WGU C214 Financial Mgmt Pass the OA
Characteristics of preferred stock includes ✔✔-dividends in arrears
-dividends are cumulative
-higher payoff claim in a BK (has first dibs in a BK)
-considered "hybrid" (part stock/part bond)
-no fixed maturity date
-no voting rights
-can skip dividend payments
-dividends don't change year-after-year
-used in start ups (IPO)
Preferred stock dividends ✔✔can go without payment and pay in arrears the following year
Characteristics of common stock are ✔✔-voting rights
-no maturity date
-corporate governance
-lower payoff claim in BK
,-variable returns
-unlimited earnings potential
-earnings are in dividends & the increase in price of stock
New start up ventures often issue ✔✔preferred stock (in an IPO)
What stock is considered a hybrid ✔✔preferred stock
One thing common stock and preferred stock have in common is ✔✔both have no maturity date
Which type of security has voting rights ✔✔common stock
Debt covenants and restrictions help to ensure that ✔✔management is meeting bond and
shareholder expectations
NOTE: covenants are promises meant to be kept
What is true regarding bonds ✔✔-when bond matures, bondholder gets lump sum back
-coupon rate doesn't change
, -maturity is in years
-PAR value is typically $1000
-Future value (same as PAR) is typically $1000
Bond sells at face value when ✔✔required rate of return is equal to the coupon rate
Why are bonds the primary method for raising capital ✔✔because bonds remove the
intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a group of banks underwriting the
security issue
What type of bond can be traded for stock ✔✔convertible bonds
What is the interest rate for annual payments of a bond known as ✔✔the coupon rate
NOTE: coupon rate is the established interest rate for the life of the bond and will remain
unchanged
Coupon rate is the established rate of the bond and should ✔✔never change
Characteristics of preferred stock includes ✔✔-dividends in arrears
-dividends are cumulative
-higher payoff claim in a BK (has first dibs in a BK)
-considered "hybrid" (part stock/part bond)
-no fixed maturity date
-no voting rights
-can skip dividend payments
-dividends don't change year-after-year
-used in start ups (IPO)
Preferred stock dividends ✔✔can go without payment and pay in arrears the following year
Characteristics of common stock are ✔✔-voting rights
-no maturity date
-corporate governance
-lower payoff claim in BK
,-variable returns
-unlimited earnings potential
-earnings are in dividends & the increase in price of stock
New start up ventures often issue ✔✔preferred stock (in an IPO)
What stock is considered a hybrid ✔✔preferred stock
One thing common stock and preferred stock have in common is ✔✔both have no maturity date
Which type of security has voting rights ✔✔common stock
Debt covenants and restrictions help to ensure that ✔✔management is meeting bond and
shareholder expectations
NOTE: covenants are promises meant to be kept
What is true regarding bonds ✔✔-when bond matures, bondholder gets lump sum back
-coupon rate doesn't change
, -maturity is in years
-PAR value is typically $1000
-Future value (same as PAR) is typically $1000
Bond sells at face value when ✔✔required rate of return is equal to the coupon rate
Why are bonds the primary method for raising capital ✔✔because bonds remove the
intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a group of banks underwriting the
security issue
What type of bond can be traded for stock ✔✔convertible bonds
What is the interest rate for annual payments of a bond known as ✔✔the coupon rate
NOTE: coupon rate is the established interest rate for the life of the bond and will remain
unchanged
Coupon rate is the established rate of the bond and should ✔✔never change
