Series 7

  1. Order of Asset Distribution upon Liquidation:
    • Taxes
    • Secured Debt
    • Unsecured Debt
    • Preferred Stockholders
    • Common Stockholders
  2. Reasons a company would repurchase its own stock:
    • 1. to increase Earnings per Share
    • 2. to finance future acquisitions (i.e. a stock for stock acquisition)
    • 3. to provide stock for employee stock option plans
    • 4. to fight a takeover attempt
  3. Formula to calculate number of Outstanding Shares is simply:
    Issued Stock - Treasury Stock = Outstanding Shares

    • Outstanding Shares are the only shares that Vote
    • Receive Dividends
    • Used to Calculate Earnings per Share
  4. Treasury Stock (or Repurchased Stock)

    Only the Board of Directors makes the decision to repurchase shares).

    Important Points to Remember:
    • 1. does not vote
    • 2. does not receive dividends
    • 3. is not used in the Earnings Per Share (EPS) calculation
    • 4. appears on the balance sheet as a deduction from issued stock
  5. Which is the riskiest form of stock?
    Common Stock - as it is always paid last
Card Set
Series 7
Basics of Equity Securities