ACC 301 EXAM 1 STUDY GUIDE
Common stock - Answers -The residual interest in a firm; equity which has voting
rights.
Cumulative P/S - Answers -P/S on which missed dividends (arrears) must be paid prior
to payment of a current dividend
Treasury Stock - Answers -Reacquired stock of a firm
Preferred Stock - Answers -Non-voting stock on which dividends and assets @
liquidation have a higher priority for payment than does common stock.
Liquidating Dividend - Answers -Dividend not based on R/E of the firm (represents a
reduction in equity).
Discount B/P - Answers -Represents the increase in interest recognized over the term
of a bond because the yield rate is greater than the coupon rate; also, the decrease in
present value of a B/P relative to par@ issue due to the rate relationship
Debenture - Answers -Unsecured (no collateral) B/P
Participating P/S - Answers -P/S paid a dividend at a rate greater than that stated on
the certificate
Preemptive Right - Answers -Right to maintain one's ownership percentage in a firm
before public sale of new C/S
Par Value - Answers -Legal capital; amount recorded in a given security account @
sale (such as C/S)
Moral Hazard - Answers -Tendency of managers to overstate their performance
(concentrate on indicators rather than economic measures of performance; post-hiring
issue). Also, tendency of buyers to overuse items such as insurance
Adverse Selection - Answers -Tendency of managers to overstate their credentials
(misstatement of achievement; pre-hiring issue). Also, tendency of more reckless
individuals to buy items such as insurance
Stock Dividend - Answers -A dividend consisting of additional shares of the underlying
stock. Can be either large or small.
Stock split - Answers -A change in the number of outstanding shares by reissuing
shares with new par values
Common stock - Answers -The residual interest in a firm; equity which has voting
rights.
Cumulative P/S - Answers -P/S on which missed dividends (arrears) must be paid prior
to payment of a current dividend
Treasury Stock - Answers -Reacquired stock of a firm
Preferred Stock - Answers -Non-voting stock on which dividends and assets @
liquidation have a higher priority for payment than does common stock.
Liquidating Dividend - Answers -Dividend not based on R/E of the firm (represents a
reduction in equity).
Discount B/P - Answers -Represents the increase in interest recognized over the term
of a bond because the yield rate is greater than the coupon rate; also, the decrease in
present value of a B/P relative to par@ issue due to the rate relationship
Debenture - Answers -Unsecured (no collateral) B/P
Participating P/S - Answers -P/S paid a dividend at a rate greater than that stated on
the certificate
Preemptive Right - Answers -Right to maintain one's ownership percentage in a firm
before public sale of new C/S
Par Value - Answers -Legal capital; amount recorded in a given security account @
sale (such as C/S)
Moral Hazard - Answers -Tendency of managers to overstate their performance
(concentrate on indicators rather than economic measures of performance; post-hiring
issue). Also, tendency of buyers to overuse items such as insurance
Adverse Selection - Answers -Tendency of managers to overstate their credentials
(misstatement of achievement; pre-hiring issue). Also, tendency of more reckless
individuals to buy items such as insurance
Stock Dividend - Answers -A dividend consisting of additional shares of the underlying
stock. Can be either large or small.
Stock split - Answers -A change in the number of outstanding shares by reissuing
shares with new par values
