Accounting
Financial Mgmt.
Chapter 7
Questions
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Hour:
7.1 STOCK MARKETS
1. What are some motives that investors have for buying stock?
2. What are capital gains? How are they achieved?
3. What is a motivating factor for corporations to issue stock?
4. Who buys and sells shares of stock after the initial sale?
5. What is the most frequently used type of corporate ownership?
6. What fundamental rights are associated with common stock?
7. What specific issues do these stockholder have the right to vote on?
8. What can a stockholder do if they hold shares for more than a year?
9. What are dividends?
10. Who makes decisions regarding dividends a company will pay, or whether it will pay them at all?
11. What type of company usually pays dividends? What type of company usually reinvests its profits for continual growth?
12. What is an advantage of preferred stock in comparison to common stock?
13. What is a disadvantage of preferred stock in comparison to common stock?
14. What is an IPO? What is it sometimes called?
15. How does the status of a company change after an IPO?
16. In your own words, describe the IPO process in full detail.
17. What is the IPO process also referred to as?
18. What is a secondary market?
19. Where do more security transactions occur, in the primary or secondary market?
20. What are some examples of secondary markets?
21. What is a stockbroker? How do they serve as intermediaries?
22. What are the two types of brokers? What are advantages and disadvantages of both?
23. What cities besides New York operate regional stock exchanges?
24. How many stock exchanges are in operation globally?
25. What is an over-the-counter (OTC) market? What is an example of this type of market in the U.S.?
26. What is market value? What are some factors that can affect market value?
27. What is a stock market index?
28. Describe how the Dow Jones Industrial Average (DJIA) and the Standard & Poor’s (S&P) indexes are measured?
29. What is a bull market? What is a bear market?
30. What is the motive behind a stock split?
7.2 BOND MARKETS
31. Who sells bonds?
32. What is a bond?
33. How long are short-term bonds? Intermediate? Long-term?
34. What length of terms generally command the highest interest rates?
35. Who specifically can issue bonds?
36. What are the reasons that corporations need to raise capital?
37. What are the advantages and disadvantages of choosing a corporate bond versus a government bond?
38. What are the most common terms for corporate bonds?
39. What is the primary reason that governments need to raise money?
40. What are the three major types of debt securities that the U.S. Treasury issues? Explain the terms of each.
41. What is an incentive for investing in municipal bonds?
42. Who may therefore be most attracted to municipal bonds?
43. What is a general obligation bond backed by?
44. What is a revenue bond backed by?
45. What is a bond rating?
46. What are bond ratings commonly affected by?
7.3 MUTUAL FUNDS
47. What do investment companies actually sell when they sell mutual funds?
48. Why might investing in mutual funds be a safer option than investing in individual stocks and bonds?
49. Approximately how many different mutual funds are available to investors?
50. List five of the various different objectives that mutual funds focus on?
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