Csc Chapter 8

Front 1

Common shareholders are...

Back 1

The owners of the company. They benefit from the increase in value of their shares and dividend income. They have junior claims on assets compared to bond and debenture holders.

Front 2

CDS

Back 2

Clearing and depository services. A service that handles the ownership of stock certificates electronically, eliminating the need for holding on to physical stock certificates.

Front 3

Who determines what dividends get paid?

Back 3

Board of directors

Front 4

Standard Trading Units and Odd Lots

Back 4

Standard trading units are the # of shares that a stock can be bought it (Usually 100). If you want to buy less than that denomination it is called an odd lot.

Front 5

Benefits of Common Share Ownership

Back 5

Potential for Capital Appreciation. The right to all common share dividends. Voting privileges. The right to all periodic financial statements and some company documents. Favorable tax treatment in regards to capital gains and dividend income.

Front 6

Regular Dividends

Back 6

Some companies set a designated dividend amount they will always pay out, barring an earnings collapse.

Front 7

Extra Dividends

Back 7

A bonus dividend payout above the regular dividend paid at the end of the company's fiscal year. Not assumed to be repeated.

Front 8

Dividend Record Date

Back 8

All shareholders as of close of business on this announced date are entitled to the common share dividend. Usually 2-4 weeks ahead of the payment date to allow for cheque preparation.

Front 9

Ex-Dividend

Back 9

A share being sold after the Ex-dividend date will not entitle the new owner to the dividend. The seller will still be the one to receive the dividend.

Front 10

Ex-Dividend Date

Back 10

Set two business days before the dividend record date. Any common shares traded after this date will be sold ex-dividend as the trade will not have enough days to clear and settle before the Dividend Record date.

Front 11

Cum Dividend

Back 11

The stock is traded along with the rights to the dividend. The last day a stock is traded cum dividend is the day before the ex-dividend date.

Front 12

Dividend Reinvestment Plan

Back 12

An option sometimes given to common shareholders that allows them to have their dividends paid out in additional shares (and often times partial shares) instead of cash

Front 13

Stock Dividends

Back 13

High growth companies that need to keep their cash often pay out additional shares of stock as dividends instead of cash.

Front 14

Voting Rights

Back 14

Allows the common share holding to vote on Board of Director members who control the company. Many things like mergers also require shareholder approval.

Front 15

Restricted Shares

Back 15

Shares which give the shareholder the right to all dividends and earnings/capital appreciation of the company but do not give voting rights.

Front 16

Dividend Tax Credit

Back 16

Makes the purchase of dividend-paying shares more attractive to Canadian investors. Since the dividend money paid out was already taxed, the tax credit is given. Means the investor will pay less tax on dividend income than on interest income from debt investments. Only applies to issues from Canadian firms.

Front 17

Capital Gains Tax

Back 17

50% of marginal income tax rate

Front 18

Capital Losses

Back 18

The losses can be used to reduce taxes on other capital gains but can not be used to reduce taxes on other income.

Front 19

Stock Splits

Back 19

A 4 for 1 split means that if you own 1000 share of $100 stock, you now will own 4000 shares of $25 stock. Mathematically, equity remains unchanged.

Front 20

Pari Passu

Back 20

Ifvarious outstanding preferred share issues rank equally as to asset and dividend entitlement, theshares are described as ranking pari passu.

Front 21

Preffered Shares

Back 21

Ususally entitled to some sort of fixed dividend payment. Part owners along with common stock. In the event of bankruptcy, senior in claim to common shareholders but junior in claim to debt holders/creditors.

Front 22

Preference as to Assets

Back 22

Feature of most preferred shares. In the event of bankruptcy, senior in claim to common shareholders but junior in claim to debt holders/creditors.

Front 23

Why are preferred share more expensive to issue than debt issues?

Back 23

Because interest payments to creditors are tax deductible whereas the dividend payments to preferred shareholders are not.

Front 24

Why might a company issue preferred shares over a debt issue?

Back 24

If their assets are already mortgages/they have a lot of debt already. They want to decrease the debt/equity ratio. They dont want to obligation to pay interest and principal.

Front 25

Arrears

Back 25

The principal that all forgone/cancelled preferred dividends accumulate and must be paid out in full before any more dividends are paid out to common shareholders.

Front 26

Callable Preferred Shares

Back 26

Shares that have the feature to be bought back at a premium by the issuer. The vast majority of preferred shares have this option because, if they dont, the preferred shares will be a PERMANENT capital structure consequence.

Front 27

Foreign-Pay Preferreds

Back 27

Canadian preferred stock that pays its dividends in other currencies.

Front 28

Stock Index

Back 28

A time series of numbers use to calculate percentage change of a group of stocks.

Front 29

Value Weighted Index

Back 29

Large Market Cap stocks effect changes in the index more than small market cap stocks. Ex: S&P TSX Composite.

Front 30

Stock Average

Back 30

A stock average is the arithmetic average of the current prices of a group of stocks designed torepresent the overall market or some part of it. Price weighted.

Front 31

S&P/TSX Composite

Back 31

To be included in the Index, a stock must meet specific criteria based on price, length of timelisted on the exchange, trading volume, capitalization and liquidity. The stocks are classified into 10 sectors.

Front 32

S&P/TSX 60 Index

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The S&P/TSX 60 Index includes the 60 largest companies that trade on the TSX as measuredby market capitalization

Front 33

S&P/TSX Ventures Composite Index

Back 33

Market capitalization-basedindex meant to provide an indication of performance for companies listed on the TSX VentureExchange.

Front 34

Dow Jones Industrial Average

Back 34

Calculated by adding the prices of the stock and dividing by a special divisor. 30 large, blue chip stocks. Usually under performs S&P 500.

Front 35

S&P 500 Index

Back 35

Broader than the DOW, weighted by market cap.