Financial Services _Çô Client Services RFC121 Study Guide - Final Guide: Dividend, Capital Appreciation, Retained Earnings
19 Dec 2016
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Primary objectives: safety of income, income. Secondary objectives: liquidity (marketability, tax minimization. Equity capital: money obtains from its owners: no legal obligations to pay dividend. Retained earnings: not required to repay back. Common shares: capital appreciation, price affected by profits and market, dividends approved by board of directors, can increase dividends, lowest preference in bankruptcy. Preferred shares: little capital appreciation, price affected by market and not profit, trade like bonds on interest rates, dividend promised (not guaranteed, preference in case of bankruptcy, cumulative feature. Pays before common stock dividend: participation feature. Share earnings beyond stated dividends: conversion feature. Earnings per share: corporation after tax earnings divided by number of outstanding shares of common stock, eps = after-tax earnings/# of outstanding common shares. Price-earnings (pe) ratio: low pe may be good investment, price-earnings ratio = price per share/earnings per share of stock outstanding last 12 months. Bonds: corporate bond secured by assets of the firm, secured by land/building.
