Kaplan SIE Unit 1: Equity Securities

authorized stock

number of shares a company is authorized to issue as specified in the corporate charter

issued stock

authorized stock that has been sold to investors

outstanding stock

all shares that a company has issued that are in the hands of investors

issued stock - treasury stock = outstanding

treasury stock

stock that is issued by a corporation and then later bought back

market cap calculation

(# of outstanding shares)*(CMV of share)

large-cap stock

market cap in excess of $10 billion

mid-cap stock

Market cap between $2 billion and $10 billion

small-cap stock

market cap between $250 million and $2 billion

blue-chip stocks

stocks with a long history of steady dividend payments

penny stocks

unlisted securities trading at less than $5 per share

What must penny stock customers be given?

a risk disclosure document and a monthly account statement

What must a representative determine when cold-calling about penny stocks?

Suitability based on customer's financial situation and objectives.

What must a customer do regarding suitability when dealing with penny stocks?

Sign and date the suitability statement

What determines an established customer to a representative cold-calling about penny stocks?

If the customer has deposited into an account held with the broker-dealer for at least one year

OR

Made at least 3 penny stock purchases of different issuers on different days

Who is exempt from the suitability statement when cold-calling about penny stocks?

established customers

How often are cash dividends paid if the board of directors decides to pay one?

quarterly

stock dividend

dividend in the form of additional shares of common stock to current stockholders

How is the cost per share of a stockholder's common stock adjusted when a stock dividend is declared?

adjusted downward so the total cost of shares owned by each shareholder does not change

What is the process for distributing cash dividends?

declaration date, ex-dividend date, record date, payable date

declaration date

The date on which a company's board approves a dividend payment.

What does the declaration date set besides the dividend payment?

The record and payable dates.

ex-dividend date

stock must be purchased before this FINRA- or exchange- declared date for the buyer to receive a dividend

record date

the date when the company determines ownership of outstanding shares for dividend purposes

payable date

The date the dividend checks will be mailed by the corporation's dividend disbursing agent

statutory voting rights for common stockholders

one vote per share owned for each item on a ballot

cumulative voting rights for common stockholders

one vote per share owned that can be allocated on the ballot in any manner the stockholder chooses

preemptive rights of common stockholders

right to purchase additional shares that a corporation wants to issue to keep their proportionate ownership in the company

Describe the two ways in which the annual dividend from preferred stock can be issued

fixed dollar amount or % of par value

straight (noncumulative) preferred stock

stated dividend payment only that the company does not have to make up if missed

cumulative preferred stock

accrues payments to shareholders if dividends are reduced or suspended

dividends in arrears

preferred dividends that were supposed to be declared but were not declared during a given period

callable preferred stock

preferred stock that can be bought back by the company at a stated price after a specified date

convertible preferred stock

Preferred stock with an option to exchange it for a fixed number of shares of common stock

adjustable-rate preferred stock

preferred stock on which the quarterly dividends fluctuate with the market interest rate

participating preferred stock

preferred stock that pays fixed dividends and additional share of corporate profits once all dividends are paid