FIN3244_FINAL_EXM_STUDY_GUIDE-1 - FIN3244 FINAL EXM STUDY...

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FIN3244 FINAL EXM STUDY GUIDE!! FOR ALL THOSE WHO HAVE BOUGHT A STUDY GUIDE FROM ME FOR THIS CLASS, I WISH YOU ALL THE BEST OF LUCK ON THIS EXM AND THE REST OF YOUR FINALS. THANK YOU FOR HELPING ME HELP YOU!!! Common Stock: Dividends o Managements goal is always to maximize shareholders wealth. A dividend is a decision made by the Board of Directors whether or not to give existing shareholders a “bonus” at the end of the year. Giving a dividend is seen as a good thing. It shows that the company is confident in its decisions and is growing as a whole and increasing its returns. When a company no longer gives dividends it is a bad sign. Dividend Dates: o Declaration Date: the dividend is announced. The company has declared that they feel confident enough to give a dividend. o Ex-Dividend Date: determines if one is a registered shareholder on the Date of Record. This day determines if you are registered and fully able to receive a dividend. The shares of stock can still be sold. o Date of Record: determines if shareholder is entitled to dividend. On this date is decided who is the actual person holding the stock and entitled to the dividend. o Payment Date: dividend checks are mailed Cash Dividends: o The most common type of dividend given. To figure out how much of a dividend you receive, you would take the CLOSING PRICE the night before the Ex- Dividend Date with the OPENING PRICE on the Ex- Dividend date. o A cash dividend is taxed as a long term capital gains rate because stock are perpetual, they never mature, you can essentially keep a stock forever and receive a dividend so long as a company continues to give one. **Benefits those in the highest tax bracket. Stock Dividends: o A dividend that is paid in the form of additional shares of stock. They are taxed differently then cash dividends, and sometime preferred more. The have no real impact on stock prices. o When giving a dividend it does not decrease the firms value it just allocates its cost to a different section.
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Thought Questions: o Not all firms pay dividends. o Firms start paying dividends to give back to their shareholders as a sign that they the firm are growing and making returns. o A stock that pays dividends is not necessarily ‘better’ then one that doesn’t but the firms that do give dividends are more confident in the annual returns. o Once a firms stops giving dividends it is not seen as a good thing. It is a sign that the company is regressing. Stock Prices: o Are based on supply and demand. When there is a fixed amount, demand is no longer taken into account. o When something is overpriced: one thinks the market expectation is too high. o When something is underpriced: markets expectations are too low. o Prices are constantly moving on new information. The quicker you get the information the better chance you will have to beat the market.
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