Series 79 Flashcards
(105 cards)
1
Q
Current Yield
A
Annual Interest / Market Price
2
Q
Conversion Ratio
A
Par Value / Conversion Price
3
Q
Parity price of a bond
A
MV (Stock) * Conversion Ratio
4
Q
Parity price of a stock
A
MV (Bond) / Conversion Ratio
5
Q
Equity Value
A
Enterprise value - debt + cash OR Total Shares Outstanding * Stock Price
6
Q
Enterprise Value
A
Equity value + debt + preferred stock + NCI - cash
7
Q
Gross margin
A
Gross profit / sales
8
Q
Operating Margin
A
EBIT / sales
9
Q
EBITDA margin
A
EBITDA / sales
10
Q
Net Profit margin
A
Net income / sales
11
Q
Price to Earnings (P/E)
A
Price / EPS OR Equity Value / Net Income
12
Q
Price to Earnings Growth (PEG Ratio)
A
(P/E) / Annual Growth rate
13
Q
Price to Book value (P/B)
A
Equity Value / Book value of Equity
14
Q
Price to tangible book value
A
Equity value / (Book value of equity - goodwill)
15
Q
Dividend Yield
A
Annual dividend / stock price
16
Q
Dividend payout ratio
A
Annual dividen / Reported EPS
17
Q
Earnings yield
A
EPS / Stock Price OR 1 / (P/E)
18
Q
Interest Coverage Ratio
A
Adj. EBITDA / Interest expense
19
Q
Debt to EBITDA
A
Total Debt / Adj. EBITDA
20
Q
Net Debt to EBITDA
A
Net Debt / Adj. EBITDA
21
Q
Invested Capital
A
Average Equity + Average Net Debt
22
Q
Return on Assets
A
Net Income / Average Assets
23
Q
Return on Equity
A
Net Income / Average shareholders’ equity
24
Q
Return on invested capital
A
Adj. EBIT / Invested Capital OR
EBIAT / Invested capital
25
Return on Capital
Net Income / Invested Capital
26
Accounts Receivable Turnover
Sales / Average Accounts receivable
27
Days Sales outstanding (DSO)
(Accounts Receivable / Sales) * 365
28
Inventory Turnover
COGS / Inventory
29
Days Inventory Held (DIH)
(Inventory / COGS) * 365
30
Accounts payable turnover
COGS / Average accounts payable
31
Days payable turnover (DPO)
(Average accounts payable / COGS) * 365
32
Current Ratio
Current Assets / Current Liabilities
33
Quick Ratio
(Current Assets - Inventory) / Current Liabilities
34
Implied EV
Sales * (EV/Sales)
EBITDA * (EV/Sales)
EBIT * (EV/EBIT)
35
Implied Equity Value
Net Income * P/E multiple
36
Exchange Ratio
(offer price per share - cash per share) / Stock price of acquirer Co.
37
Securities Act of 1933
- Regulates the new issue market
| - Requires registration of securities before they are sold to the public
38
Securities Exchange Act of 1934
- Regulates secondary marketplace
- created SEC
- Requires registration of broker-dealers with SEC
- Requires financial reports
- Prohibits fraud (any manipulative or deceptive act, no exemptions from anti-fraud provisions, no such thing as accidental fraud)
- Defines corporate insiders (corporate affiliates - officer, director, or 10% shareholder of a ocmpany's stock)
39
Trust Indenture Act of 1939
- Corporate bonds to be issued with a Trust Indenture (set of covenants with obligations to the issuer and rights of the bondholder)
40
Cross default clause
Protects an investor if the issuer defaults on any other tranche of its capital structure
41
Penalties for Insider trader under '34 Act
civil - Treble damages (3x profits made or losses avoided)
| criminal - $5 mm and 20 years in prison
42
Insider Trading and Securities Fraud Enforcement Act of 1988
Misappropriation of Information - Someone uses non-public information to trade on someone other than employer
- Duty of Trust - violation when a person should have known the were using non-public information
43
Insider trading
- Married couple, wife an investment banker - husband violated duty of trust by reading info and trading
- employee of broker dealer accused of insider trading - broker-dealer can avoid liability by showing adequate supervisory procedures and employee wilfull violated these procedures (firing doesn't avoid liability)
44
Regulation FD
- Ensure fair disclosure of sensitive info to all investors!
- Disclosure of insider information requires disclosure to the public (intentional - requires simultaneous public disclosure; unintentional - requires public disclosure within 24 hours) CEO discloses to analysts - then needs to disclose via 8K press release
45
Financial Industry Regulatory Authority (FINRA)
Statutory disqualification - cannon be associated with a member firm w/o exemption waiver from FINRA (Rep arrested for shoplifting (misdemeanor) - notify compliance, then let things run their course)
46
Series 24
IB or sales and trading supervision
47
Series 9 / 10
General securities sales supervisor - Branch Office Manager
48
FINRA continuing education
Regulatory element - must be completed within 120 days of 2nd Anniversary as a registered rep and then every 3 years thereafter (if laps rep is said to be CE inactive - can't function or be paid a rep)
Annual - proctored by firm
49
Selling Away / Private securities transactions
Sells securites outside the juridiction of their firm
- Requires notification to the firm and requires supervision from the firm
- if for compensation, requires permission from the firm
50
Outside employment
- requires firm to be notifeid of full details of activity (don't need permission) (owing and managing a piece of real estate - just notification, not permission) Can't help raise equity for a friend on the side without permission
51
Brokerage account
- brokerage account at another firm. Opening firm must notify employer, and must also offer duplicate trade and account statments, must be done before initial trade in the account
52
Sharing in customer accounts
requires permission from firm, permission from customer, gains and losses must be proportional to each's contribution (Rep loans money to a client - allowed ifi client is a bank, client is family member)
53
Gift limitation
$100 per client per year (not a gift if you attend)
54
Compaints
Written complaints must be forwarded to a principal or supervisor. Customer must receive a written response in the form of a brochure.
55
Anti-Money laundering (Currency Transaction report)
Required for any cash deposits of >$10,000 in any single day
56
Suspicious Activity Report (SAR)
required for any suspicious acitivity ($9500 on 3 consecutive days)
- Rep is prohibited form telling a client when the form has been filed
57
AML Compliance
AML program is not subject to SEC approval
- must be reviewed annually by someone else at the firm
- Compliance person must be registered principal of the firm
58
Patriot Act Rule
- identity must be identified promptly after an account is opened
59
Office of Foreign assets control
List of countries and people with whom US doesn't do business - must report within 10 days
60
FINRA rules violations
Censure (warning), fine, suspension, retake a test, revoke registration (can't imprison)
61
Arbitration
Always results in monetary award (never jail)
- Intra-industry arbitration will be not public (people that work in the industry
- Involving a customer - arbitrators will be public- customer can't be forced to go to arbitration unless they sign an arb agreement
- Simplified arbitartion - $50k or less, single arbitrator will issue decision within 30 days (no appeal)
62
Mediation
mediator chose by parties or by FINRA as a way to avoid arbitration. If settment is reached, memo of understanding, parties must sign and it's binding
63
Declaration Date
company announces a dividne will be paid
64
Record date
Date at the end of trading, individual must be a shareholder to recive the dividend
65
Payable date
date the dividends are paid
66
Ex-dividend date
T+3; 3rd business day following trade date
67
DERP
Declartion, Ex-dividend, Record, Payable
68
Voting rights of Common
Statutory - one vote per share for each seat on the company's board
Cumulative - Aggregate all of thei votes and choose their own allocation
69
Preemptive rights
Offer stock to exisiting shareholders before offering to public (not common in US)
70
ADRs
Facilitate the domestic trading of foreign securities (banks purchase and hold)
Sponsored - registered with SEC by the issuer and only sponsored can be listed on the exchange
Unsponsored - bank will register the shares, trade over the counter (OTC)
71
GDRs
Almost same as ADRs, but listed overseas
| CAnadian companies do not list ADRS - common stock!
72
Warrants
pruchase company stock at a specific price; usually issued w another security (bond, preferred stock), used as a sweetener, once issued they are detachable
73
Bonds
Normal yield curve, Inverted yield curve (recessionary environment), humped yield curve
74
Rates
short-term rates affected by the FED, long-term rate affected by the market
Bond rates and bond prices have an inverse relationship - firm has 8% bond and 7% bonds are issued - then 8% bond is trading at a premium
75
Bonds
At par = Nominal Yield, Current Yield, and Yield to maturity are all the same
At a discount = (bottom to top) NY, then CY, then YTM, then YTC
At a premium = YTC, YTM, CY, NY
76
Zero bonds
Trade at a deep discount and they mature at par
77
Muni / Corp bonds
Assume 30/360 and T+3 settlement
78
Treasury Bonds
Actual days / 365 day year - T+1 settlement
79
Bond Risk
Interest rate risk (duration - measures change in price as interest rates change & Convexity - change in duration as interst rates change), call risk (risk of bond being called), reinvestment risk (as interest rates fall bonds run the risk of being recalled), credit risk
80
Bond ratings
AA to A+ is to notches down (AA+, AA-, A+); Ba1 and BB+ are the highest non-investment grade.
81
Debentures
backed by good faither and creid tof the issuer; Senior, Senior subordinated, junior, junior subordinated
82
Convertible Bonds
8% convertible corporate bond with a $40 conversion price (par value / conversion price) - assume $1000 par value so $1000/$40 = 25:1; market price where investor is indifferent between 2 options so parity price of bond with a conversion ratio of 25:1 = $1000; Similarly $36 * 25 = $900
83
Treasury Bills
4 weeks, 13 weeks, 26 weeks, 52 weeks;
zeros, no coupon - Bid is always listed first, then the ask. ***Bond Equivalent Yield on a treasury will be higher than it's discounted yield****
84
Treasury Notes
2 yrs, 3 yrs, 5 yrs, 7 yrs, 10 yrs (every other way identical to T bills)
85
Treasury Bonds
30 year maturity (***a plus denotes another point to the price (changes from 32 to 64))
86
Government Agencies vs. Government Sponsored Enterprises (GSEs)
GSEs not backed by full faith and credit of US govt. Implied guarantee
87
Securities Trading
OTC marketplace - negotiation between two parties - over the phone or electronically, trading away from an exchange; Bonds trade almost exclusively OTC
88
Nasdaq Stock Market
Listing requirements - $4 bid, 3 market makers
- Continued listing requirements: $1 bid, 2 market makers / 400 shareholders;
***no public float requirement, no daily trading activity requirements***, ***no required seasoning period****
Bid, Ask, Size (bid and ask) in round lots of 100; All nasdaq quotes by rule are firm quotes
89
OTC Pink
Non-exchange equity quotation facilities (don't trade...only look)
ONly for unlisted or Delisted stocks (only equities)
No eligibility critera - stock has to have a pulse as longas unlisted or delisted, must have one market maker - unpriced indication - subject quotes (not firm quotes)
90
OTC Bulletin Board
Must make financial information information available to buyers, must have a market maker, any price quote must be firm
91
Suitability Requirements
Appropriateness of a recommendation -
Reasonable basis suitability
quantitative suitability
customer specific suitability
- individual investors - requires an examinattion of their investment profile
- institutional investors - exampe from specific customer suitability as lonas a s investor can evaluate risk of hte transaction
92
Foreign Currency
Interest rates increase, strengthening a currency - investors will shift assets into that currency
Inflation - moderate inflation will strengthena currency
Political risk - political instability will weaken a currency
Foreign exporters - Want a strong dollar
US importers - want a strong dollar
Foreign importers and US exporters want a weak dollar
93
US Dollar based assets
Eurodollars - US collars on deposti outside the U.S.
Eurodollar bonds - US dollar bonds outside the US (neither of these are SEC registered)
Yankee bonds - USD bonds in the U.S., but issued by a foreign entity.
94
Economics
***CPI high for 4 consecutive quarters - prices up, rates up, bond yeild up, bond prices going down***
Producer price index - ****an increase in PPI will adversely affect manufacturers***
95
Recession
2 consecutive quarters of negative GDP growth; Recession proof stocks - utilities, food retailers, beer, cigarettes, cosmetics.
96
Economic indicators
Leading (6 months in future), lagging (evaluation of 6 months in the past), Coincident (snapshot - examples include inddustrial production index, monthly non-farm payrolls)
97
Interest rates
lowest to highest - Fed funds rate (overnight lending rate between banks, most volatile, changes daily, set by the market not the FED), Discount rate (lending rate form FED to a bank, set by Fed), Broker's Call Rate - from bank to broker-dealer, Prime Rate - from bank to customer (best lending rate)
98
Securities act of 1933
Regulates new issue market -
| - Registration is required for non-exempt securities in non-exempt transactions
99
C Corp
Unlimited number of shareholders, does not pass thorugh gains and losses (pays taxes)
100
S Corp
pass through gains and losses, entity pays no tax, 100 shareholders max, No institutional investors, will never be listed, investors must hold security for greater than 1 year in order to get favorable tax rate
101
Exempt Securities
US govt, Govt agencies, municipalities, short-term corp debt (commercial paper), securities issued by commercial banks,
102
REITS
75% of income from real estate or 75% of assets invested in RE and 90% of gain must be passed through to shareholders
103
MLPs
limited partnerships - public, listed on an exchange UNLIKE an s corp
104
Registration Statements
S-1 for IPO, S-3 for follow on, S-4 for M&A activity, S-8 for securities issued to employee benefit plans, S-11 for REITS
105
S-1
issuers business, use of proceeds, legal procceddings, capitalization table ****DONT need financial projections**** Affiliates - list of all corporate insiders, addresses, salaries, 5-year business histories; 2 years of BS, 3 years for CFS and IS. Refiling requirement if they become outdated - 130 days for large issuers (seasoned issuer or larger) other issuers become outdated after 135 days
