Overview of Equity Securities

7 questions

1. 1. Which of the following statements about common shares is TRUE?
   The common shareholders have the right to vote on certain issues in the company.The common shareholders receive guaranteed dividends from the profits of the company.The common shares are less risky compared to preferred shares.
2. 2. All the following statements about the cumulative voting system are true EXCEPT:
   A shareholder may give all the votes he/she holds to a single candidate.Cumulative voting favors minority shareholders.Directors are elected one at a time.
3. 3. Which of the following is an advantage of participating preference shares over non-participating preference shares?
   Participating preference shares receive additional profits.In participating preference shares, dividend accumulates if it is not paid in a given year. Participating preference shares receive voting rights
4. 4. Which of the following American Depository Receipts (ADRs) do not trade on a stock exchange?
   Level I ADRSLevel II ADRSLevel III ADRS
5. 5. Which of the following statements about depository receipts is least accurate?
   ADRs are denominated in US dollars and issued in the US.GDRs are generally denominated in US dollars but issued outside the US.GDRs are generally denominated in a foreign currency and issued in the US.
6. 6. Within common shares, which of the following are most risky for the investors?
   Callable common sharesPuttable common sharesNon-callable, non-puttable common shares
7. 7. If the ROE of a company is increasing, it is a positive sign; however, the analyst must identify the reasons behind the increase in ROE. Which of the following is a positive sign?
   Raising more debt and use it to repurchase equity.Net income is increasing but at a faster rate than book value of equity.Net income is decreasing but at a slower rate than book value of equity.