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18 Questions

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Corporate Actions: Rights and Warrants

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Questions and Answers

Which of the following transactions does not require a risk disclosure?

A stock transaction not recommended by a BD or a RR (correct)

A product dividend distribution to an established customer

A mutual fund transaction not recommended by a RR

A stock transaction recommended by a BD

What is the purpose of the Ex-Dividend Date in dividend distribution?

To determine the stockholders of record for dividend distribution

To make the dividend payment to the stockholders

To trade the stock without the dividend (correct)

To declare the dividend to the public

Who sets the Record Date in the dividend distribution process?

The Board of Directors (BOD) (correct)

FINRA or the exchange

The brokerage firm

The stockholders of record

What is the meaning of the acronym DERP in the context of dividend distribution?

Declaration, Ex-Date, Record, Payment Signup and view all the answers

How many business days does it take for a trade to settle?

2 business days Signup and view all the answers

What is the exception to the Ex-Date rule in dividend distribution?

For cash transactions and mutual funds, the Ex-Date is the business day after the Record Date Signup and view all the answers

What is the purpose of a buyback?

To invest in itself or improve its financial ratios Signup and view all the answers

What is a tender offer?

An offer to buy a security directly from shareholders Signup and view all the answers

Why might a company make a tender offer on its own debt?

To retire the debt early Signup and view all the answers

What is the tax implication of a stock split or stock dividend?

It is never a taxable event Signup and view all the answers

What happens to the number of outstanding shares when a company buys back its own shares?

It decreases Signup and view all the answers

Why might a company prefer share buybacks to paying dividends?

To increase the ownership stake of shareholders Signup and view all the answers

What is the maximum duration for a rights offering?

90 days Signup and view all the answers

What is the main difference between rights and warrants?

All of the above Signup and view all the answers

What happens to the number of shares outstanding in a forward stock split?

Increases Signup and view all the answers

What is the tax consequence of a stock dividend?

Non-taxable Signup and view all the answers

What is the purpose of an antidilution provision?

To prevent dilution of ownership Signup and view all the answers

What is the term for a long-term contract to buy stock at a specific price?

Warrant Signup and view all the answers