Chapter 8 Flashcards Preview

Investments Test 2 > Chapter 8 > Flashcards

Flashcards in Chapter 8 Deck (49):
1

A security representing ownership in a corporation

Stock

2

A document creating a corporation

Certificate of incorporation

3

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

Charter

4

A document specifying the relationship between a corporation and its stockholders

Bylaws

5

The rights of stockholders to vote their shares

Voting rights

6

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

Director

7

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

Cumulative voting

8

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

Preemptive right

9

Sales of new securities to existing stockholders

Rights offering

10

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

Dividend

11

Steady dividend payments that are distributed at regular intervals

Regular dividends

12

A sum paid in addition to the firms regular dividend

Extra dividend

13

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

Irregular dividends

14

The ratio of dividends to earnings

Payout ratio

15

The ratio of earnings not distributed to earnings

Retention ratio

16

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

Date of record

17

Stock that trades exclusive of any dividend payment

Ex-dividend

18

The day on which a stock trades exclusive of any dividends

Ex-dividend date

19

The date on which a dividend is paid to stockholders

Distribution date

20

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

Dividend reinvestment plan (DRIP)

21

A dividend paid in stock

Stock dividend

22

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

Recapitalization

23

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

Dilution

24

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

Stock split

25

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

Preferred stock

26

Cumulative preferred dividends that have been not paid

Arrearage

27

A preferred stock whose dividends accumulate if they are not paid

Cumulative preferred stock

28

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

Non cumulative preferred stock

29

An analysis of a firm over a period of time

Time-series analysis

30

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

Cross-sectional analysis

31

Current assets dividend by current liabilities; a measure of liquidity

Current ratio

32

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

Quick ratio (acid test)

33

The speed with which inventory is sold

Inventory turnover

34

The number of days required to collect accounts receivable

Day sales outstanding (average collection period)

35

The speed with which a firm collects its accounts receivable

Receivable turnover

36

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

Fixed asset turnover

37

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

Total asset turnover

38

Percentage earned on sales after deducting the cost of goods sold

Gross profit margin

39

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

Operating profit margin

40

The ratio of earnings after interest and taxes to sales

Net profit margin

41

The ratio of earnings to total assets

Return on assets

42

The ratio of earnings to equity

Return in equity

43

The use of borrowed funds to acquire an asset

Financial leverage

44

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

Debt ratio

45

Having insufficient equity financing

Undercapitalized

46

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

Times-interest-earned

47

Earnings divided by preferred dividend requirements

Times-dividend-earned-ratio

48

The total earnings divided by the number of preferred shares outstanding

Earnings per preferred share

49

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

Statement of cash flows