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equity

pass the series 7 2010 on the first try-equity

QuestionAnswer
Common equity issued by regular corporations and investment companies
A common stockholder an "owner" of a corporation
Owners _____have an equity position in the corporate structure
common stock _____is an "equity" security
Authorized stock the fixed number of common shares that may be used as authorized by the corporate charter when the corporation is formed
issuers of common stock include regular corporations and investment companies, such as mutual funds and real estate investment trusts.
Statutory voting method a voting method that requires the shareholder to divide his or her total votes equally among the issues or directorships being decided; this is the standard voting method in most corporations.
Cumulative voting method a voting method that allows the shareholder to allocate his or her aggregate votes on issues or directorships in any combination he or she chooses.
Voting right the right of a common shareholder to vote to elect the members of the company's Board of Directors; and to vote on any matters that would affect the shareholder's ownership interest.
Non-negotiable security a security which cannot be traded; i.e. a redeemable security. For example, common stock is negotiable and trades in the public markets; whereas mutual fund shares are redeemable with the sponsor - they do not trade.
Preemptive right an entitlement that enables common stockholders to maintain proportionate ownership in a company when the company issues new shares. An existing stockholder can use the rights to subscribe to the new shares or may sell the rights to someone else.
Rights offering the method and terms by which preemptive rights to subscribe to newly issued common shares are distributed to a company's existing common shareholders.
ex-date the date that purchasers no longer qulify for the divedend. 2 business days prior to the record date
Rights agent usually the transfer agent, the rights agent accepts the monies (along with the appropriate number of rights certificates) for subscriptions to new shares via a rights offering and issues the new shares to the subscribers.
Stand-by underwriter an investment banker who makes a firm commitment to an issuer that is attempting to sell additional shares through a rights offering, to stand by ready to buy any of the unsubscribed shares.The underwriter will resell these shares to the public.
Subscription price lower than a stock's current market price, the fixed price at which a company's existing shareholders can purchase new shares during a rights offering.
Value "Cum Rights" formula market price - Subscription price / number of right per share to subscribe + 1
negotiable transferable
transfer agent cancels old shares and issues new shares, keeping a record of current shareholders names and addresses.
Declaration date the day the Board of Directors of a company announces to the public the terms and amount of any corporate distribution to shareholders such as $ or stock dividends,a rights offering, or a stock split.at least 10 business days in advance of the Record date
Convertible preferred preferred stock that the shareholder can convert into a fixed number of common shares.The conversion ratio is set when the preferred stock is issued.note:common stock can never be convertible -only preferred stock and bonds can have a conversion feature.
Preferred stock an equity security that is senior to common stock.pays a fixed dividend rate &usually has no voting or preemptive rights.It has preference over common shares in dividend distributions& in liquidation,it gets a fixed return,so price is based on rate change
rights formula 1 share = 1 right
current yield (formula) = annual income from security/market price of security
theoretical market price (formula) = annual income/market price
Cumulative Preferred If the issuer omits dividend payments, they "accumulate" and are paid if the issuer can ever resume making dividend payments. All accumulated preferred dividends must be paid, of course, in order to make a common dividend distribution.
Callable Preferred The issuer has the right to "call in" the shares after a set date, usually at par. Issuers will call in the shares if interest rates have fallen. After retiring the old high rate shares, new preferred shares can be issued at the current lower rates
Convertible Preferred The preferred shareholder can "convert" his shares into the common stock of the issuer based on a predetermined price. If the market price of the common rises, the convertible's value is pushed up as well
conversion ration (formula) par / conversion price
Participating preferred stock receives the fixed dividend& also participates in better than expected earnings with the common shareholder.This "extra" dividend is payable to both the preferred &common stock only if the earnings for common exceed a specified amount.
Forced conversion when an issuer calls in convertible preferred stock or convertible bonds that are trading in the market at a substantial premium.
Cumulative preferred if company misses dividend payments,holders of cumulative preferred shares have the right to receive all back dividends,AWA current dividend payments, before any distributions can be made to common shareholders.missed dividends accrue as arrearages
CURRENT YIELD (FORMULA) annual income from security/ market price of security
calls taken place when interest rates have fallen - what event ususally takes place with preferred stock
100% taxable interest interest received by a small corporate investor is _____ taxable
30% taxable interest divedends received by a small corporate investor are ______ taxable
WARRANT a long term option to buy at a fixed price. a sweetener.trade alongside common until expiration
right a short term option to buy stock at a fixed price-typically issued for 30-60 days then expire.issued under an offer of new common to existing shareholders under their preemptive rights.trade alongside common until expiration
ADR- american depository receipts a vehicle for trading foreign securities in US stock exchanges.if "actual" shares were traded in the US it would be expensive& time consuming.The bank holds foreign securities in the country of origin&then issues receipts in US backed by foreign security
ADS - Amercian depository Shares -aka ADR- american depository receipts -aka
Over-the-counter (OTC) market a decentralized, negotiated market in which many dealers in diverse locations execute trades for customers over an electronic trading system such as NASDAQ or over telephone lines.
dividend yield or current yield (formula) annual income / market price
price/earnings ratio(formula) market price of a security / earnings per share
earnings per share (formula) MARKET PRICE / THE MULTIPLE(in the p - e ratio colomn)
calculate percentage loss or gain p=100[v2-v1] / v1
calculate percentage loss for the year loss / year high price
Conversion ratio the number of common shares that an investor will receive when converting a bond or preferred stock.
Performance preferred a not-widely used name for preferred stock issued by a growth company. Also, another name for participating preferred stock.
At issuance, warrants typically have exercise prices well above current market price of common stock.for the warrant to have real value,the market price of the common must rise above the exercise price of the warrant.
annual income / market price current yield (formula)
Record date the deadline date, set by a corporation's Board of Directors, on which an investor must be recorded as an owner of the stock in order to be eligible to receive a corporate distribution such as a cash dividend, stock dividend, stock split or rights
Ex date the day on which the price of the stock is reduced by the dividend amount and anyone purchasing the stock will no longer be eligible to receive the dividend.
Declaration date the day on which the Board of Directors of a company announces to the public the terms and amount of any corporate distribution to shareholders such as cash or stock dividends, a rights offering, or a stock split.must be 10 days prior to record date
Created by: PAJAAM81 on 2010-07-22



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