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Questions and Answers
What are the two components of corporate capital structure?
What are the two components of corporate capital structure?
- Equity and assets
- Equity and cash flows
- Equity and liabilities
- Equity and debt (correct)
What are the two types of equity offered by most publicly listed companies?
What are the two types of equity offered by most publicly listed companies?
- Common equity and venture equity
- Preferred equity and convertible equity
- Common equity and preferred equity (correct)
- Common equity and debt equity
What do common equities offer to the holders?
What do common equities offer to the holders?
- Guaranteed dividends
- Real ownership of the enterprise (correct)
- Priority in liquidation
- Fixed returns
What process do common shares follow to enter the market for the first time?
What process do common shares follow to enter the market for the first time?
What is the difference between face value and market value of common shares?
What is the difference between face value and market value of common shares?
What is the main characteristic of common equities?
What is the main characteristic of common equities?
What is the primary cash flow associated with common equities?
What is the primary cash flow associated with common equities?
What process do common shares follow to enter the market for the first time?
What process do common shares follow to enter the market for the first time?
What distinguishes common shareholders from preferred shareholders?
What distinguishes common shareholders from preferred shareholders?
What is the difference between face value and market value of common shares?
What is the difference between face value and market value of common shares?
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Study Notes
Corporate Capital Structure
- Two components of corporate capital structure: debt and equity
Types of Equity
- Two types of equity offered by most publicly listed companies: common equity and preferred equity
Characteristics of Common Equity
- Offer holders the right to vote at company's annual general meeting
- Holders receive dividends declared by the company
- Holders are entitled to receive a portion of company's assets upon liquidation
Initial Public Offering (IPO)
- Process by which common shares enter the market for the first time: initial public offering (IPO)
Face Value vs Market Value
- Face value: nominal or par value of a share, usually a fixed amount
- Market value: current price of a share in the marketplace
Main Characteristics of Common Equities
- Represent ownership in a company
- Holders have voting rights and potential to receive dividends
Cash Flow Associated with Common Equities
- Primary cash flow: dividends paid to common shareholders
Distinguishing Features of Common Shareholders
- Have voting rights and potential to receive dividends
- Unlike preferred shareholders, common shareholders do not have a fixed rate of return
Face Value vs Market Value (again)
- Face value: nominal or par value of a share, usually a fixed amount
- Market value: current price of a share in the marketplace
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