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FHCE 4200 Exam 3 Review (Chapter 6)
Terms in this set (37)
A common stockholder's claim on company wealth is subordinate to the claims of other investors, such as lenders, and thus there is no guarantee that they will receive any return on their investment.
Take into account both price behavior and dividend income.
Every share of common stock represents an equity (ownership) position in a company. This is why stocks are sometimes called "equity securities".
Publicly Traded Issues
Shares of stock that are readily available to the general public and that are bought and sold in the open market.
An offering to sell to the investing public a set number of shares of a firm's stock at a specified price.
Existing stockholders are given the first opportunity to purchase new shares of the company's stock in proportion to his or her current ownership position.
Conversion of one of a firm's subsidiaries or divisions to a stand-alone company by distribution of stock in the new company to existing shareholders.
When a company increases the number of shares outstanding by exchanging a specified number of new shares of stock for each outstanding share.
Shares of stock that were originally sold by the company and have been repurchased by the company. Share repurchases are often called "buybacks."
Classified Common Stock
Common stock issued in different classes, each of which entitles holders to different privileges and benefits.
Total number of shares outstanding multiplied by the share price (market value per share).
100 shares of stock or multiples of 100.
Less than 100 shares of stock.
Arbitrary (Random) amount assigned to a stock when it is first issued.
Stockholders' equity in the firm as reported on the balance sheet.
The current price of the stock in the stock market.
The amount that investors believe the stock should be trading for, or what they think it is worth.
Earnings Per Share
the amount of annual earnings available to common stockholders, stated on a per-share basis.
Date of Record (Dividend Decision)
Date on which the investor must be a registered shareholder of the firm (holder of record) to be entitled to a dividend.
Payment Date (Payable Date) (Dividend Decision)
Actual date on which the company will mail dividend checks to holders of record; generally follows the date of record by a week or two.
Ex-Dividend Date (Dividend Decision)
Dictates whether you were an official shareholder and therefore eligible to receive the declared dividend.
Dividend paid out in the form of cash.
Tend to increase over time as companies' earnings grow; Average annual increase 3% to 5%
Dividend paid out in the form of stock.
The firm pays its dividend by distributing additional shares of stock.
A measure of dividends on a relative (percentage) basis rather than on an absolute (dollar) basis.
Dividend Payout Ratio
Measures the percentage of earnings that a firm pays in dividends.
Dividend Reinvestment Plan (DRIP)
A corporate-sponsored program where shareholders can have their cash dividends automatically reinvested into additional shares of the company's stock.
Stocks issued by large, well-established firms with long track records of earning profits and paying dividends.
Stocks with a long history of regularly paying higher-than-average dividends.
Stocks issued by companies experiencing rapid growth in revenues and earnings.
Stocks representing the technology sector of the market.
Stocks that offer potential for substantial price appreciation, but that lack sustained records of success.
Stocks issued by companies whose earnings are closely linked to the overall economy.
Stocks that tend to hold their value, and even do well, when the economy starts to falter.
Stocks of large companies with market capitalizations over $10 billion.
Stocks of medium-sized companies with market capitalizations between $2 billion and $10 billion.
Stocks of small companies with market capitalizations less than $2 billion.
American Depository Receipts (ADRs)
Are dollar-denominated instruments that represent ownership interest an American Depository Shares (ADSs).
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