high
B Rental income provides a poor hedge against the impact of inflation
C There may be periods when suitable tenants are difficult to find
D The capital value of the property may fall
B Rental income provides a poor hedge against the impact of inflation
Bank deposit accounts are NOT generally considered to be suitable vehicles for long term investment because they:
A pay interest net of lower rate tax.
B have proven unattractive when compared with asset-backed
investments.
C are generally only suitable for higher rate tax payers.
D normally have a maximum investment term.
B have proven unattractive when compared with asset-backed
investments.
Which of the following types of share is most commonly a convertible over recent years? A Cumulative B Ordinary C Redeemable D Preference
D Preference
Which one of the following statements concerning preference shares is
FALSE?
A They are a part of the share capital of the company
B They normally rank before ordinary shares for dividends
C The dividends are always fixed
D Convertible shares are a type of preference share
C The dividends are always fixed
What is the main attraction of direct investment in the ordinary shares of
quoted companies?
A Dealing costs are lower than those charged by unit trust fund managers
B Dividends are guaranteed to be paid and are tax-efficient for higher rate taxpayers
C Potential capital growth in the medium to long term
D The selling price of shares is usually the same as the purchase price,
thus removing the bid/offer spread
C Potential capital growth in the medium to long term
Jon purchased a share when the price was very high. He was able to justify this because:
A the price earnings ratio was also high.
B the dividend cover was 0.80.
C the dividends had decreased.
D the price has increased by more than 25% in two years.
A the price earnings ratio was also high.
If Helen invests in shares, which are quoted in the Alternative Investment
Market, her shares:
A are likely to be in new, small companies with growth potential.
B must be held by her for at least one year before they can be sold.
C have a minimum guaranteed capital value.
D will provide a fixed income for the first five years.
A are likely to be in new, small companies with growth potential.
James has a residential property from which he generates a rental income. When he has to pay tax on the income he can:
A opt to pay a flat rate of tax on the gross income.
B offset any income tax due against any fall in the capital value of the property.
C deduct certain expenses to reduce the tax due.
D defer payment of any tax until the property is sold.
C deduct certain expenses to reduce the tax due.
Why would an investor be interested in holding warrants issued by a company?
A Because investors can receive dividends without having to make any capital outlay
B Because investors can receive shares without having to make any capital outlay
C Because, if the value of the connected shares falls, the investor can claim a loss that can be offset against capital gains made elsewhere
D Because, if the price of the shares has increased at the time a warrant is
exercisable, the holder will make a profit on their sale
D Because, if the price of the shares has increased at the time a warrant is
exercisable, the holder will make a profit on their sale
Alec Enterprises intends to raise additional finance by issuing more shares. They are therefore obliged to:
A make a rights issue
B delay dividend payments
C guarantee no existing shareholder will be adversely affected
D make at least 25% more shares available
A make a rights issue
The risk of investment fluctuations can be reduced through which feature of the investment process? A Clustering B Dynamisation C Diversification D Gearing
C Diversification
Greg decided to invest in cumulative preference shares as he wanted to
ensure:
A guaranteed security
B conversion to ordinary shares
C capital growth
D some certainty regarding future dividend payment
D some certainty regarding future dividend payment
A right to buy shares at a specified price by a specified date is a:
A forward contract
B warrant
C put option
D future contract
B warrant
