THE STOCK MARKET

Question 1

Can participate through voting on specific decisions like board of directors

Answer 1

EQUITY

Question 2

Does not participate

Answer 2

Debt

Question 3

Subordinate to debt

Answer 3

Equity

Question 4

Prioritized over equity

Answer 4

Debt

Question 5

Least priority in terms of assets and income distribution

Answer 5

Equity

Question 6

Claim of creditors are satisfied before distributing to shareholders

Answer 6

Debt

Question 7

Type of Financing: Permanent

Answer 7

Equity

Question 8

Type of Financing: Temporary

Answer 8

Debt

Question 9

No Maturity Date

Answer 9

Equity

Question 10

Maturity date is based on what is stipulated in contract

Answer 10

Debt

Question 11

Higher risk; investors expect higher returns (through infinite capital appreciation)

Answer 11

Equity

Question 12

Lesser risk; return is limited to interest stipulated in agreement

Answer 12

Debt

Question 13

Cannot be claimed as tax-deductible expense by company

Answer 13

Equity

Question 14

Tax-deductible expense for company

Answer 14

Debt

Question 15

funds provided by the firm’s owners (investor or stockholder)

Answer 15

Equity

Question 16

portion in the statement of financial position which is the residual value of the company after deducting the liabilities from the assets

Answer 16

Equity

Question 17

the maximum amount of shares that is legally allowed to be issued
cannot be issued additional shares until it files amendment

Answer 17

Authorized Capital Stock

Question 18

the total amount of shares held by the shareholders

Answer 18

Outstanding Shares

Question 19

shares that are repurchase or bought back by the company from its shareholders

Answer 19

Treasury Shares

Question 20

shares that were issued by the company, whether outstanding or treasury shares

Answer 20

Issued Shares

Question 21

the rise in the value of an asset in relation to increase in its market price
since shares can be sold in secondary market, investors may sell shares they originally bought

Answer 21

Capital Appreciation

Question 22

payments made by corporations to shareholders representing the earning of the company
usually paid in quarterly, and some pays semi or annually
can be in form of cash, property, or own shares
based on current performance of the business

Answer 22

Dividends

Question 23

have distinct rights to be prioritized in terms of liquidation

Answer 23

Preference Shares

Question 24

has fixed periodic dividend payments

Answer 24

Preference Shares

Question 25

treated as quasi-debt where dividends associated with the shares are like interest payments on debt

Answer 25

Preference Shares

Question 26

dividends in arrears and the current dividend should be paid to preference shareholders before paying the ordinary shareholders

Answer 26

Cumulative

Question 27

retire or repurchase outstanding shares within a predetermined period of a time at a specified price

Answer 27

Callable

Question 28

convert the preference shares to a stated number of ordinary shares after a certain date

Answer 28

Convertible

Question 29

represent the true ownership of the corporation which is called the residual value to be received by the common stock shareholders after all claims of creditors and preference shareholders on the net assets are satisfied

Answer 29

Ordinary Shares

Question 30

T/F: Dividends are guaranteed unlike preference shareholders.

Answer 30

FALSE, not guaranteed

Question 31

T/F: Ordinary shareholders have limited liability where their obligation is up to the amount they have invested.

Answer 31

TRUE

Question 32

T/F: High returns in terms of dividends when the company is earning.

Answer 32

TRUE

Question 33

T/F: Two share is equivalent to one vote.

Answer 33

FALSE, one share only

Question 34

T/F: Has pre-emptive rights where ordinary shareholders are not permitted to retain their proportionate share in the company

Answer 34

FALSE, it is permitted

Question 35

instruments issued by companies to provide shareholders with the opportunity to preserve their fraction of corporate ownership

Answer 35

Stock Rights

Question 36

financial instrument which permits shareholders to buy additional shares from the company in direct proportion to the shares they own

Answer 36

Stock Rights

Question 37

long-term instruments that also allow shareholders to purchase additional shares of stock.

Answer 37

Warrants

Question 38

offered in conjunction with fixed income securities and act as a "sweetener", or financial enticement to purchase a bond or preferred stock

Answer 38

Warrants

Question 39

composed of exchanges and over the counters where the shares are issued and traded publicly

Answer 39

Stock Market

Question 40

________ where shares are purchased and sold face to face in a trading floor is called a __________

Answer 40

physical site, stock exchange

Question 41

refers to the market wherein shares can be traded by dealers that are connected electronically by computers

Answer 41

over the counter market

Question 42

T/F: The overall performance of stock market is measured through stock market indexes which represents the average of stock prices currently being traded.

Answer 42

TRUE

Question 43

T/F: Investors use stock market indexes to gain some insight on how a group of stocks could have performed in the market.

Answer 43

TRUE