unit 5 module 11- Equity and stock valuation

Question 1

corporate chartes

Answer 1

the legal document setting up the corporation

Question 2

common stock shareholders

Answer 2

shareholders, their payments can vary from one quarter to the next in the same company

• have voting rights
• common dividends vary in amount
• it is riskier than debt

Question 3

voting rights

Answer 3

• common stock shareholders have voting rights
• preferred stock holders do not
• generally each share of common stock equals one vote.

Question 4

preemptive rights

Answer 4

the right to retain their proportional ownership in a company should it issue another stock offering

Question 5

preferred stock shareholders

Answer 5

• does not have voting rights.
• they get fixed payments
• get payed no matter what before common stock

Question 6

bank loans

Answer 6

• federally regulated.

- they only make loans to businesses already established that have strong credit scores

Question 7

systematic risk

Answer 7

affects the entire stock market, not just a particular stock. it is an unpredictable risk impossible to avoid.

Question 8

unsystematic risk

Answer 8

affects individual stock. it can be reduced by diversifying or owning multiple stocks and other investments

Question 9

stocks and bonds

Answer 9

-the first time that stocks and bonds are issued that issuing company receives most of the money.

Question 10

investment bankers

Answer 10

specialists who arrange for common stock, preferred stock and bonds to be sold that first time, which is done in the primary market

Question 11

stock brokers

Answer 11

or retail securities firms; used in the secondary market