Section 16.2 Review

What does common stock represent in a business?

• A type of bond issued by the company

• Ownership that includes voting rights and profit sharing through dividends

• A fixed interest rate agreed upon at the time of purchase

• A certificate of debt owed by the company to the stockholder

What is the par value of a stock?

• The market value of the stock at any given time

• The minimum selling price of the stock set by the company

• A dollar value shown on a share of stock, used for accounting purposes

• The maximum liability of the stockholder

What is the market value of a stock?

• The historical cost of the stock when it was first issued

• The price at which stock is actually bought and sold

• The dividend payout ratio of the stock

• The total number of shares outstanding

What type of stock gives holders the first claim on corporate dividends if a company earns a profit?

• Bond stock

• Common stock

• Preferred stock

• Treasury stock

What right do common stockholders have that preferred stockholders do not?

• The right to receive dividends first

• The right to vote on corporate issues and elect the board of directors

• The right to convert stocks into bonds

• The right to a fixed dividend rate

What is the book value of a company's stock calculated by?

• Multiplying the corporation's net worth by the total number of shares outstanding

• Dividing the corporation's net worth by the total number of shares outstanding

• Adding the corporation's assets to its liabilities and then dividing by the total number of shares outstanding

• Subtracting the corporation's liabilities from its assets and then multiplying by the total number of shares outstanding

What does the term "Secondary Stock Issuance" refer to in the context of stock market?

• The initial offering of stock to the public

• The distribution of dividends to shareholders

• The issuance of new stock shares by a company after the initial public offering

• The process of buying back shares from the stock market

What are "Retained Earnings" in the context of a corporation?

• The total dividends paid out to shareholders

• The portion of net earnings not paid out as dividends

• The initial capital raised by the company through stock sales

• The yearly profit of the company before taxes

What does it mean to buy a share of stock in a company?

• Lending money to the company.

• Owning a portion of the company.

• Owning the company's products.

• Borrowing money from the company.