WGU C214 Financial Mgmt Pass the OA
2023| 160 Questions and Answers|
Graded A+
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
-Debentures are - -secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash, secured against a
company's assets and backed by credit, transferable by the holder, and may also be
unsecured
-Secured loan - -has collateral like a mortgage
-The amount repaid at the expiration date of a bond is - -PAR value
NOTE: expiration date is also known as maturity date PAR (or Face Value) is typically
$1000
-Duration measures - -the market risk of a bond and is the percentage drop in price
caused by a 1% increase in yield (rate)
NOTE: measurement of the drop in price after a rate increase
-Maturity of bonds is calculated in - -years
-A bond premium occurs when - -bonds are issued for an amount greater than their
face or maturity amount; caused by the bonds having a stated interest rate that is higher
than the market interest rate for similar bonds
-Junk Bonds are - -high yield bonds without any stability
-"Leveraged" results in - -having more debt (bonds) than equity (stock) and lower stock
prices
NOTE: recall that debt is safer and levels out risk in a portfolio
-In current assets, inventory is the - -LEAST liquid of current assets
NOTE: current assets take less than 12 months to make liquid
-Net fixed assets are - -long term assets such as buildings, land, equipment, machinery
NOTE: assets that are not current
2023| 160 Questions and Answers|
Graded A+
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
-Debentures are - -secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash, secured against a
company's assets and backed by credit, transferable by the holder, and may also be
unsecured
-Secured loan - -has collateral like a mortgage
-The amount repaid at the expiration date of a bond is - -PAR value
NOTE: expiration date is also known as maturity date PAR (or Face Value) is typically
$1000
-Duration measures - -the market risk of a bond and is the percentage drop in price
caused by a 1% increase in yield (rate)
NOTE: measurement of the drop in price after a rate increase
-Maturity of bonds is calculated in - -years
-A bond premium occurs when - -bonds are issued for an amount greater than their
face or maturity amount; caused by the bonds having a stated interest rate that is higher
than the market interest rate for similar bonds
-Junk Bonds are - -high yield bonds without any stability
-"Leveraged" results in - -having more debt (bonds) than equity (stock) and lower stock
prices
NOTE: recall that debt is safer and levels out risk in a portfolio
-In current assets, inventory is the - -LEAST liquid of current assets
NOTE: current assets take less than 12 months to make liquid
-Net fixed assets are - -long term assets such as buildings, land, equipment, machinery
NOTE: assets that are not current
