Unit 1: Types & Characteristics of Equity Securities
The board of directors of DDC omitted dividends in 2016 on their $100 par 6% noncumulative preferred stock. In 2017, a $2 preferred dividend was paid. For DDC, 2018 was a good year, and the board wishes to pay a common dividend. How much must be paid per share on the preferred for 2018 in order to pay a common dividend?
$6 - Because this preferred stock is noncumulative, any missed dividends need not be paid before common dividends can be declared.
Ownership in a corporation is evidenced by holding shares of the company's...
Common or preferred stock
For a profitable and rapidly growing firm, holders of preference shares are least likely to benefit from the firm's growth if the preference shares are
Cumulative. Preferred stock shares, sometimes called preference shares, are cumulative if any dividends in arrears must be paid before the firm pays any common dividends. A profitable and rapidly growing firm is unlikely to be in arrears on its preferred dividends.
One characteristic found in equity securities issued by a corporation is...
Limited liability. The investor can never be held liable for debts of the corporation.
When comparing restricted stock to nonrestricted stock, it is important to note that the restricted stock has a restricting placed upon its...
Resale
A common stockholders does not have the right to determine what?
The par value of the stock. This is an accounting decision made by the company when the stock is first issued and is not something voted on by the shareholders.
The issuer of an ADR is...
a U.S depository bank
In a portfolio containing common stock, straight preferred stock, convertible preferred stock, and adjustable-rate preferred stock, changes in interest rates would be most likely to affect the market price of the...
adjustable-rate preferred stock
The residual right of common shareholders refers to their right to
claim company assets in bankruptcy after wages, taxes, creditors, and preferred shareholders have been paid. The residual right of common shareholders refers to their position in the event of bankruptcy.
Nonqualified stock options (NQSO's) are taxable to the recipient at the time of...
exercise to the extent of the difference between the fair market value of the stock and the exercise price.
An ADR is used to
facilitate trading in foreign securities in U.S. markets by U.S. citizens living in the United States.
One difference between common stock and preferred stock is that common stockholders...
have voting rights
Investing in an emerging market mutual fund provides what benefit to the investor?
liquidity. The fund must be redeemed at NAV (Net Asset Value) upon request
KAPCO common stock is listed on the New York Stock Exchange, Inc. (NYSE). If an executive vice president of the company buys 400 shares of the company's stock on the NYSE, she
may sell immediately subject to Rule 144 volume limitations. If purchased in the open market, such as on the NYSE, the transaction is not a private placement, and the stock does not have a holding period restriction. The officer, however, is an affiliate and is therefore subject to the reporting and volume limitations under Rule 144.
