SIE Chapter 1 : Equities

A corporate issuer declares a reverse stock split. After the split is effected, which statement is TRUE? A. the market price of the corporation's shares will increase B. the number of shares outstanding will increase C. the reported earnings per common shares will decrease D. the P/E ration will decrease

a

An investor has 300 shares and is voting for 3 open board sets. Which statement is correct if the election employs the cumulative voting method? A. cumulative voting gives the shareholder a disproportionate voting weight and allows her to cast a maximum of 900 votes for a favored director B. cumulative voting gives the shareholder a disproportionate voting weight and allows her to cast a maximum of 300 votes for a favored director C. cumulative voting gives the shareholder a proportionate voting weight and allows her to cast a maximum of 900 votes for a favored director D. cumulative voting gives the shareholder a proportionate voting weight and allows her to cast a maximum of 300 votes for a favored director

a

An investor has 500 shares and is voting for 3 open board seat. Which statement is correct if the election employs the statutory voting method? A. statutory voting gives the shareholders a proportionate voting weight and allows her to cast a maximum of 500 votes for a favored director B. statutory voting gives the shareholders a proportionate voting weight and allows her to cast a maximum of 1500 votes for a favored director C. statutory voting gives the shareholder a disproportionate voting weight and allows her to cast a maximum of 500 votes for a favored director D. statutory voting gives the shareholder a disproportionate voting weight and allows her to cast a maximum of 1500 votes for a favored director

a

An investor who holds a warrant for ABC corporation would profit most when the market value of the company's stock does which of the following? A. rises high above the warrant's strike price B. reaches the warrant's strike price C. drops far below the warrant's strike price D. reaches its par value

a

How is shareholder's equity calculated on a company's balance sheet? A. subtracting total liabilities from total assets B. subtracting total assets from total liabilities C. subtracting current liabilities from current assets D. subtracting current assets from current liabilities

a

In a "regular way" settlement most securities must be delivered and paid for no later than how many days from the transaction date by a broker-dealer: A. 2 business days B. 3 business days C. 3 calendar days D. 5 business days

a

One of the privileges of owning common stock is the right to vote for members of BOD. The method of voting that favors small and minority shareholders is referred to as A. cumulative voting B. statutory voting C. in-person voting D. proxy voting

a

Shareholders approval is needed to: A. issue stock options to executives B. declare a preemptive rights to distribution C. declare a cash dividend D. declare a stock dividend

a

The market value of preferred stock is based primarily on: A. rising and falling interest rates B. the issuer's earnings and losses C. the stock's protective provisions D. the stock's capital gains

a

What are stock dividends? A. additional shares of company stock granted to shareholders B. a specific type of stock issued by some corporations C. additional shares of company stock purchased with distributed cash D. rights granted to current shareholders allowing them to purchase shares of company

a

Which statement is TRUE when comparing preferred stock to common stock: A. preferred dividends are paid before common B. both preferred and common stock has voting rights C. preferred shareholders have a junior claim to assets upon liquidation after common shareholders D. preferred interest is paid semi-annually

a

A corporation's issuance of a new shares in a 4-for-1 stock split would A. increase the book value per share of common shares B. decrease the book value per share of common stock C. increase total stockholder's equity D. decrease total stockholder's equity

b

A customer gives the right to vote his shares on his behalf at the company's annual meeting to someone else. Which statement is TRUE? A. this is known as a proxy and once given, it cannot be revoked B. this known as a proxy which may be revoked prior to the annual meeting C. this is known as a voting trust and once given, it cannot be revoked D. this is known as a voting trust which may be revoked prior to the annual meeting

b

ABC 10% $100 par preferred is trading at $120 in the market. The current yield is: A. 5% B. 8.33% C. 10% D. 12%

b

ABC 8% $100 par preferred is trading at $105 in the market. The current yield is: A. 6.6% B. 7.6% C. 8.6% D. 10.6%

b

ADRs trade in: A. the foreign currency that underlies the ADR B. U.S. dollars C. a combination of foreign currency and U.S. dollars D. a special exchange rate that takes into consideration how much foreign currency can purchase one U.S. dollar

b

All of the following securities typically have maturities of less than a year, except: A. commercial paper B. warrants C. rights D. options

b

American Depositary Receipts may best be described as: A. bank certificates issued by U.S. depositary banks B. receipts for shares of foreign stock held in a foreign branch of an American bank C. bank certificates issued by the U.S. National Bank D. foreign stock issued by the U.S. National Bank

b

Among common types of investments, common stock offers investors the greatest reward potential becauseL A. returns are guaranteed B. the value of the stock increases with the growth of the company C. the stock is pegged to the rate of inflation D. an investor can never lose more than they contributed

b

An anti-dilution agreement: A. prevents companies from holding additional issues of shares after the IPO B. gives shareholders the right to keep their percentage ownership in the event of a new issue of shares C. requires the company to give shareholders free shares in the event of a new issue of shares D. requires shareholders to maintain a certain percentage holding in the company

b

Dawn owns 100 shares of ACME Company common stock, currently trading at $60 per share. She receives a notice that ACME has declared a 20% stock dividend. What does this mean to Dawn? A. dawn's stock will increase in value by 20% per share B. dawn will receive 20 additional shares of stock C. dawn will receive $20 in cash from ACME Corporation D. dawn's stock will decrease in value by 20% per share

b

Halle buys 5 shares of Amazing Inc. for a total of $175. Amazing Inc. has one million shares outstanding. What is Amazing Inc.'s market capitalization? A. $175 million B. $35 million C. $1 million D. $5 million

b

How often are dividends paid? A. monthly B. quarterly C. semiannually D. annually

b

In a corporate liquidation, common shareholders are paid: A. before bondholders and preferred stockholders B. after bondholders and preferred stockholders C. after bondholders but before preferred stockholders D. before all creditors

b

Subscription rights typically expire after two to four: A. days B. weeks C. months D. years

b

The exercise price of a warrant is set at issuance at: A. a discount to the market price of the common stock B. a premium to the market price of the common stock C. the market price of the common stock D. any price designated by the issuer

b

Which of the following investments is most likely to be subject to exchange risk? A. an exchange-traded stock B. an American depository receipt C. a callable bond D. a treasury bill

b

Which statement is TRUE regarding warrants? A. warrants are typically issued with an exercise price that is higher than the stock's current market price and would be exercised when the stock's market price is below the warrant strike price B. warrants are typically issued with an exercise price that is higher than the stock's current market price and would be exercised when the stock's market price is above the warrant strike price C. warrants are typically issued with an exercise price that is lower than the stock's current market price and would be exercised when the stock's market price is below the warrants strike price D. warrants are typically issued with an exercise price that is lower than the stock's current market price and would be exercised when the stock's market price is above the warrant strike price

b

All of the following terms describe rights EXCEPT? A. exercisable B. negotiable C. redeemable D. giftable

c

How often are shareholder meetings typically held? A. quarterly B. semiannually C. annually D. every 2 years

c

Howard & Phillip issued 15 million shares last year. The company now has 5 million treasury shares. The shares price of the company's stock is $10. What is Howard & Phillip's market capitalization? A. $10 million B. $50 million C. $100 million D. $150 million

c

If interest rates fall, issuers most likely will call: A. all preferred issues B. any preferred issue close to maturity C. preferred issues trading at a premium D. preferred issues trading at a discount

c

Participating preferred stock specifically allows what? A. investors to participate in dividends B. investors to transfer their shares to common stock at some time in the future C. investors to receive extra dividends when the company exceeds some predetermined financial goals D. issuers to call back the stock at their discretion

c

Regular way settlement for corporate securities is: A. the same day as the trade date B. one business day after the trade date C. two business days after the trade date D. five business days after the trade date

c

Shareholders may get to vote on all of the following except? A. a stock split B. an acquisition C. whether a dividend will be paid D. board member selection

c

The market value of which of the following kinds of preferred stock is least dependent on market interest rates? A. participating preferred stock B. cumulative preferred stock C. convertible preferred stock D. callable preferred stock

c

The number of shares outstanding: A. always includes all authorized shares B. always includes all issued shares C. never includes treasury shares d. could include treasury shares depending on the situation

c

What does T+2 mean in the securities industry? A. that a security will settle 2 calendar days after the trade date B. that a customer will receive a dividend within 2 calendar days of the trade date C. that a security will settle 2 business days after the trade date D. that a customer will receive a dividend within 2 business days of the trade day

c

What is the purpose of a company's income statement for potential investors? A. the income statement gives investors details on the company's liabilities B. the income statement gives investors the company's net worth C. the income statement gives investors information as to whether the company has been profitable during a specified period of time D. the income statement forecasts future earnings growth

c

Which of the following is not true of treasury stock? A. it has been removed from public circulation B. it never pays dividends C. it is no longer considered issued stock D. it comes with no voting rights

c

Which of the following pay dividends? A. rights B. warrants C. ADRs D. bonds

c

X Corporation stock has been trading at $1,200 per share recently and trading volume has fallen to record lows. To increase trading volume, the X Corporation may: A. perform a reverse split to reduce the number of shares outstanding B. suspend trading for a month period to create a market for its stock C. split the stock three-for-one to make its price more attractive D. reverse split the stock one-for-three to increase its price

c

Your client owns 1000 shares of LMN corporation stock trading at $8 per share. LMN declares a 2:5 reverse stock split. After the split, your client would own: A. 2500 shares worth$8 per share B. 2500 shares worth $3.20 per share C. 400 shares worth $20 per share D. 400 shares worth $16 per share

c

All of the following are rights given to common stockholders EXCEPT: A. right to create a voting trust B. right to inspect corporate books C. right to retrain radical corporate acts D. right to adjust executive officer salary

d

All of the following statements regarding company balance sheets are true EXCEPT: A. balance sheets aren broken into assets, liabilities and stockholder's equity B. balance sheets provide a snapshot of a company's fiancial well-being on a specific date C. shareholders equity is the value of the company that shareholders' own D. balance sheets should show stockholder's equity equalling the sum of total assets and total liabilities

d

Assume the par value for a cumulative preferred stock is $100, and that the stated dividend on the cumulative preferred stock is 3%. An investor purchased the cumulative preferred stock two years ago. Two years ago, the Board of Directors declared no dividend. Last year, the Board also declared no dividend. This year, the Board wishes to declare a dividend of 3% to the common shareholders. How much must be paid to the cumulative preferred stockholders before paying dividends to others? A. $0 B. $3 C. $6 D. $9

d

Dividends are ____ an expense and they ____ required to appear on the income statement A. are, are B. are, are not C. are not, are D. are not, are not

d

In a corporation liquidation, common stockholders are paid: A. first B. after creditors but before preferred stockholders C. after bondholders but before preferred stockholders D. last

d

Voting of the common stockholder is NOT required for which of the following? A. when a corporation wishes to issue convertible securities B. when a shareholder decides to accept a tender offer for the company's shares C. when a corporation declares a stock split D. when a corporation declares a cash dividend

d

What is a settlement date: A. the date a security is sold or purchased B. the date an exchange receives an order C. the date an exchange executes an order D. the date ownership of a security changes

d

Which of the following actions by a corporation would be prohibited? A. making a cash distribution to shareholders B. making a stock distribution to shareholders C. repurchase its own shares in the public markets D. distributing tax credits to shareholders

d

Which of the following characteristics apply to preferred stock? A. it typically has a maturity date printed on the face of the certificate B. it is always issued with a par value of $100 C. in bankruptcy, its standing is inferior to common stock D. the annual dividend is set at issuance and stated in the prospectus

d

Which of the following statements is MOST accurate regarding warrants? A. warrants are typically issued to employees of a corporation B. warrants cannot be traded as a separate security C. warrants must always be given to investors during an initial public offering D. warrants give an investor the right to buy shares of a security at a particular price

d

Which statement is TRUE about preferred stock? A. when interest rates rise, preferred stock price rise B. interest rates and preferred prices move in the same direction C. preferred stock dividends are typically adjusted for interest rate swings D. when interest rates fall, preferred stock prices rise

d