Equities Flashcards
(22 cards)
What is authorized stock?
Total nu.ber if common shares authorized. Includes all issued and unissued shares.
How to calculate market capitalization?
Number of outstanding shares multiplied by the current market price
What type shares make up issued shares?
Outstanding shares and treasury shares
Regular way settlement duration?
T+1
One business day after the Trade date
When does stock buyer become the owner of record?
When settlement occurs. One business day after the Trade date
What are preemptive rights?
Gives current shareholders the right to buy a certain number of shares at a reduced price prior to the issuance of new shares to the public so they can maintain their proportional ownership of the company.
Items that require a shareholder vote?
- Declare a stock split
- Declare a reverse stock split
- Issue convertible bonds or preferred shares
- Issue stock options to officers on a preferential basis
Items that do not require a shareholder vote?
- Declare a cash dividend
- Declare a stock dividend
- Declare a preemptive rights distribution
What happens to earnings per share when a company does a stock buyback?
The earnings per share increases because the number of common shares outstanding decreases
Statutory voting
Most common method.
Votes must be cast evenly
Cumulative voting
The shareholder may divide their total votes in whatever manner they choose.
Proxy voting
Shareholders not attending the annual shareholders meeting must recieve ballots from the company. These ballots are called proxies
What rights do preferred shares not have?
- Right to vote
- Preemptive rights
Cumulative preferred stock
If the issuer does not pay, missed payments accumulate and must be paid prior to making any other dividend payments
Cumulative preferred stock
If the issuer does not pay, missed payments accumulate and must be paid prior to making any other dividend payments
Callable preferred stock
The issuer has the right to redeem the shares after a set date. When stock is called, the shareholder will typically receive the pay value. Issuers may call in shares when interest rates fall, then issue new preferred shares at the current lower rates. Typically pay higher dividends than noncallable issues
Convertible preferred stock
Shareholders can exchange their preferred shares for common stock at a predetermined price. Typically pay lower dividends than noncomvertible issues
Participating preferred stock
In addition to the fixed dividend rate, participating preferred shareholders may also be given additional dividends if declared by the board of directors
How to calculate current yield (CY)?
Annual income from security / market price of security
Warrants
Is a long-term option to buy stock at a fixed price. Usually priced quite a bit above market price and become more valuable as stock price rises. Typically attached to a new stock or bond issue as an extra incentive. Although received as part of a packaged unit, a warrant is a separate security that can be traded by itself
Perpetual warrants
Warrants usually have a life of 5 years, Perpetual warrants have NO expiration
American Depositary Receipts (ADRs)
Purpose is to facilitate the trading of foreign securities in the U.S. without having to go through process to trade on the stock exchange. Although priced in USD, subject to currency exchange rate risk (currency risk)
