Unit 2 Equity Securities Flashcards
_______ represent ownership in a company and give an investor the opportunity to grow their wealth along with a company’s success.
Equity securities
Common stocks are called ____ because they represent ownership in the company.
equities
Investors who buy common stock are called ____
shareholders
The 4 classes of common stock are:
authorized, issued, outstanding, or treasury.
The ____specifies the number of shares the company is authorized to issue.
corporate charter
Common Stock Characteristics:
ownership in a company
purchase for growth (capital appreciation)
purchase income (dividend)
_____ refers to the maximum number of shares a publicly-traded company can issue, as specified in its articles of incorporation or charter
Authorized stock
______is authorized stock that has been sold to investors.
Issued stock
_____ includes all shares that a company has issued and that are in the hands of investors.
Outstanding stock
____is stock a corporation has issued and subsequently reacquired.
Treasury stock
Market cap is determined by
multiplying the number of outstanding shares by the current market value (CMV) of a share (outstanding shares ×CMV).
Common stocks are often classified by the of the corporation.
size (market cap)
Types of Common Stock:
Large-Cap
Mid-Cap
Small-Cap
_____ stocks are the largest companies. These can be rapidly growing technology companies or big, long-established firms
Large-cap
Large-cap companies that have a long history of steady dividend payments are often called ____
blue-chip stocks
____stocks are still large by most standards, just not as huge as the large-cap stocks.
Mid-cap
____ are still large enough to be listed on national exchanges but still the smallest size. They tend to be oriented toward growth and produce very little dividends.
small caps
A _____ is an unlisted (not listed on a U.S. stock exchange) security trading at less than $5 per share.
penny stock
equity securities defined as penny stocks are considered ____
highly speculative. come with rules
penny stock rules of suitability and disclosure apply only to ____
solicited transactions
are distributions of a company’s profits to its shareholders.
Dividends
Dividends may be paid in any of three ways:
Cash dividends
Stock dividends
Product dividends
There are four dates to remember that are associated with the dividend disbursing process:
Declaration date.
Ex-dividend date (ex-date).
Record date
Payable date.
On the ____ , the dividend disbursing agent sends dividend checks to all stockholders whose names appear on the books as owners as of the record date.
payable date
The stockholders of record (those who own the stock) on the ____ receive the dividend distribution.
record date
To receive the dividend, the stock must be purchased before the ____
ex-dividend date
If the stock is purchased on or after the _____, the new owner has purchased the stock without the dividend, and is therefore not entitled to receive it.
ex-date
When a company’s BOD approves a dividend payment, it is recognized as the date the dividend as the ____.
Declaration date
The declaration date, record date, and payable date are established by the company’s ____.
Board of Directors
Test Alert DERP
The order of dates is declaration, ex-dividend, record, and payable.
Benefits of Owning Common Stock:
voting rights, freely transferable shared, the opportunity for capital appreciation, and current income, as well as limited liability
A stockholder can cast ____ vote for each share of stock owned.
one
____ allows a stockholder to cast one vote per share owned for each item on a ballot, such as candidates for the BOD. Aboard candidate needs a simple majority to be elected.
Statutory voting
____ allows stockholders to allocate their total votes in any manner they choose.
Cumulative voting
___ voting benefits the smaller investor, whereas ____ voting benefits larger shareholders.
Cumulative, statutory
Freely transferable means:
Common Stock Shareholders have the right tos ell or give away their shares without permission of the corporation.
Shareholders have preemptive rights which means:
If a corporation wants to issue additional shares, existing shareholders have the right to purchase those shares in an amount that would keep their proportionate ownership in the corporation unchanged.
Risks of owning Common Stock:
Value Risk
Decreased or no dividend income
Low priority at dissolution (bonds and preferred stock are considered senior securities if there is a bankruptcy
Another term for stocks and bonds is
equity and debt
A ____ is a class of stock that is granted certain rights that differ from common stock. Namely, preferred stock often possesses higher dividend payments, has a fixed rate of return and a higher claim to assets in the event of liquidation
preferred stock
preferred shareholders generally do not have ____ or _____
voting rights or preemptive rights.
