Chapter 8 Stocks

Front 1

Preferred Stock

Back 1

it has no fixed maturity date, does not bring on bankruptcy, divedends are not deductible for tax purposes

Front 2

Cumlative Feature

Back 2

a requirement that all past, unpaid preffered stock dividends be paid before any stock dividends declared

Front 3

Protective Provisions

Back 3

protect the investors interest, voting in event of nonpayment of common stock dividends, or restrict the payment of common stock dividends

Front 4

Convertible Preferred Stock

Back 4

preferred shares that can be converted into a predetermined number of shares of common stock, if investors so choose

Front 5

Call Provision

Back 5

a provision that entitles the corporation to repurchase its preferred stock from investors at stated prices over specified periods

Front 6

Sinking Fund Provision

Back 6

a protective provision that requires the firm periodically to set aside an amount of money for the retirement of its preferred stock.

Front 7

Common Stock

Back 7

shares that represent the ownership in a corporation

Front 8

Limited Liability

Back 8

a protective provision whereby the investor is not liable for more than the amount he or she has invested in the firm

Front 9

Proxy

Back 9

a means of voting in which a desingated party is provided with the temporary power of attorney to vote for the signee at corporations annual meeting

Front 10

Proxy fight

Back 10

a battle between rival groups for proxy votes in order to control the decisions made in a stockholders meeting

Front 11

Majority Voting

Back 11

voting in which each share of stock allows the sharholder one vote, and each position on the board of directors is voted on separately

Front 12

Cumulative Voting

Back 12

voting in which each share of stock allows the shareholder a number of votes equal to the number of directors being elected. Can select one or many candidates

Front 13

Preemptive Right

Back 13

the right entitiling the common stockholder to maintain his or her proportionate share of ownership in the firm

Front 14

Right

Back 14

a certificate issued to common stockholders giving them an option to purchase a stated number of new shares at a specified price during a 2 to 10 week period

Front 15

Internal growth

Back 15

a firms growth rate resulting from reinvesting the companys profits rather than distributing them as dividends

Front 16

Profit retention rate

Back 16

the companys percentage of profits retained

Front 17

Dividend payout ratio

Back 17

divdends as a percentage of earnings

Front 18

Expected rate of return

Back 18

the rate of return that investors expect to receive on an investment by paying the current market price of the security

Front 19

How is preferred stock different from common stock?

Back 19

1. no fixed maturity date
2. fails to pay dividends does not bring bankruptcy
3. dividends are not deductible for tax purposes

Front 20

What is multiple series stock?

Back 20

More than one series of stock

Front 21

What are claim on assets or income on preferred stock?

Back 21

Has higher priority on claims of assets and income

Front 22

What are claims on income for common stock?

Back 22

Have the right to residual income after creditors and preferred stockholders
-common shareholders might not gain any dividends from there investements if it is eaten up by preferred stock holders and creditor
-same goes with claims on assets

Front 23

What is limited liability?

Back 23

- the amount of money that investors will lose in bankruptcy is only the amount that they invested

Front 24

What are voting rights with common stocks?

Back 24

can elect a board of directors
-change in the coroporate charter
-majority vote in proxy

Front 25

What is a common problem with voting in directors?

Back 25

-managers have there say in which directors to vote in

Front 26

How is the dividend different for a common stock to a bond?

Back 26

Dividends rely on the profitability of the firm