Chapter 1 - Equity Securities Flashcards
(30 cards)
Which of the following is true regarding a limited partner who has invested in a limited partnership tax shelter?
A) The limited partner has flexibility regarding choosing the types of investment made by the partnership.
B) Limited Partners have limited liability and possible tax write-offs against other passive income for the limited partner.
C) The limited partner has considerable control over management.
D) Because of the tax shelter aspect of limited partnerships, income to the limited partners is always tax-free.
B) Limited Partners have limited liability and possible tax write-offs against other passive income for the limited partner.
A client is a new investor in common stock and wants to know what her rights are as shareholder in the company she bought. Her broker should highlight which of the following?
A) Annual dividend payments are guaranteed
B) Shareholders don’t have the right to sue the Board of Directors for it’s negligence
C) Shareholders are not eligible for receipt of pre-emptive rights
D) Shareholders have a right to part of the assets of the corporation should it liquidate
D) Shareholders have a right to part of the assets of the corporation should it liquidate
In a limited partnership, which one of the following would represent the least potential for a conflict of interest?
A) The general partner is allowed to lend money to the limited partnership.
B) The general partner owns leases next to leases owned by the limited partnership.
C) The general partner has a substantial amount of funds at risk in the limited partnership.
D) The general partner is allowed to borrow money from and lend money to the limited partners.
C) The general partner has a substantial amount of funds at risk in the limited partnership.
A corporation has authorized common stock of 10MM shares. 8MM shares have been issued and 4MM shares are Treasury Stock. Which of the following is true?
A) 14MM shares are outstanding
B) 10MM shares are outstanding
C) 8MM shares are outstanding
D) 4MM shares are outstanding
D) 4MM shares are outstanding
Crystal Keep is a publicly traded company. It declares a dividend on May 9th for shareholders of record as of May 17th. The dividend is paid on June 5th. On which date does the investor incur a tax liability for this dividend?
A) June 5th
B) June 3rd
C) May 9th
D) May 17th
A) June 5th
Which of the following securities could pay a dividend in cash or in other securities?
A) Common Stock
B) Mutual Funds
C) Municipal Bonds
D) Corporate Bonds
A) Common Stock
REITs (Real Estate Investment Trusts) have which feature?
A) REITs pass profit and losses on to their shareholders
B) 90% of all investment income must be passed onto shareholders in order to ensure special tax treatment.
C) Any profits passed onto shareholders of a REIT are not taxable until the REIT shares are sold.
D) Income received is exempt of federal taxation.
B) 90% of all investment income must be passed onto shareholders in order to ensure special tax treatment.
Which of the following risks is NOT normally a major factor when analyzing ADRs (American Depository Receipts)?
A) Risks associated with changes in inflation
B) Risks associated with changes to legislators and political climate
C) Risks associated with the call of such securities by the issuers
D) Risks associated with fluctuations in currency exchange rates
C) Risks associated with the call of such securities by the issuers
A corporation that issued several types of securities is being liquidated. Investors who own which of the following securities will have the most junior claim to company assets?
A) Common Stock
B) Convertible Bonds
C) Preferred Stock
D) Collateral Bonds
A) Common Stock
Which of the following securities have over time best kept up with inflation?
A) Highly rated Corporate Bonds
B) Highly rated Municipal Bonds
C) Callable Preferred Stock
D) Common Stock
D) Common Stock
All of the following are rights of common stockholders EXCEPT?
A) To vote for members of the board of directors
B) To inspect the corporate books
C) To receive a pro rata share of dividends declared by the board of directors
D) To vote for the amount of stock dividends they will receive.
D) To vote for the amount of stock dividends they will receive.
A stock dividend would be paid on which of the following securities?
A) Common Stock
B) Preferred Stock
C) Treasury Notes
D) Treasury Bills
A) Common Stock
When existing shareholders are given the opportunity to subscribe to additional shares that are offered by the corporation, this is called a(n)
A) secondary offering
B) preemptive rights offering
C) equity option
D) stock dividend
B) preemptive rights offering
A correct statement concerning the federal tax treatment of a “qualified” Real Estate Investment Trust (REIT) is that it is:
A) Permitted to carry over any operating losses
B) Not subject to the pass-through tax treatment
C) Must pay out a specified portion of its ordinary income as dividends
D) Not taxed on retained earnings
C) Must pay out a specified portion of its ordinary income as dividends
A company would most likely include warrants in a new distribution of what type of issue?
A) common stock
B) debentures, to secure a lower interest rate
C) preferred stock
D) convertible bonds to secure a higher interest rate
B) debentures, to secure a lower interest rate
A security which gives the holder the privilege of investing in a company’s stock at a pre-determined price at any time, over a long period of time is known as a
A) coupon
B) right
C) bond
D) warrant
D) warrant
Which of the following is incorrect regarding supervoting shares? They?
A) Are issued by corporations
B) Are considered preferred stockholders
C) Permit a limited number of stockholders to retain control of a company
D) provide shareholders with more than one vote per share as compared to another class of stock issued by the same company.
B) Are considered preferred stockholders
Which of the following securities receives no dividends and has no voting rights?
A) American Depository Receipts (ADR)
B) Preferred Stocks
C) Treasury Stocks
D) Common Stocks
C) Treasury Stocks
Of the following assets, which are most likely to be included in the investment portfolio of a real estate investment trusts (REITs)?
A) Farmland and Parks
B) Airports and Stadiums
C) Single Family Housing and Raw Land
D) New Apartment houses and shopping centers
D) New Apartment houses and shopping centers
Mr. Smith has owned 400 shares of ABC common stock for several years. ABC announces a 3:2 stock split. How many additional shares of ABC will Mr. Smith own after the stock split?
A) 200 shares
B) 400 shares
C) 600 shares
D) 1200 shares
A) 200 shares
When the owner of common stock receives Proxy Material, which of the following do they then have?
A) First choice on new shares being issued by the company
B) their right to vote has been waived
C) the right to vote their shares in the voting matter presented at the shareholders meeting
D) the right to set the amount of the next dividend to be paid to the shareholders
C) the right to vote their shares in the voting matter presented at the shareholders meeting
When a common stock has had a long record of growth, quality management, and services, and consistently pays a moderate dividend, it would generally be referred to as a:
A) Blue Chip Stock
B) Growth Stock
C) Income Stock
D) Defensive Stock
A) Blue Chip Stock
ABC Corp has declared a cash dividend to owners of record July 17th. The last date for the customer to buy the stock regular way and still receive the dividend is:
A) July 11th
B) July 16th
C) July 17th
D) July 18th
B) July 16th
A Preemptive Rights clause in a corporate charter is included to:
A) allow the new investors to gain access to shares
B) protect the existing shareholders from dilution of shares
C) give control people the right to sell their shares prior to the issuance of rights
D) require the corporation to repurchase shares from existing shareholders at predetermined intervals
B) protect the existing shareholders from dilution of shares
