Volume 1- Chapter 8 Flashcards
Who are common shareholders?
Common shareholders can be an individual investor, a business, or an institutional investor.
What do common shareholders benefit from?
They benefit from the growth in value of their original investment and from the flow of dividend income.
What is a risk associated with common share ownership?
Common shareholders may lose their entire investment if the business fails.
What is the position of common shares on asset claims in bankruptcy?
Common shares have a relatively weak position on asset claims, falling behind senior creditors, bondholders, and preferred shareholders.
Are dividends on common shares guaranteed?
No, dividends on common shares are payable at the discretion of the board of directors.
What is evidence of ownership for common shares usually in?
Shares are most often registered in street certificate form.
What does CDS stand for in the context of securities transactions?
CDS stands for Clearing and Depository Services Inc.
What is a standard trading unit for most stocks?
The usual unit of trading for most stocks is 100 shares.
What is one benefit of common share ownership?
Potential for capital appreciation.
What is another benefit of common share ownership?
Voting privileges, including the right to elect directors.
What is a risk of investing in common shares?
Common shareholders generally have very little influence over the day-to-day operations of the company.
What is capital appreciation?
Any increase in the value of a company’s assets, including the value of its common shares.
What influences a company’s dividend policy?
The company’s size, goals, financial position, and the industry in which it participates.
What are regular dividends?
A specified amount to be paid each year, indicating that payments will be maintained barring major earnings collapse.
What are extra dividends?
Bonus payments paid in addition to the regular dividend, which may not be repeated the following year.
What is the ex-dividend date?
The date on which shares begin to trade without the right to receive the upcoming dividend.
What is a dividend reinvestment plan?
A plan that allows shareholders to reinvest dividends into additional shares of the company.
What are stock dividends?
Dividends paid in the form of additional stock rather than cash.
What is the voting privilege associated with common shares?
Each common shareholder typically has one vote for each share owned.
What are restricted shares?
Shares that give the shareholder rights to earnings and assets but do not carry full voting rights.
Name one category of restricted shares.
Non-voting shares.
What is responsible investment?
Investment that incorporates environmental, social, and governance (ESG) factors into selection and management.
What must be given to holders of restricted shares regarding shareholders’ meetings?
Notice of shareholders’ meetings and an invitation to attend and speak
This is a protection measure for restricted shareholders.
What is required for any corporate action that would create new restricted shares?
Minority approval
This ensures that the interests of existing restricted shareholders are considered.