Equity Securities word.docx - Equity Securities These notes are in addition to the textbook material and are among the topics discussed in class This is

Equity Securities word.docx - Equity Securities These notes...

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Equity Securities These notes are in addition to the textbook material and are among the topics discussed in class. This is NOT a complete list of what we covered and is NOT a substitute for you taking notes in class and reading further sources on these topics. Some of this information may be basic to you, however, it will be on any securities licensing test, the CFP test and our tests. What is a Security? In the simplest terms, a security is an investment that represents either an ownership stake or debt stake in a company. An investor becomes a part owner in a company by buying shares of the companvs stock. A debt security is usually acquired by buying a company's bonds. A debt investment is a loan to a company in exchange for interest income and the promise to repay the loan at a future date. It does not confer ownership. Stock represents equity or ownership in a company, and bonds are a loan to the company (a debt). A company discloses the composition of its total capitalization —equity and debt— by publishing a balance sheet. Common Stock Holders Rights — 1. The right to vote 2. Preemptive Rights 3. The right to inspect the books of the company 4. The right to sue for wrongful acts 5. The right to transfer ownership 6. The right to share in the profits of the company (dividends) 7. Residual Claims on Assets Common Stock / Preferred Stock — When speaking of stock, people generally refer to common stock. Preferred stock represents equity ownership in a corporation but it usually does not have the same voting rights or appreciation potential as common stock. Preferred stock normally pays a fixed, semi-annual dividend and has priority claims over common stock. Common Stock can be classified as: 1. Authorized (refers to the specific number of shares a company has authorized to issue or sell) 2. Issued (has been authorized and distributed to investors) 3. Outstanding (refers to any shares a company has issued but has not repurchased-that is, it is investor owned)
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4. Treasury (is the stock a corporation has issued and subsequently repurchased from the investors. By buying back its own shares in the open market, the corporation reduces the number shares outstanding. Treasury stock does NOT carry the rights of outstanding common shares) Common Stock Values — 1.
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  • Fall '08
  • Olander
  • shares of the companvs stock

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