finance test 3
Which of the following are expected cash flows to investors in stocks?
Dividends Capital gains
t/f For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed.
False
A benchmark PE ratio can be determined using:
a company's own historical PEs the PEs of similar companies
__________ is a payment by a corporation to shareholders, made in either cash or stock
dividend
Common stock as no special preference either in receiving __________ or in bankruptcy.
dividends
The assumption of constant growth infers that _________.
dividends change at a constant rate
When the stock being valued does not pay dividends,
the dividend growth model can still be used.
Which of the following entities declares a dividend?
The board of directors
Preferred stock has preference over common stock in the _____.
-distribution of corporate assets -payment of dividends
When voting for the board of directors, the number of votes a shareholder is entitled to is generally determined as follows:
one vote per share held
Investment firms that are active participants in stocks assigned to them are called _______ liquidity providers.
supplemental
Which of the following are reasons why it is more difficult to value common stock than it is to value bonds?
-The life of a common stock is essentially forever. -Common stock cash flows are not known in advance -The rate of return required by the market is not easily observed.
A share of common stock is ________ (less/more) difficult to value in practice than a bond.
more
A stock with dividend priority over common stock is called a _________ stock
preferred
The trading of existing shares occurs in the ______ market.
secondary
Which of the following are features of common stock?
-It has no special preference in bankruptcy. -It has no special preference in receiving dividends. -It generally has voting rights.