BCOR 2204 quiz 3
Debt - ANSincludes all borrowing incurred by a
firm, including bonds, and is repaid
according to a fixed schedule of payments.
Equity - ANSconsists of funds provided by the
firm's owners (investors or stockholders)
that are repaid subject to the firm's performance.
Which has a voice in management debt or equity? - ANSEquity
Which type of capital has an interest deduction - ANSDebt
Does debt or equity have a maturity? - ANSDebt has a stated maturity
Which is senior in claims on assets& income? - ANSDebt
Who gets claims first stockholders or bondholders? - ANSBondholders (creditors)
Which is riskier stocks or bonds? - ANSStocks
equity's maturity date - ANSThere is none, it's a permanent form of financing.
Interest payments to debt-holders are treated as... - ANStax deductible expenses
Are dividend payments tax deductible? - ANSNo
3 types of stock ownership - ANSPrivate
Closely owned (small group)
Publicly owned
Authorized shares - ANSshares of common stock that a firm's corporate charter allows it to
issue
Outstanding shares - ANSissued shares of common stock
held by investors, this includes private and public
investors.
Treasury stock - ANSissued shares of common stock held
by the firm; often these shares have been repurchased by
the firm.
, Issued shares - ANSshares of common stock that have
been put into circulation.
issued shares equation - ANSIssued shares = outstanding shares + treasury stock
initial financing for most firms.. - ANStypically comes from a firm's original founders in the form
of a common stock investment.
3 ways to 'go public' for a firm - ANSPublic offering, rights offering, private placement
Public offering - ANSWhen a firm offers its shares for
sale to the general public.
Rights offering - ANSWhen a firm sells new shares to existing shareholders
Private placement - ANSthe firm sells new securities directly to an investor or a group of
investors.
Find price of a stock by: - ANSdiscounting all future cashflows at an appropriate rate of return.
What are the future cash flows? - ANSDividends
Appropriate rate of return - ANSRisk of those dividends
Covenants - ANSConditions lenders place on firms that seek long-term debt financing. Written
into a bond.
Tax treatment - ANSinterest paid to bond holders vs. dividends to stock holders
Tax credit - ANSAn amount subtracted directly from the tax owed
Tax deductible - ANSable to be deducted from taxable income when calculating income tax due.
Lowers your tax burden.
What happens when a company buys its own shares - ANSDrives up price/demand for shares.
3 reasons people buy/sell stocks - ANSIncome (dividends)
Diversify (portfolio)
Pure speculation (thinking it will be worth more)
The more risky the dividends - ANSThe higher the rate of return
3 models for dividend growth rate - ANS0 growth
Debt - ANSincludes all borrowing incurred by a
firm, including bonds, and is repaid
according to a fixed schedule of payments.
Equity - ANSconsists of funds provided by the
firm's owners (investors or stockholders)
that are repaid subject to the firm's performance.
Which has a voice in management debt or equity? - ANSEquity
Which type of capital has an interest deduction - ANSDebt
Does debt or equity have a maturity? - ANSDebt has a stated maturity
Which is senior in claims on assets& income? - ANSDebt
Who gets claims first stockholders or bondholders? - ANSBondholders (creditors)
Which is riskier stocks or bonds? - ANSStocks
equity's maturity date - ANSThere is none, it's a permanent form of financing.
Interest payments to debt-holders are treated as... - ANStax deductible expenses
Are dividend payments tax deductible? - ANSNo
3 types of stock ownership - ANSPrivate
Closely owned (small group)
Publicly owned
Authorized shares - ANSshares of common stock that a firm's corporate charter allows it to
issue
Outstanding shares - ANSissued shares of common stock
held by investors, this includes private and public
investors.
Treasury stock - ANSissued shares of common stock held
by the firm; often these shares have been repurchased by
the firm.
, Issued shares - ANSshares of common stock that have
been put into circulation.
issued shares equation - ANSIssued shares = outstanding shares + treasury stock
initial financing for most firms.. - ANStypically comes from a firm's original founders in the form
of a common stock investment.
3 ways to 'go public' for a firm - ANSPublic offering, rights offering, private placement
Public offering - ANSWhen a firm offers its shares for
sale to the general public.
Rights offering - ANSWhen a firm sells new shares to existing shareholders
Private placement - ANSthe firm sells new securities directly to an investor or a group of
investors.
Find price of a stock by: - ANSdiscounting all future cashflows at an appropriate rate of return.
What are the future cash flows? - ANSDividends
Appropriate rate of return - ANSRisk of those dividends
Covenants - ANSConditions lenders place on firms that seek long-term debt financing. Written
into a bond.
Tax treatment - ANSinterest paid to bond holders vs. dividends to stock holders
Tax credit - ANSAn amount subtracted directly from the tax owed
Tax deductible - ANSable to be deducted from taxable income when calculating income tax due.
Lowers your tax burden.
What happens when a company buys its own shares - ANSDrives up price/demand for shares.
3 reasons people buy/sell stocks - ANSIncome (dividends)
Diversify (portfolio)
Pure speculation (thinking it will be worth more)
The more risky the dividends - ANSThe higher the rate of return
3 models for dividend growth rate - ANS0 growth
