Question 1

Assume the Plum Corporation has two different issues of common stock.One issue carries voting rights, and the other issue does not.In this situation, Plum is said to have issued

Accepted Answer

Plum Corporation has issued classified stock, which means they have multiple classes of stock with different voting rights.

Question 2

Westlake Industries has total assets of $42.5 million, total debt of $29.3 million, and $2.4 million of 6% preferred stock outstanding.If the company has 250,000 shares of common stock outstanding, its book value per share would be

Accepted Answer

The answer of Westlake Industries has total assets of $42.5...

Question 3

When a corporation declares a stock split, it usually does so because

Accepted Answer

When a corporation declares a stock split, it usually does so because the stock price is too high. A stock split aims to lower the stock price by increasing the number of outstanding shares while simultaneously reducing the value of each share. This makes the stock more affordable for individual investors and can increase liquidity in the market.

Question 4

A stock's market value would normally be higher than it's book value.

Accepted Answer

A stock's market value represents what investors are willing to pay for it, taking into account factors such as future growth potential and market conditions. In contrast, book value represents the accounting value of a company's assets, liabilities, and equity. Therefore, a stock with a strong market position and growth prospects is likely to have a higher market value than its book value.

Question 5

Stock which has been issued and subsequently reacquired by the issuing corporation is called

Accepted Answer

Stock which has been reacquired by the issuing corporation is called treasury stock.

Question 6

A round lot consists of

Accepted Answer

A round lot typically consists of 100 shares, although this can vary depending on the market and the specific securities being traded.

Question 7

If a firm has a 2 million shares outstanding and its stock trades at $25, the company has a market capitalization of $50,000,000.

Accepted Answer

Market capitalization is calculated by multiplying the number of shares outstanding by the current market price per share. Therefore, in this case, 2 million shares outstanding multiplied by $25 per share equals a market capitalization of $50,000,000.

Question 8

Wall Street Journal Stock quotations include
I.the highest and lowest price over the last 52 weeks
II.dividend and dividend yield
III.PE (price/earnings)ratio
IV.the stock's beta

Accepted Answer

Wall Street Journal stock quotations typically include the highest and lowest price over the last 52 weeks, dividend and dividend yield, and PE ratio. The stock's beta is not typically included in these quotations.

Question 9

Treasury stock can be used to do which of the following?
I.pay for an acquisition
II.pay the company employees
III.pay stock dividends
IV.cover employee stock option plan contributions

Accepted Answer

Treasury stock can be used to pay for an acquisition, pay stock dividends, and cover employee stock option plan contributions. It cannot be used to directly pay company employees, but it can indirectly benefit them by increasing the value of their shares through share buybacks.

Question 10

The value that represents the amount of stockholders' equity in a firm is called the

Accepted Answer

The book value represents the amount of stockholders' equity in a firm. It is calculated by subtracting the liabilities from the assets, and it differs from the market value, which is the price at which the company's shares are traded on the stock market. Par value is the nominal value assigned to a share of stock, while the liquidation value represents the amount of money that the stockholders would receive if the company were to be liquidated.

Question 11

Tiffany owned 1000 shares of GIA stock which was selling for $1.50 per share when the company declared a 1 for 10 reverse split.After the split, Tiffany owned

Accepted Answer

A reverse stock split combines multiple shares into a single share, so in this case, Tiffany's 1000 shares would have been combined into 100 shares. The value per share would have increased by a factor of 10, so the new value per share would be $15 (not $0.15 or $1.50). Therefore, after the split, Tiffany would own 100 shares worth approximately $15 per share.

Question 12

The par or stated value of common stock is important for

Accepted Answer

The answer of The par or stated value of common...

Question 13

Treasury stock can be used to do which of the following?
I.pay for an acquisition
II.pay the company employees
III.pay stock dividends
IV.cover employee stock option plan contributions

Accepted Answer

Treasury stock can be used to pay for an acquisition, pay stock dividends, and cover employee stock option plan contributions. It cannot be used to directly pay company employees, but it can indirectly benefit them by increasing the value of their shares through share buybacks.

Question 14

The investment value for a publicly traded stock can readily be found in the financial section of the newspaper or on the internet.

Accepted Answer

The answer of The investment value for a publicly traded...

Question 15

Rob owns 300 shares of Blackwood common stock valued at $9 a share.Blackwood has declared a 3-for-1 stock split effective tomorrow.After the split, Rob will own

Accepted Answer

The answer of Rob owns 300 shares of Blackwood common...

Question 16

Another term for the stated value or face value of a stock is its

Accepted Answer

The par value or stated value of a stock refers to the original face value of the stock as determined by the issuing company. This value is usually quite small and does not reflect the market value of the stock. The book value refers to the value of a company's assets minus its liabilities as recorded on the balance sheet, and is not necessarily related to the stock's par value. The liquidation value refers to the amount of money that could be raised if a company were to sell off all of its assets and pay off its debts, which can be different from the par value of its stock. Proxy value is not a commonly used term in finance or investing, and is not related to the par value of a stock.

Question 17

Why do some companies split their stock?

Accepted Answer

The answer of Why do some companies split their stock?...

Question 18

Engines, Inc.declares a 2-for-5 stock split.The stock currently sells for $3 a share.A shareholder who owned 100 shares of stock prior to the split will now own

Accepted Answer

The stock split means that for every 5 shares owned, the shareholder will now own 10 shares. Since the shareholder owned 100 shares, they will now own 200 shares. The stock price will be adjusted to reflect the split, so the new stock price will be $3 / 2 = $1.50 per share. Therefore, the shareholder's 200 shares will be worth 200 * $1.50 = $300.

Question 19

Investors should never pay more than par value for a stock.

Accepted Answer

Investors may pay more than the par value for a stock if they believe that the company's future growth prospects will increase the value of the stock over time. This is known as buying a stock at a premium, and it is common practice in the stock market. However, investors should always consider their own financial goals and risk tolerance before deciding to invest in any particular stock.

Question 20

As a general rule, which one of the following statements concerning the various values of common stock is correct?

Accepted Answer

Book values are typically conservative estimates of a company's worth, calculated based on the company's balance sheet. Market values often exceed book values because they reflect the trading price of the stock in the market, which can be influenced by future growth prospects, market conditions, and investor perceptions.

Quiz 6: Common Stocks