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17 Cards in this Set
- Front
- Back
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Bonds are |
debt |
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characteristics of debt |
no ownership interest, no voting rights, interest is tax deductible, creditors have legal recourse if interest or principal payments are missed, excess debt leads to financial stress and bankruptcy |
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characteristics of equity |
ownership interest, common vote to elect board and on other issues, dividends are not a liability of the firm, stockholders have no legal recourse if dividends are not declared, an all equity firm cannot go bankrupt |
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sinking fund provision |
firm cant go out and borrow more money until they've paid X amount of the loan; if you don't pay X amount of the loan and go out and raise money, you're in default of loan |
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on BONDs as interest rates increase, PVs |
decrease |
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on BONDS, as interest rates increase, bond prices |
decrease |
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long term bonds have MORE or LESS interest rate risk than short term bonds |
MORE |
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lower coupon rate bonds have MORE OR LESS interest rate risk than higher coupon rate bonds |
more |
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contract between the company and the bondholders |
bond indenture |
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when using minimal risk method in portfolio, the only time investor will deviate is ____ |
to buy more and put more into the stock with higher return and less of lower return stock. |
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Are dividends tax deductible?
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NO |
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stated dividend must be paid ___ |
before dividends can be paid to common stockholders |
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preferred dividends can be deferred indefinitely |
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preferred dividends are ______ (in regards to common ) |
cumulative, all missed must be paid before common gets paid |
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2 factors determining stock prices |
1. speculative factor relates to stock prive movements to market psychology and investor trading behavior 2. fundamental factor relates stock price movements to expectations about the discounted value of company cash flows |
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most significant difference between speculative and entrepreneurial factors pertains to |
timing; stock prices in the long run require support from sales, profit and cash flow; stock prices in the short run appear sometimes to vibrate randomly (Speculative explains these movements) |
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a buy signal results when the short-run moving average becomes BIGGER OR SMALLER than the long run moving average. |
bigger |
