S6 Securities Markets, Investment Securities, & Economic Factors (Kaplin) Flashcards Preview

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Flashcards in S6 Securities Markets, Investment Securities, & Economic Factors (Kaplin) Deck (76)
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1

Prospectus

- the legal document that states a new issue security price, delivery date, & underwriting spread, as well as other material information.

- it must be given to every investor who purchases a new issue of registered securities

2

Net Worth

- A-L= NW
- A=L+NW

3

Dealer

- a firm acts as a dealer when it buys or sells security for its own account and add its own risk, then charges the customer a markup or markdown

4

Broker

- when executing trade orders on behalf of the customer (others)

- an individual or firm that charges a fee or commission for executing buy and sell orders submitted by another individual or firm

5

Market Maker

- a dealer willing to accept the risk of holding a particular security in its own account to facilitate trading in that security

6

Common Stock can be classified in 4 ways:

1. Authorized
2. Issued
3. Treasury
4. Outstanding

7

Authorized Stock

- The number of shares of stock that a corporation may issue. This number of shares as stipulated in the corporation state approved charter

- may be changed by a vote of the corporation stockholders

8

Issued Stock

- Equity securities authorized by the issuers registration statement and distributed to the public

9

Treasury Stock

- was outstanding stock before it was repurchased by the insurer

-equity securities that the issuing corporation has issued & repurchased from the public at the CMP

- NO VOTING
- NO DIVIDENDS

10

Outstanding Stock

- Equity securities issued by a corporation and in the hands of the public

- I-T=O/S

11

Book Value

- current hypothetical liquidation value of a share

12

Par Value

- an arbitrary accounting value

13

The Privileges of Common Stock Ownership

1. Voting Rights: DONT vote on dividends (when declared & how much). DO vote on stock splits, memberships on the BOD

2. Preemptive Rights: maintain their proportionate share

3. Dividends: cash or additional stock

14

Voting
(common stock)

1. Statutory: allows a stockholder to cast one vote per share owned for each item on a ballot

2. Cumulative: allow stockholders to allocate their boats in any manner they choose (advantageous for small shareholders)

15

Limited Liability

- and investors right to limit potential losses to know more then the amount invested

- A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of their investment in the company

- if a company with limited liability is sued, then the plaintiffs are suing the company not its owners or investors

- AKA: common stock is non-assessable b

16

Common Stock is the most ______ security

- junior (last in liquidation priority list)

17

Capital Appreciation

- is an increase in the price or value of assets

18

Market Risk

- The tendency for securities to move with the market

19

Business Risk

- includes speculative nature of the business, the management of the business, the philosophy of the business and so on

20

Round Lot

- 100 shares

21

If ABC Corporation stock is purchased at its trading day low ($71), how much does an investor pay for a round a lot?

- $71*100=$7,100

22

Preferred Stock

- purchases for income & safety

- LIKE A BOND, preferred stock is issued with a fixed stated rate

23

Preferred Stock Par Value

- $100

24

Preferred Stock Ownership Privileges

- except for rare instances, preferred stock does NOT have voting or preemptive rights

25

Categories of Preferred Stock

- straight preferred: no special features

- cumulative preferred: ant dividends in arrears must be paid prior to paying a common dividend

- convertible preferred: the owner can exchange each preferred share for shares of common stock

- participating preferred: entitled to its stated dividend & also to additional dividends as a specified % of dividends on common stk, if declared

26

Current Yield

- annual div/CMP

27

American Deposit Receipts (ADRs)
(negotiable certificate)

-a negotiable certificate representing a given number of shares of stock in a foreign corporation. It is bought and sold in the American securities markets

- is a document guaranteeing the payment of a specific amount of money

- NO voting rights
- NO preemptive rights

28

ADR owners are subject to ________ risk

-currency

29

The owner of an ADR is likely to receive which of the following?

1. Dividends
2. Capital gains or losses
3. Both dividends and capital gains or losses

4. Neither dividends nor capital gains or losses

-both dividends and capital gains or losses

30

Rights

- short term

- offered to existing shareholders with preemptive rights

- allows stockholders to purchase, talk below the current market price