Chapter 4: Equities

Front 1

Affiliated Directors

Back 1

senior executives (i.e. presidents, CEO) who also serve on the board

Front 2

Nonaffiliated Directors

Back 2

directors who are not otherwise affiliated with the corporation

Front 3

Transfer agent

Back 3

hired by the issuer to keep a list of all registered stockholders and to be responsible for canceling old stock certificates

Front 4

Registrar

Back 4

hired to audit the transfer agent and to make certain that the company does not issue more shares than its charter authorizes.

Front 5

Treasury Stock

Back 5

Shares issued and now owned by the company

Front 6

Declaration Date

Back 6

date the board of directors “declares” a dividend

Front 7

Record Date

Back 7

the last possible day to own shares and receive a dividend

Front 8

Payment Date

Back 8

the date the dividend is sent to shareholders

Front 9

Ex-Dividend Rule (Cash)

Back 9

1. Set by the SRO. A stock will typically trade ex-dividend on the second business day prior to the record date.
2. An individual purchasing a stock on or after the ex-dividend date will not receive the quarterly cash dividend
3. As a result of the dividend payment, the company’s assets will be reduced. Therefore, on the ex-dividend date, the stock price will be reduced by an amount equal to the dividend to be paid.

Front 10

Ex-Dividend Rule (Stock)

Back 10

For stock dividends and stock split, the ex-dividend date is the business day following the payable date. To insure that the proper shareholder receives the additional shares, the stock will trade with a due bill attached, from the record date through to the payable date.

Front 11

Rights

Back 11

Avaliable to: Existing Shareholders
Price: Below Market
Time: Short-term

Front 12

Warrants

Back 12

Avaliable to: Existing Shareholders
Price: Above Market
Time: Long-Term

Front 13

Statutory Voting

Back 13

shareholders vote each of their shares once for each direct slot being contested

Front 14

Cumulative Voting

Back 14

shareholders may multiply the number of shares they own by the number of directors being elected and cast all the votes any way they want

Front 15

Cumulative Preferred Stock

Back 15

All the preferred dividends that are in arrears (owed) must be paid before the common stockholders can receive any dividends. Most preferred stock is cumulative.

Front 16

Noncumulative Preferred Stock

Back 16

Dividends in arrears are not paid to stockholders. Only the current year’s dividends needs to be paid before common stock dividends may be paid.

Front 17

Convertible Preferred Stock

Back 17

investors can exchange their shares for common stock at a specified price, at their discretion. The par value of preferred stock exchanged for each share of common is called the conversion price.

Front 18

Conversion ratio

Back 18

the number of shares of common stock that the investor can receive for each share of the preferred.

Front 19

Current Yield (Dividend Yield)

Back 19

i. Measures the annual income an investor receives from an investment compared to its current market price.
ii. Calculation: (dividend x # of periods in a year) / share price (e.g. .25*4/50 = 2%)

Front 20

Blue-Chip Stocks

Back 20

High-grade issues of major companies that have long and unbroken records of earnings and dividend payments.

Front 21

Growth Stocks

Back 21

An issue of a company whose sales, earnings, and share of the market are expanding faster than the general economy and the industry average. It usually retains most of its earnings to finance expansion and therefore pays little or no cash dividends.

Front 22

Defensive Stocks

Back 22

Stocks of companies that are resistant to change (i.e. necessary services; electric and gas, food, tobacco, soft drinks, and candy)

Front 23

Income Stocks

Back 23

Stocks of companies that pay higher than average returns. Their dividends are high relation to their market price (e.g. Utility stocks).

Front 24

Cyclical Stocks

Back 24

Stocks of companies whose earnings fluctuate with the business cycle (e.g. steel, cement, machine tools, and automobiles).

Front 25

American Depository Receipts (ADR)

Back 25

i. Used to facilitate the trading of foreign stocks in the US
ii. ADR represents a claim to foreign securities with the shares themselves being held by U.S. banks abroad.
iii. ADRs trade in the U.S. markets either on an exchange or OTC and are priced in U.S. dollars (although holders are still subject to foreign currency risk).
iv. Dividends are paid in U.S. dollars.
v. ADR shareholders have dividend rights, but they would not directly receive preemptive rights.