WGU C214 OA Financial Management Exam Guide
Characteristics of preferred stock includes
Preferred stock dividends
Characteristics of common stock are
New start up ventures often issue
What stock is considered a hybrid
One thing common stock and preferred stock have in common is
Which type of security has voting rights
Debt covenants and restrictions help to ensure that
What is true regarding bonds
Bond sells at face value when
Why are bonds the primary method for raising capital
What type of bond can be traded for stock
-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)
can go without payment and pay in arrears the following year
-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
preferred stock (in an IPO)
preferred stock
both have no maturity date
common stock
management is meeting bond and shareholder expectations
NOTE: covenants are promises meant to be kept
-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
required rate of return is equal to the coupon rate
because bonds remove the intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a
group of banks underwriting the security issue
convertible bonds
the coupon rate
What is the interest rate for annual payments of a bond known as 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
secured bonds
never change
Debentures are
Secured loan
The amount repaid at the expiration date of a bond is
Duration measures
Maturity of bonds is calculated in
A bond premium occurs when
Junk Bonds are