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Investments Test 2 > Chapter 8 > Flashcards

Chapter 8 Flashcards

1
Q

A security representing ownership in a corporation

A

Stock

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2
Q

A document creating a corporation

A

Certificate of incorporation

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3
Q

A document specifying the relationship between a firm and the state in which it is incorporated

A

Charter

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4
Q

A document specifying the relationship between a corporation and its stockholders

A

Bylaws

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5
Q

The rights of stockholders to vote their shares

A

Voting rights

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6
Q

A person who is elected by stockholders to determine the goals and policies of a firm

A

Director

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7
Q

A voting scheme that encourages minority representation by permitting each stockholder to cast all of his or her votes for one candidate for the firms board of directors

A

Cumulative voting

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8
Q

The right of current stockholders to maintain their proportionate ownership in the firm

A

Preemptive right

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9
Q

Sales of new securities to existing stockholders

A

Rights offering

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10
Q

A payment to stockholders that is usually in cash but may be in stock or property

A

Dividend

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11
Q

Steady dividend payments that are distributed at regular intervals

A

Regular dividends

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12
Q

A sum paid in addition to the firms regular dividend

A

Extra dividend

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13
Q

Dividend payments that either do not occur in regular intervals or vary in amount

A

Irregular dividends

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14
Q

The ratio of dividends to earnings

A

Payout ratio

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15
Q

The ratio of earnings not distributed to earnings

A

Retention ratio

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16
Q

The day on which an investor must own shares in order to receive the dividend payment

A

Date of record

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17
Q

Stock that trades exclusive of any dividend payment

A

Ex-dividend

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18
Q

The day on which a stock trades exclusive of any dividends

A

Ex-dividend date

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19
Q

The date on which a dividend is paid to stockholders

A

Distribution date

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20
Q

A plan that permits stockholders to have cash dividends reinvested in stock instead of received in cash

A

Dividend reinvestment plan (DRIP)

21
Q

A dividend paid in stock

A

Stock dividend

22
Q

An alteration in a firms sources of finance, such as the substitution of long-term debt for equity

A

Recapitalization

23
Q

A reduction in earnings per share due to the issuing of new securities

A

Dilution

24
Q

Recapitalization that affects the number of shares outstanding, their par value, the earnings per share, and the price of stock

A

Stock split

25
Q

A class of equity whose claim is prior to that of common stock on the corporation’s earnings, and on its assets in case of liquidation or reorganization

A

Preferred stock

26
Q

Cumulative preferred dividends that have been not paid

A

Arrearage

27
Q

A preferred stock whose dividends accumulate if they are not paid

A

Cumulative preferred stock

28
Q

Preferred stock whose dividends do not accumulate if the firm misses a dividend payment

A

Non cumulative preferred stock

29
Q

An analysis of a firm over a period of time

A

Time-series analysis

30
Q

An analysis of several firms in the same industry at a point in time

A

Cross-sectional analysis

31
Q

Current assets dividend by current liabilities; a measure of liquidity

A

Current ratio

32
Q

Current assets excluding inventory dividend by current liabilities; a measure of liquidity

A

Quick ratio (acid test)

33
Q

The speed with which inventory is sold

A

Inventory turnover

34
Q

The number of days required to collect accounts receivable

A

Day sales outstanding (average collection period)

35
Q

The speed with which a firm collects its accounts receivable

A

Receivable turnover

36
Q

Ratio of sales to fixed assets; tells how many fixed assets are needed to generate sales

A

Fixed asset turnover

37
Q

Ratio of sales to total assets; tells how many total assets are used to generate sales

A

Total asset turnover

38
Q

Percentage earned on sales after deducting the cost of goods sold

A

Gross profit margin

39
Q

Percentage earned on sales before adjusting for non recurring items, interest, and taxes

A

Operating profit margin

40
Q

The ratio of earnings after interest and taxes to sales

A

Net profit margin

41
Q

The ratio of earnings to total assets

A

Return on assets

42
Q

The ratio of earnings to equity

A

Return in equity

43
Q

The use of borrowed funds to acquire an asset

A

Financial leverage

44
Q

The ratio of debt to total assets; a measure of the use of debt financing

A

Debt ratio

45
Q

Having insufficient equity financing

A

Undercapitalized

46
Q

Ratio of earnings before interest and taxes divided by interest expense; a coverage ratio that measures the safety of debt

A

Times-interest-earned

47
Q

Earnings divided by preferred dividend requirements

A

Times-dividend-earned-ratio

48
Q

The total earnings divided by the number of preferred shares outstanding

A

Earnings per preferred share

49
Q

An accounting statement that enumerates a firms cash inflows and cash outflows

A

Statement of cash flows

Investments Test 2 (4 decks)

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