Equity Securities

Question 1

Securities Act of 1933

Answer 1

“The Paper Act” requires prospectus and full disclosure filings for all non-exempt new issue securities, such as corporate stock and bond offerings.

Question 2

Securities Exchange Act of 1934

Answer 2

” The People Act” Created the SEC

Question 3

The Maloney Act of 1934

Answer 3

Established SROs, to regulate the over-the-counter market.

Question 4

Security

Answer 4

A financial instrument that trades for value based on the expectation of profit from the efforts of third-party management.

Question 5

To be considered a security

Answer 5

It must be easily transferable between parties.
It s owner must be subject to the risk of loss of a portion or the entire principle.

Question 6

Capital Structure

Answer 6

The sum of all issued securities of a corporation.

Question 7

Net Worth

Answer 7

Assets - Liabilities

Question 8

Balance Sheet

Answer 8

summarizes a company’s assets, liabilities, and share holder equity.

Question 9

Stated Value

Answer 9

value assigned to a corporation’s no-par stock on its financial statements.

Question 10

Income Statement (Profit and Loss Statement)

Answer 10

a financial statement that shows a company’s performance over a specific accounting period ( such as a fiscal year)

Question 11

Operating Margin

Answer 11

(Sales - Cost of Goods Sold - Selling, General & Administrative Costs) / Sales

Question 12

Net Profit Margin

Answer 12

Taxes - Preferred Dividend) / Sales

Question 13

Net Working Capital

Answer 13

Current Assets - Current Liabilities

Question 14

Current Ratio

Answer 14

Current Assets / Current Liabilities

Question 15

Common Stock Ratio

Answer 15

(Par Value of Common + Retained earnings + Paid-in Capitol) / Total Long-term Capitalization (Stockholders Equity + Bonds)

Question 16

Quick Ratio ( ACID TEST)

Answer 16

( Current Assets - Inventory) / Current Liabilities

Question 17

Bond Ratio

Answer 17

Par Value / Total Long-term Capitalization

Question 18

Earnings per Common Share

Answer 18

(Net Income - Preferred Dividend) / Common Shares Outstanding

Question 19

Fully dilutes Earnings Per Share

Answer 19

( Net Income + convertible bond interest) / (Outstanding common shares + common shares resulting from conversion)

Question 20

Price/Earnings Ratio

Answer 20

Market Price / Earnings Per Share

Question 21

Dividend Payout Ratio

Answer 21

Annual Dividend / Earnings per share

Question 22

Current Yield

Answer 22

Annual Dividend / Market Stock Price

Question 23

Cash Flow

Answer 23

Net Income (or Loss) + Current Depreciation + Amortization

Question 24

Debit/Equity Ratio

Answer 24

Total Liabilities / Stockholders Equity

Question 25

Inventory Turnover Ratio

Answer 25

Cost of Goods Sold / Average Inventory

Question 26

Net Profit Margin

Answer 26

(Net Profit - Preferred Dividend) / Sales

Question 27

Interest Coverage Ratio

Answer 27

Earnings before Interest and Taxes / Interest Expense

Question 28

Book Value Per Share

Answer 28

(Total Shareholder Equity - Preferred Equity) / Total Outstanding Common Shares

Question 29

Return on Common Equity

Answer 29

Net Income After Preferred Dividend / Common Stockholders Equity

Question 30

Outstanding Stock

Answer 30

Issued - Treasury

Question 31

Market Cap

Answer 31

The number of outstanding common shares multiplied by the market price per share

Question 32

T-2

Answer 32

Settlement date is normally 2 business days after trade date. ( Corporate Securities, municipal bonds, and government agency bonds)

Question 33

T - 1

Answer 33

Settlement date is normally 1 business day after trade date ( Government notes and bonds)

Question 34

Cash Settlement (T)

Answer 34

Settlement same day as trade

Question 35

Dividend Yield

Answer 35

Annual dividend / current share price