Equities/Stocks -chapt 3

Which term is commonly used to describe the long-term borrowing of a company?

• Shares

• Equities

•  Bonds

• Dividends

Answer explanation

Answer: C. Bonds

Explanation: According to the text, the long-term borrowing of a company is referred to as bonds.

In which form can shares be issued where ownership passes by transfer of the share certificate?

• Registered form

• Non-certificated basis

• Non-certificated basis

• Digital form

Answer explanation

Answer: C. Bearer form

Explanation: Bearer shares are issued in a form where ownership is transferred by possession of the physical share certificate.

What is the distinguishing feature of preference shares compared to ordinary shares?

• Voting rights

• Fixed dividend payments

• Capital gains potential

• Risk and reward balance

Answer explanation

Explanation: Preference shares typically offer fixed dividend payments, unlike ordinary shares which may fluctuate based on company performance.

What does the term "cumulative" refer to in relation to preference shares?

• Ability to convert to ordinary shares

• Voting rights entitlement

• Accumulation of unpaid dividends

• Redemption date flexibility

Answer explanation

Answer: C. Accumulation of unpaid dividends

Explanation: Cumulative preference shares accumulate unpaid dividends if the company is unable to pay in a particular year.

Which benefit of owning shares involves the return of profits to investors?

• Capital gains

•  Voting rights

• Shareholder perks

• Dividends

Answer explanation

Explanation: Dividends are the returns paid to shareholders from the company's profits.

 

What does the term "capital gains" refer to in relation to shares?

• Fixed income from dividends

• Fixed income from dividends

• Increase in share price over time

• Voting rights at shareholder meetings

Answer explanation

Explanation: Capital gains refer to the profit made when the share price increases from the time of purchase to sale.

Which type of shares ranks above equities in the capital structure and has legal priority in bankruptcy?

• Ordinary shares

• Common shares

• Common shares

• Cumulative shares

Answer explanation

Explanation: Preferred stock ranks above ordinary shares in terms of receiving dividends and assets in bankruptcy.

What do pre-emption rights provide to existing shareholders in a company?

• Right to vote on major corporate decisions

• Right to sell their shares at a premium price

• Right to subscribe for new shares before they are offered to the public

• Right to receive higher dividends than other shareholders

In which country are pre-emption rights particularly stringent, imposing tough constraints on companies raising funds?

• United States

• United Kingdom

• Australia

• Canada

What is the primary risk associated with owning shares, defined as the risk that share prices might decline across the market?

• Issuer risk

• Foreign exchange risk

• Price risk

• Liquidity risk