SERIES 7 - COMMON STOCK

B. 600 shares Because the company is issuing 20% additional shares (1,000,000 new shares/5,000,000 outstanding shares = 20%), a stockholder with 500 shares will be allowed to subscribe to 100 of the new shares, for a total holding of 600 shares.

A client owns 500 shares of a company with 5,000,000 shares outstanding. The company will issue 1,000,000 shares through a rights offering. If the client subscribes to the offering, he or she will now own: A. 500 shares B. 600 shares C. 1,000 shares D. 1,500 shares

D. distributing tax credits to shareholders

A corporation can pay a dividend in all of the following fashions EXCEPT: A. making a cash distribution to shareholders B. making a stock distribution to shareholders C. distributing the stock of another company to shareholders D. distributing tax credits to shareholders

C. II, III, IV

A corporation can pay a dividend in which of the following fashions? I Distributing tax credits to shareholders II Distributing the stock of another company to shareholders III Making a stock distribution to shareholders IV Making a cash distribution to shareholders A. I and II only B. I, III, IV C. II, III, IV D. I, II, III, IV

B. $30,000,000 Outstanding stock is: Issued stock (20,000,000 shares) - Treasury stock (5,000,000 shares) = 15,000,000 shares outstanding at $2 par = $30,000,000 value.

A corporation has issued 20,000,000 shares of common stock at $2 par. The corporation has 5,000,000 shares of Treasury Stock on its books. The aggregate value of the outstanding shares is: A. $10,000,000 B. $30,000,000 C. $40,000,000 D. $50,000,000

C. proxy

A customer gives a power of attorney to a caretaker to vote his shares on his behalf at the company's annual meeting. This is called (a): A. discretionary authority B. voting trust C. proxy D. trading authorization

B. The shareholder can buy a maximum of 11 shares by paying $242 The terms of the rights offering are that fractional holdings are rounded up to buy 1 additional share. This person owns 107 shares and thus, will receive 107 rights. 107 rights / 10 rights per share = 10.7 shares, which is rounded up to 11 shares @ $22 each = $242 necessary to subscribe.

A customer owns 107 shares of ABC common stock. ABC declares a rights offering, with the terms being that for every 10 rights tendered, a shareholder may purchase one additional share at $22 per share. Any fractional rights holding may be rounded up to buy an additional share. If this shareholder wishes to subscribe, which statement is TRUE? A. The shareholder can buy a maximum of 10 shares by paying $220 B. The shareholder can buy a maximum of 11 shares by paying $242 C. The shareholder can buy a maximum of 107 shares by paying $2,354 D. The shareholder can buy a maximum of 110 shares by paying $2,420

D. 400 rights

A customer owns 400 shares of ABC stock. ABC is having a rights offering where 20 rights are needed to subscribe to 1 new share. The customer will receive: A. 1 right B. 20 rights C. 100 rights D. 400 rights

B. Wednesday, December 8th

ABC Corporation has declared a cash dividend to stockholders of record on Friday, December 10th. The last day to buy ABC shares BEFORE they go ex dividend is? A. Tuesday, December 7th B. Wednesday, December 8th C. Thursday, December 9th D. Friday, December 10th

B. 12 shares for $228 The subscription offer allows fractional shares to be rounded up to buy 1 whole share. Since 10 rights are needed to buy 1 new share, the customer receiving 111 rights can buy 111 / 10 = 11.1 shares which rounds up to 12 shares at $19 each = $228 total for 12 shares.

ABC Corporation has declared a rights offering to stockholders of record on December 10th. Under the offer, shareholders need 10 rights to subscribe to 1 new share at a price of $19. Fractional shares can be rounded up to purchase 1 full share. A customer owning 111 shares wishes to subscribe. The market price of the stock is currently $30. The customer can buy: A. 11 shares for $209 B. 12 shares for $228 C. 11 shares for $341 D. 12 shares for $372

B. $.50 Since the record date is Friday, December 10th, a customer buying on Wednesday, December 1st would settle on Friday, December 3rd (2 business days later) and would be on the record books for the distribution. Therefore, the stock is trading cum rights. The value of a right "cum rights" is: ($24.5 - $19)/(10 + 1) = $5.50/11 = $0.50 Value "Cum Rights"

ABC Corporation has declared a rights offering to stockholders of record on Friday, December 10th. Under the offer, shareholders need 10 rights to subscribe to 1 new share at a price of $19. Fractional shares can be rounded up to purchase 1 full share. As of Wednesday, December 1st, the stock is trading at $24.50. The value of the right is: A. $.45 B. $.50 C. $.55 D. $1.00

B. $1.00 ($29 - $19)/$10 = $10/$10 = $1 Value "Ex Rights" Notice that the market price of $29 was already adjusted on the ex date by the exchange where the stock trades. Do not try and reduce the price again!

ABC Corporation has declared a rights offering to stockholders of record on Friday, December 10th. Under the offer, shareholders need 10 rights to subscribe to 1 new share at a price of $19. Fractional shares can be rounded up to purchase 1 full share. As of the ex date, the stock is trading at $29. The value of the right is: A. $.90 B. $1.00 C. $1.10 D. $1.25

C. right to manage

All of the following are rights of a common shareholder EXCEPT the: A. right to vote B. right to receive a dividend C. right to manage D. right to transfer shares

B. quarterly

Common dividends are usually paid: A. monthly B. quarterly C. semi-annually D. annually

C. II, III, IV

Common dividends can be paid in which of the following forms? I Rights II Product III Stock IV Cash A. I and IV B. I, III, IV C. II, III, IV D. I, II, III, IV

C. I, III, IV

Corporate dividend payments can be made in the form of: I Cash or company products II Listed options of that company III Additional common shares of another company IV Additional common shares of that company A. II, III, IV B. I, II, III C. I, III, IV D. I, II, III, IV

D. Common stockholders

In a corporate liquidation, the last to get paid is: A. Unpaid wages and taxes B. Bondholders C. Preferred stockholders D. Common stockholders

B. 23 shares for $1,840 Since 20 rights are needed to buy 1 new share, the customer receiving 450 rights can buy 450 / 20 = 22.5, rounded up to 23 shares at $80 each = $1,840 total for 80 shares.

PDQ Corporation has declared a rights offering to stockholders of record on Thursday, July 22nd. Under the offer, shareholders need 20 rights to subscribe to 1 new share at a price of $80. Fractional shares can be rounded up to purchase 1 full share. A customer owning 450 shares wishes to subscribe. The market price of the stock is currently $100. The customer can buy: A. 22.5 shares for $1800 B. 23 shares for $1,840 C. 22.5 shares for $2250 D. 23 shares for $2,300

C. II and III

PDQ Corporation has declared a rights offering to stockholders of record. The company has 5,000,000 shares outstanding and is selling an additional 1,000,000 shares via the rights offer. Which statements are TRUE regarding a customer who owns 500 shares of PDQ stock? I The customer will receive 100 rights II The customer will receive 500 rights III The customer may buy 100 shares IV The customer may buy 500 shares A. I and III B. I and IV C. II and III D. II and IV

C. repurchase shares for Treasury

Stockholder approval is needed if a corporation wishes to do all of the following EXCEPT: A. split its stock 1 for 2 B. split its stock 2 for 1 C. repurchase shares for Treasury D. issue convertible securities

C. II and IV

Stockholder approval is needed if a corporation wishes to: I pay a cash dividend II split its stock 2 for 1 III repurchase shares for its Treasury IV issue convertible securities A. I and IV B. II and III C. II and IV D. I, II, III, IV

C. I, II, IV

The Board of Directors of a company will set which of the following? I Declaration date II Record date III Ex date IV Payable date A. I and II B. III and IV C. I, II, IV D. I, II, III, IV

B. II and III

The market price of common stock will be influenced by which of the following? I The par value of the shares II Expectations for future earnings of the company III Expectations for future dividends to be paid by the company IV Book value of the company A. I and IV B. II and III C. I, II, III D. II and IV

B. issued shares minus outstanding shares

The definition of Treasury stock is: A. authorized shares minus issued shares B. issued shares minus outstanding shares C. authorized shares minus outstanding shares D. capital in excess of par value minus par value

A. I and II only

The market price of common stock will be influenced by which of the following? I Expectations for future earnings of the company II Expectations for future dividends to be paid by the company III Book value per share IV Par value per share A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

B. Minority shareholders have greater voting effectiveness with cumulative voting

When comparing the statutory voting method to the cumulative voting method, which statement is TRUE? A. Minority shareholders have the same voting effectiveness with both methods B. Minority shareholders have greater voting effectiveness with cumulative voting C. Minority shareholders have greater voting effectiveness with statutory voting D. Minority shareholders have limited voting powers under the statutory and full voting powers under the cumulative method

A. verifying the record of all shareholder names and addresses

Which function would be performed by the registrar? A. verifying the record of all shareholder names and addresses B. acting as disbursement agent for the corporation C. issuing new stock certificates D. canceling old stock certificates

D. II, III, IV

Which of the following actions by a corporation will affect an individual common shareholder's equity? I Declaration of a stock dividend or stock split II Conversion of convertible preferred stock III Repurchase of common shares IV Issuance of additional common shares A. I and III B. II and IV C. III and IV D. II, III, IV

C. I, II, III

Which of the following are functions of the transfer agent? I Mailing dividend payments to shareholders II Canceling old shares and issuing new shares III Preparing and mailing proxies IV Setting the Declaration Date A. I and II B. III and IV C. I, II, III D. I, II, III, IV

B. Investor expectations about the future of the company

Which of the following influences the market price of common stock? A. The par value of the shares B. Investor expectations about the future of the company C. Stated value of the shares D. Book value of the shares

B. I and IV

Which of the following statements are TRUE regarding the effect of a repurchase of Treasury Stock? I Outstanding shares are reduced II Outstanding shares are increased III Earnings Per Share are reduced IV Earnings Per Share are increased A. I and III B. I and IV C. II and III D. II and IV

D. I, II, III

Which of the following statements are TRUE regarding the rights agent? I The rights agent usually handles the mechanics of a rights offering II The rights agent is usually the existing transfer agent of the issuer III The rights agent issues the additional shares upon presentation of the rights certificates with payment A. I only B. I and II C. II and III D. I, II, III

D. non-callable

Which of the following terms applies to common stock? A. convertible B. redeemable C. non-negotiable D. non-callable

B. I and IV

Which of the following terms describes common stock? I Negotiable II Non-negotiable III Callable IV Non-callable A. I and III B. I and IV C. II and III D. II and IV