Finance Section 2 Test

1. A stock represents:

• A loan to a company

• Ownership in a company

• A bond issued by a government

• A guaranteed return

Equity financing means a company:

• Raises money by selling ownership shares

• Takes out a bank loan

• Issues government bonds

• Sells products

Which is a key benefit of owning stock?

• Guaranteed repayment

• Potential dividends and appreciation

• Fixed interest payments

• Risk-free growth

When a stock increases in value, this is called:

• Dividend yield

• Price appreciation

• Equity financing

• Short selling

A dividend is:

• The stock’s selling price

• A loan repayment

• A company's profits given to investors

• A payment given to bondholders

Common stockholders generally have:

• No voting rights

• Voting rights

• Guaranteed dividends

• Higher claim in bankruptcy

Preferred stockholders usually:

• Receive dividends before common stockholders

• Vote on management decisions

• Have no claim on assets

• Trade only on NASDAQ

Which is riskier but offers higher potential returns?

• Bonds

• Preferred stock

• Common stock

• Treasury bills

Which investor would prefer preferred stock?

• One seeking steady dividend income

• One seeking voting rights

• One seeking capital appreciation only

• One avoiding dividends

In liquidation, preferred shareholders:

• Are paid before common shareholders

• Are paid last

• Have the same claim as common

• Have voting rights