Overview of Equity Securities

Types of Equity Investments

A growing company wishes to issue equity to a private equity fund, but the fund manager is hesitant to commit as the company is not profitable yet.

What is the most suitable option the company can offer to help convince the fund manager to commit?

Types of Equity Investments

The preferred shareholders of InTrouble Corp were supposed to receive $13 dividend per share for this year, but only received $4 as the company did not have enough cash to pay. As part of the terms, any shortfall in dividend payment has to be repaid in the future.

What type of preference shares is this?

Private versus Public Equity Securities

Which of the following is least likely a disadvantage of investing in private equity?

Private versus Public Equity Securities

A venture capital firm is providing funding to a firm that is going develop its first products and market them. This stage of financing is most likely:

Investing in Non-Domestic Equity Securities

Trevor is a US citizen and wishes to invest in a Japanese company. He prefers to have direct voting rights in the company, and also have the right to receive dividends. Which of the following is the LEAST suitable option for him?

Risk and Return Characteristics of Equity Securities

Which of the following is the least likely reason that preferred shares are less risky the common shares?

Risk and Return Characteristics of Equity Securities

A company has the following shares outstanding. Rank them from the safest to the riskiest. (Drag and drop)

Equity Securities and Company Value

ValuBuy’s common stock is trading at $86 and the company has 7,000 outstanding shares. Given that the company’s book value is $890,000, the P/B ratio of the firm is closest to:

Equity Securities and Company Value

ValuBuy recently announced a full-year net income of $176,000. The company has declared a dividend payout of $24,000 to common shareholders, and $16,000 to preferred shareholders. Using the company’s beginning book value of $890,000, calculate the account ROE of the firm.