Stocks

Front 1

types of business organizations

Back 1

-individual sole proprietorship
-partnership
-corporation

Front 2

capitalization

Back 2

how corporations raise money

Front 3

2 ways a corporation raises money to finance its operations

Back 3

-debt securities
-equity securities

Front 4

equity capital

Back 4

stock

Front 5

debt capital

Back 5

bonds

Front 6

total capitalization

Back 6

equity plus the debt capital

Front 7

net worth or stockholders equity

Back 7

equity capital raised by the sale of common and preferred stock plus the retained earnings

Front 8

retained earnings or earned surplus

Back 8

profits the corporation made on the sale of its product or service which have not been distributed as dividends

Front 9

incorporators

Back 9

original stockholders; owners

Front 10

How is ownership in a corporation represented?

Back 10

equity securities (stock)

Front 11

stock

Back 11

unit of corporate ownership

Front 12

What does a corporation operate under?

Back 12

a charter granted by the state

Front 13

What must incorporators file?

Back 13

a certificate of incorporation with proper state officers

Front 14

7 rights of common stockholders

Back 14

-right to receive a stock certificate for full paid stock
-right to share in corporate profits when dividends declared
-right to voice their stock at stockholders meetings
-right to transfer stock at will
-limited access to the corporation's books
-pre-emptive right to subscribe to new stock

Front 15

statutory (regular) voting

Back 15

must split votes evenly

Front 16

cumulative voting

Back 16

-may cast votes in any manner
-benefits minority interests

Front 17

What are the 2 broad classes of equity securities?

Back 17

-common stock
-preferred stock

Front 18

How much is common stockholder personally at risk for?

Back 18

the amount invested in the corporation

Front 19

authorized shares

Back 19

the specific number of shares, authorized in the corporate charter, to be sold

Front 20

issued shares

Back 20

authorized stock that has been sold to investors

Front 21

unissued shares

Back 21

authorized stock that has not yet been sold

Front 22

outstanding stock

Back 22

issued shares currently in the hands of investors

Front 23

market capitalization

Back 23

-indicates the total value of the shares of a company
-multiply current price
of shares of the
common stock by the
number of shares
outstanding

Front 24

How are companies generally categorized in regards to market capitalization?

Back 24

-large cap - market capitalization exceeds $5 billion
-mid cap - market capitalization between $1 billion and $5 billion
-small cap - market capitalization under $1 billion

Front 25

treasury stock

Back 25

-common stock a corporation has reacquired or bought back
-not considered outstanding
-does not vote nor receive dividends or used for earning calculation purposes

Front 26

par value (stock)

Back 26

-arbitrary value placed on the common stock at the time the stock is authorized
-nothign to do with the market price of the stock

Front 27

No Par Stock

Back 27

-has no par value
-stock is carried at a Stated Value on the corporation's financial records

Front 28

American Depositary Receipt (ADR)

Back 28

-method by which an investor usually purchases stock of foreign corporations
-everything done with US dollars in the English language

Front 29

warrant

Back 29

-an inducement attached to new securities
-can be purchased in open market
-gives the purchaser a long-term (5 to 10 years) privilege of subscribing to one or more shares of stock reserved for him by the corporation from its unissued or treasury stock reserve
-predetermined fixed price

Front 30

options

Back 30

-call
-put

Front 31

call option

Back 31

right to buy stock

Front 32

put option

Back 32

right to sell stock

Front 33

restricted stock

Back 33

-called Private Placements
-corporations raise money privately
-selling to one or two large institutional buyers
-can have up to 35 investors to remain private
-

Front 34

Private Placements

Back 34

-restricted stock
-distribution of unregistered securities to a limited number of purchasers without the filing of a registration statement with the SEC
-generally require submission of an investment letter to the seller by all purchasers
-restricted from resale for period of one year

Front 35

statutory underwriter

Back 35

-aspect of Private Placement
-an individual or corporation that purchases an unregistered security and offers it in a public distribution without an effective registration statement
-such parties are subject to fine and/or imprisonment

Front 36

stock split

Back 36

-if a corporation has 1,000,000 shares of common stock outstnading selling for $80 per share, it may declare that on such and such a date the stock will split 2 for 1
-on the date indicated, the company will have 2,000,000 shares outstanding at half the par value, and each stockholder will have twice as many shares as he had before the split

Front 37

stock dividend

Back 37

-share of the corporate earnings
-after receiving, investor has more shares, same proportionate interest

Front 38

Describe how stock dividend works?

Back 38

-10% stock dividend means that for every 10 shares of common stock outstanding, one new share will be given as a dividend to the stockholders
-if a corporation with 100,00 shares of common stock outstanding declares a 10% stock dividend, it then has 110,000 shares outstanding

Front 39

preferred stock

Back 39

-preference in claims to dividends and assets ahead of common stockholders
-dividends paid at a fixed rate
-par value is important to investors because it is the figure upon which the dividend is usually calculated (percentage of par)
-no par value, dividend stated as a fixed number of dollars per year

Front 40

cumulative preferred stock

Back 40

-dividends accrue for years skipped
-run for indefinite period of time

Front 41

noncumulative dividend

Back 41

-if a corporation skips a dividend payment, the investor receives nothing for that quarter and has no further claim upon the corporation's earnings

Front 42

convertible preferred stock

Back 42

-convertible privilege attached at time of issuance
-can be changed into fixed number of shares of common stock

Front 43

callable (preferred stock)

Back 43

permits the corporation to redeem (buy back) its preferred stock at a fixed price from the investors

Front 44

call price (preferred stock)

Back 44

-feature of preferred stock through which it may be retired at the corporation's option by paying a price equal to or slightly higher than either the par or market value
-stated on certificate at time of issuance

Front 45

participating preferred stock

Back 45

-the only preferred stock that, in addition to a stated fixed dividend, is also eligible to participate in the common stock dividend

Front 46

prior preferred

Back 46

-ranking of preference and degree of preference upon corporate dissolution
-all preferred ranks ahead of common stock but behind debt securities

Front 47

transfer agent

Back 47

-responsible for the efficient transfer of securities from one owner to another
-may be a bank, trust company, or issuer itself
-keeps the list of owners of record

Front 48

stock power

Back 48

sign this document instead of the back of a stock