Chapter 10 Equity Securities
Mastering Equity Securities Quiz
Test your knowledge on the fundamentals of equity securities with our engaging quiz! This quiz covers essential concepts related to common and preferred shares, voting rights, dividends, and corporate actions.
Key Features:
- Multiple choice questions
- Assess your understanding of equity securities
- Perfect for finance students and professionals
Which of the following securities most likely provides voting rights to investors?
Common shares
Preferred shares
Depositary receipts
The right to elect members of the board of directors of a company belongs to that company’s
Senior management
Common shareholders
Preferred shareholders
Which of the following is most likely an advantage of owning common stock?
Low risk
Finite life
Limited liability
The key difference between cumulative preferred stock and non-cumulative preferred stock relates to:
Voting rights.
The treatment of missed dividends
The company’s ability to buy back the preferred shares.
Compared with a preferred shareholder, a common shareholder most likely has
Voting rights
Limited liability.
Cash flow rights
All else being equal, the fixed coupon rate on a convertible bond compared with a straight bond is most likely:
Lower
The same.
Higher
Compared with preferred shareholders, the ranking of common shareholders in the priority of claims on the company’s net assets upon liquidation is:
Equal
Lower.
Higher.
A security representing an economic interest in a foreign company that trades like a common stock on a local stock exchange is most likely a:
Warrant.
Convertible bond.
Depositary receipt.
Depositary receipts are issued by:
Governments.
Financial institutions
The company whose shares are represented by the depositary receipts.
If the price of a company’s common shares increases significantly, the conversion value of a convertible bond issued by that company most likely:
Increases.
Decreases.
Remains unchanged
Stock options issued by a company to its employees as a form of compensation are an example of:
Warrants
Convertible bonds.
Depositary receipts.
Compared with common shares, an investment in preferred shares is most likely to be:
Less risky.
More risky
Equally risky
Compared with the expected return on an investment in preferred shares, the expected return on an investment in common shares is most likely to be:
Equal.
Lower
Higher.
The discounted cash flow approach to valuation of a company’s common shares most likely considers the:
Expected dividends on the shares
Current value of the company’s assets.
Price-to-earnings ratios of comparable companies.
The approach to valuing common shares that uses price multiples of other comparable, publicly traded companies best describes:
Relative valuation
Asset-based valuation
Discounted cash flow valuation
A company that needs to raise capital in a public market for the first time would most likely:
Repurchase shares
Conduct an initial public offering.
Conduct a seasoned equity offering.
The process of a publicly traded company raising additional capital by selling new shares to the public best describes a:
Stock dividend
Share repurchase
Seasoned equity offering.
Which of the following corporate actions would decrease a company’s number of outstanding shares
Share repurchase
Exercise of warrants
Seasoned equity offering
After a company conducts a stock split, a common shareholder’s proportional ownership will most likely:
Increase
Decrease.
Remain unchanged.
The process of a company creating a new company from an existing subsidiary best describes a:
Spinoff.
Stock split.
Reverse stock split
The corporate action most likely taken to mitigate the effects of exercised warrants is:
A stock dividend.
An issuance of new shares.
A share repurchase program.
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