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Chapter 10 Flashcards

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1
Q

An equity security holder/shareholder has…

A
  1. The right to vote 2. The right to receive distributions 3. Right to receive net assets on liquidation (once creditors including bond holders) have been satisfied
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2
Q

Equity security

A

Security representing ownership interest in an enterprise (share)

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3
Q

Equity capital

A

Capital received by a corporation in return for issuance of stock

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4
Q

Debt security

A

A security representing an obligation of the corporation issuer (bond)

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5
Q

Bondholder

A

One to whom a debt is owed by corporation

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6
Q

Debt capital

A

Money received by a corporation in return for issuing debt securities

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7
Q

Dividend

A

A distribution of corporate profits

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8
Q

Common stock vs preferred stock

A

Common not safe, preferred expect steady income

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9
Q

Authorized shares

A

Number of shares the corp can issue as detailed in AOI

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10
Q

Outstanding shares

A

Shares issued by a corporation and held by investors

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11
Q

Outstanding shares

A

Only this type receives dividends and can vote

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12
Q

Treasury stock

A

Stock reacquired by a corporation and which is not outstanding

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13
Q

The AOI must

A

Authorize one or more classes of shares that together have unlimited voting rights and one or more classes of shares that together are entitled to receive the net assets of the corporation upon dissolution

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14
Q

Initially issuance of stock

A

Price set by directors

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15
Q

Par value

A

The lowest price a stock can be sold (AOI)

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16
Q

Watered stock

A

Stock sold for less than its par value

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17
Q

No par value shares

A

No minimum stated in AOI

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18
Q

Stated capital

A

Amount received by a corporation when stock is sold (at par value price)

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19
Q

Capital surplus

A

Amount received by a corporation in excess of a stocks par value (also called paid in capital)

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20
Q

Promissory note

A

An agreement to pay or repay money in the future

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21
Q

Uncertificated shares

A

Stock issued without actual stock certificates

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22
Q

Dematerialization

A

Moving from paper to electronic book entry (of stock etc)

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23
Q

Street name registration

A

Registration of securities in the name of a brokerage firm

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24
Q

Direct registration system

A

Registration of stock in purchasers name on the corporation books without paper certificate

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25
Transfer agent
Entity that processes and issues a corporations stock certificates
26
Registrar
An individual or entity that maintains a corporations list of shareholders
27
Scrip
Certificate showing ownership in a partial share (owner of scrip cannot exercise any shareholder rights vs owner of fractional shares which can)
28
29
For s corp status
Can only have 100 or less shareholders and must have only one class of stock
30
Residual interests
The interests of common stockholders who are entitled to assets remaining after others have been satisfied
31
Super voting stock
Stock that Carrie’s more than one vote per share
32
Cumulative distributions
Distributions that add up and must be paid once a corporation has funds to do so
33
Participating preferred stock
Stock that has the right to participate in other distributions as well as those built into the stock
34
Right to convert
Right to convert preferred stock into some other form of equity security, usually common stock
35
Redemption rights
Right to compel a stockholder or a corporation to sell or buy stock back
36
Sinking fund
Account kept for redemption of stock
37
Put
Right if shareholder to require corporation to redeem or repurchase shares
38
Series stock
Stock issued within one class including rights different from others and that can be issued without requiring shareholder approval if provide in AOI (black check stock)
39
Share subscription
Agreement to purchase stock
40
Option
Agreement by corporation granting a right to purchase shares at a specified price and time
41
Right
A short term option granted to an existing shareholder
42
Warrant
A long term option usually longer than 1 year often granted when a corporation borrows money
43
Debt financing
Obtaining capital for corporate operations through borrowing
44
Debenture
Unsecured debt
45
Acceleration clause
Clause in loan document allowing lender to require borrower to repay entire amount in event of some default
46
Demand note
A type of promissory note payment of which can be demanded at any time
47
Confession of judgement
Clause within a promissory note authorizing immediate court judgement in the event of nonpayment
48
Face value
Principal amount owed by debtor to creditor
49
Mortgage note
Document by which real estate is pledged as collateral to secure payment of a debt
50
Security document
Document by which personal property is pledged as collateral to secure payment of a debt
51
Financing statement
Document filed with sec of state to provide notice of a security interest
52
Trust indenture
Agreement entered into when numerous bonds are issued at once, specifying corporations and lenders rights
53
Redemption terms
Terms relating to a borrows right to pay off or redeem a debt prior to its maturity date
54
Conversion terms
Right of a lender to convert a debt security to an equity security
55
Priority
Process of making one obligation senior to others
56
Subordination
Process of making one obligation junior to others
57
Junk bond
Higher risk of default and provides higher yield
58
Thin capitalization
A high ratio of corporate debt to corporate equity
59
Inversion
Reincorporation of us company after a transaction with foreign company to take advantage of foreign countries lower tax rate
60
Accumulated earnings tax
Tax penalty imposed on corporations that retain earnings beyond reasonable business needs
61
Alternative tax minimum
Tax penalty previously (no longer) imposed on corporations to ensure that a certain minimum threshold amount of tax was paid
62
Franchise tax
State tax paid by corporations for privilege of being a corporate entity

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