Chapter 3 - Equity Securities

Flashcards covering key vocabulary and concepts related to equity securities from Chapter 3.

Equity Securities

Financial instruments representing ownership in a corporation and entitled to dividends.

Limited Liability

The legal principle that shields shareholders from being held personally responsible for the company’s debts.

Common Stock

A type of equity security that represents ownership in a corporation and typically has voting rights.

Preferred Stock

An equity security that generally does not have voting rights but has a higher claim on assets and earnings than common stock.

Treasury Stock

Shares that were once a part of the outstanding shares but were later repurchased by the company.

Outstanding Stock

Shares that are currently held by shareholders, excluding treasury stock.

Dividends

Payments made by a corporation to its shareholders, typically derived from profits.

Voting Rights

The rights of shareholders to vote on corporate matters, including board elections.

Rights Offering

An offering of additional shares of stock to existing shareholders to maintain their ownership percentage.

Warrants

Derivatives that grant holders the right to purchase a company’s stock at a specified price for a certain period.

Cumulative Preferred Stock

Preferred stock that accumulates unpaid dividends, payable before common stock dividends.

Non-Cumulative Preferred Stock

Preferred stock that does not accumulate unpaid dividends; only the current year's dividend must be paid.

Convertible Preferred Stock

Preferred stock that can be converted into a specified number of common shares at the option of the shareholder.

American Depositary Receipts (ADRs)

Certificates representing shares of a foreign stock held in trust, traded on U.S. exchanges.

Volume Limitation (Rule 144)

A regulatory limit on the quantity of stock that can be sold by affiliates over a specified period.

Lock-Up Agreement

A period following an IPO during which major shareholders cannot sell their shares.