Equities/Stocks Lecture Notes Review

A set of flashcards covering key concepts and definitions from the Equities/Stocks lecture notes for exam preparation.

What are the primary features of shares or equities?

Shares or equities represent capital issued by a company to its owners and carry both risks and rewards.

What is the key difference between private and public companies?

Public companies can issue shares to the public, while private companies cannot.

What is a dividend?

A dividend is a payment made by a company to its shareholders, usually derived from profits.

What is the meaning of 'limited liability' for shareholders?

Shareholders are only liable for the company's debts up to the amount they invested.

What are preference shares?

Preference shares are a type of stock that usually provides dividends before ordinary shares and may not carry voting rights.

What is 'price risk' in the context of owning shares?

Price risk is the risk that share prices may fall, leading to a potential loss of capital for investors.

Define liquidity risk.

Liquidity risk is the risk that shares may be difficult to sell at a reasonable price.

What is a 'corporate action'?

A corporate action is an event initiated by a company that affects its shareholders or bondholders, such as dividends, rights issues, or mergers.

What is the difference between a mandatory corporate action and a voluntary corporate action?

A mandatory corporate action does not require shareholder intervention, while a voluntary corporate action requires shareholders to make a decision.

Explain the term 'rights issue'.

A rights issue is an offer to existing shareholders to purchase additional shares at a discounted price, usually in proportion to their existing holdings.

What does 'settlement' refer to in the context of stock trading?

Settlement refers to the completion of a transaction, where the buyer pays for the shares and the seller delivers the shares.

What is an ADR?

An American Depositary Receipt (ADR) allows US investors to hold shares in foreign companies without dealing with different currencies.

What are stock market indices used for?

Stock market indices are used to gauge the performance of the market and serve as benchmarks for investment performance.

What is a stock split?

A stock split occurs when a company divides its existing shares into multiple shares to lower the trading price per share.

Define capital gains in the context of investing in shares.

Capital gains are the profits realized when shares are sold for more than their purchase price.

What are the characteristics of ordinary shares?

Ordinary shares typically carry voting rights and entitle holders to dividends, but they are last in line for assets during liquidation.

What is meant by a company's 'float' in terms of shares?

Float refers to the number of shares available for trading in the market, excluding those held by insiders or government.

What is a proxy vote?

A proxy vote allows a shareholder to appoint someone to vote on their behalf at a company meeting.

Describe the term 'ex-dividend'.

Ex-dividend refers to the period after the record date when new buyers of shares are not entitled to receive the declared dividend.

What is the significance of the regulatory requirements for listed companies?

Listed companies must provide timely and detailed financial information, thus ensuring transparency and protecting investors.