Deck 5: Common Stock

Question 1

The right to maintain ownership percentage is known as the

A) right to vote.
B) pre-emptive right.
C) right of proxy.
D) purchase right.

Answer 1

pre-emptive right.

Question 2

When shareholders receive securities in a "rights offering,"which below is not an option?

A) sell them to someone else
B) use them to buy shares
C) allow them to expire
D) trade them to the company for cash

Answer 2

trade them to the company for cash

Question 3

An owner of 200 shares of PEP receives 2 cans of Pepsi, while the owner of 100 shares receives one can. This could qualify as a

A) cash dividend.
B) property dividend.
C) gift.
D) stock dividend.

Answer 3

property dividend.

Question 4

When receiving a 10% stock dividend, the owner of 427 shares of stock will receive

A) 4.27 shares.
B) 42.7 shares.
C) 43 shares.
D) 42 shares plus cash.

Question 5

A stock you own declares a dividend with a date of payment of December 20 and a date of record of November 15. To receive the dividend, I must buy the share from you on or before_____ , assuming no holidays or weekends are relevant.

A) December 20
B) November 12
C) November 15
D) December 19

Question 6

A stock you own sells for $10.00 now. After the ex-dividend date, approximately what would the stock sell for after a 10% stock dividend?

A) $9.09
B) $11.00
C) $9.90
D) $10.10

Question 7

A company splits its stock 3 for 2. You owned 500 shares before the split. How many do you have after the split?

A) 550
B) 350
C) 750
D) 500

Question 8

The ratio of dividends to stock price is called the

A) price/earnings ratio.
B) dividend yield.
C) dividend ratio.
D) PE turnover.

Question 9

A number of 67 in the volume column of a stock listing means_____ shares traded the previous day.

A) 67
B) 670
C) 6,700
D) 67,000

Question 10

The symbol - in the left margin of a stock listing means the stock

A) announced a dividend.
B) increased in trading volume.
C) was up for the day.
D) hit a 52-week high.

Question 11

A stock that has a dividend yield of zero normally would not be considered a _____ stock.

A) blue chip
B) growth
C) cyclical
D) defensive

Question 12

Many public utilities are_____ stocks.

A) blue chip
B) income
C) cyclical
D) growth

Question 13

Retail food stocks are usually classified as a _____ stock.

A) blue chip
B) income
C) cyclical
D) defensive

Question 14

If you were interested in capital appreciation, which type of stock would you likely prefer?

A) cyclical
B) income
C) growth
D) blue chip

Question 15

The proportion of net income after taxes that is paid as dividends is the firm's

A) dividend yield.
B) price/earnings ratio.
C) payout ratio.
D) income distribution.

Question 16

Stock splits

A) increase shareholder wealth.
B) decrease shareholder wealth.
C) do not affect shareholder wealth.
D) increase the company's equity.

Question 17

A stock held in a street name has a(n) _____ name on it.

A) alias
B) relative's
C) brokerage firm's
D) portfolio's

Question 18

A subsidiary that is divested by proportionally "giving away"the shares to parent company shareholders is known as a

A) spin-off.
B) stock dividend.
C) dividend company.
D) stock split.

Question 19

A common definition of "penny stock"is one that sells for less than _____ per share.

A) $0.01
B) $0.10
C) $1.00
D) $10.00

Question 20

ABC Corp. earned $4.20/share last year and paid $1.20 in dividends on an average price of $50/share. The dividend yield on the stock was_____ and the payout ratio was_____ .

A) 2.4%; 29%
B) 2.4%; 71%
C) $1.20/year; 29%
D) 8.4%; $1.20/share

Question 21

AMC Corp. plans to sell 20% more common stock through a right's offering in support of the shareholders' preemptive rights. How many shares must a current shareholder own to be granted one right and how many rights does it take to buy one added share?

A) 20 shares; 5 rights
B) 5 shares; 5 rights
C) 1 share; 20 rights
D) 5 shares; 20 rights

Question 22

Able Corp. plans a 10% stock dividend. Its current share price is $50 and there are 100,000 shares outstanding. Mary owns 500 shares of Able and will receive_____ added shares, and the stock will be priced at _____ . After the 10% stock dividend is paid she will have a total market value of_____ ?

A) 100; $50; $30,000
B) 50; $40; $27,500
C) 50; $45.45; $25,000
D) 10; $40; $20,400

Question 23

After a three for one stock split a shareholder will likely have:

A) fewer shares.
B) lower priced shares.
C) more dividend income.
D) greater proportional ownership.

Question 24

Which of the following involves investment in a current subsidiary of the shareholders' company?

A) spin-off
B) split-off
C) stock split
D) tracking stock

Question 25

Sam is a 50 share shareholder in MOP Inc. that earned $2 million, had 100,000 shares outstanding and a price-earnings ratio of 18. What is the current market value of Sam's investment in MOP Inc.?

A) $1800
B) $360
C) $18,000
D) $15,000

Question 26

A quantity of shares owned which is not divisible by 100 is referred to as

A) an odd lot.
B) an uneven lot.
C) a round lot.
D) a small lot.

Question 27

If a stock has the potential to make its owner a lot of money quickly, it is commonly referred to as

A) a growth stock.
B) a Blue Chip stock.
C) a speculative stock.
D) none of the above.

Question 28

When a board of directors announces a dividend, it does not specify the

A) date of record.
B) payment date
C) ex-dividend date.
D) none of the above since the directors announce all three.

Question 29

Corporations and partnerships both issue common stock.

Question 30

The two types of stock are Class A and Class B.

Question 31

The preemptive right gives shareholders the right to maintain their percentage ownership in the firm.

Question 32

Rights are actual securities that can be bought and sold.

Question 33

A 2 for 1 stock split is economically equivalent to a 100% stock dividend.

Question 34

A dividend reinvestment plan sometimes permits buying shares at a premium over the current market price.

Question 35

The date of record is before the ex-dividend date.

Question 36

Dividends are usually paid quarterly.

Question 37

If a firm has a 50% payout ratio, paying a $1 dividend will cause the share price to decline 50 cents on the ex-dividend date.

Question 38

A large reverse split will reduce the number of shareholders.

Question 39

The primary motivation for a stock split is a desire to reduce the share price.

Question 40

In the financial pages, a § symbol by the company listing means you can FAX an 800 number for an annual report.

Question 41

A blue chip stock cannot also be an income stock.

Question 42

A retail food chain is a cyclical stock.

Question 43

NYSE-listed stock has 1 or 2 letters and 1 number in the ticker symbol.

Question 44

The ex-dividend date occurs before the payment date.

Question 45

A reverse split increases the total market value held by each stockholder.

Question 46

A rights offering is always associated with preemptive rights.

Question 47

In a spin-off a shareholder may own two different company stocks.

Question 48

A company with a $.75/quarter cash dividend and a 7% dividend yield will have a share value of$42.86.

Question 49

Corp. A earned $1 million last year, has a payout ratio of 40% and a price-earnings ratio of 18. The value of its total capitalization is $7.2 million.

Question 50

Five years ago Samad Corp. earned $1 million, has had an earnings growth rate of 10%, and with a price-earnings ratio of 15, the company's stock now has a market value of $2.25 million.

Question 51

An income stock is likely to have a price-earnings ratio greater than a growth stock.

Question 52

A single-letter stock symbol company is likely to be listed on the NYSE.

Question 53

In a forward, regular, direct two-for-one stock split a shareholder with $5,000 in market value prior tothe split will have approximately $10,000 after the split.