2430322
Description
Flashcards by dylan_earl, updated more than 1 year ago
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Created by dylan_earl
over 9 years ago
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| Question | Answer |
| Define true value | Price that incorporates all information currently available to investors |
| Define Authorized Share Capital | Max number of shares which a company is permitted to issue as specified in the firms articles of incorporation |
| Define Contributed Surplus | Difference between issue price and par value of stock (Par value is value of security shown on certificate) |
| Retained Earnings | Earnings not paid out as dividend |
| Difference between book and market values | Book value is backward looking (how much capital firm raised from shareholders in the past) Market is forward looking (measure of value investors place on shares today and expectations) |
| The firm has an obligation to pay dividends T/F | False. Decision is up to board of directors |
| Shareholders have the right to vote on appointments to the Board of Directors T/F | TRUE! Board of Directors (agents) manage company in interest of shareholders (principals) |
| Shareholders can vote based on how many shares they own (to determine Directors) T/F | True |
| What is corporate governance | Shareholders/Owners do not manage. Spread the responsibility |
| Define Sarbanes Oxley Act (From 2002) | Improve internal control - Protects investors from fraudulent financial information. Independant 3rd party verifies truthful information. |
| Common stock takes priority over preferred stock T/F | False Preferred stock takes priority in regard to dividends |
| Define net worth: | Book value of a company's common equity plus preferred stock |
| Preferred equity promises series of fixed payments to investors T/F | True |
| What is a floating rate preferred stock? | Pays dividends that vary with short-term interest rates |
| Define Redeemable stock | Company has right to acquire shares at a set amount known as 'Call Price' |
| What is a convertible stock | Shares can be converted into another class of shares at predetermined price for certain period of time |
| What is Default Risk? | Likelihood that firm will walk away from its obligation (voluntary OR involuntary) |
| What is Prime Rate? | Benchmark interest rate charged by banks |
| What does LIBOR Stand for? What is it? | London Interbank Offered Rate: Which international banks lend to each other |
| What is the difference between secured and subordinated debt? | Secured debt has first claim on specified collateral during default Subordinated: May be repaid in bankruptcy only after senior debt is paid |
| What are 'Protective Covenants?" | Restriction on a firm to protect bondholders |
| What is a foreign Bond: | Issued in the currency of its country but the borrower is in another country |
| Three examples of Innovated debt markets | Indexed Bonds Asset Backed Bonds Reverse Floaters |
| What do warrants provide to investors? | Chance to lock-in a purchase price for a security |
| What two ways do firms raise money? | Internal: Plow earnings back into firm External: Issuing debt/equity |
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