#1
Which of the following best describes common stock?
Ownership shares in a corporation with voting rights but no guaranteed dividends.
ExplanationCommon stock represents ownership in a company with voting rights but no guaranteed dividends.
#2
What is treasury stock?
Stock that has been repurchased by the issuing company.
ExplanationTreasury stock is shares repurchased by the issuing company.
#3
Which of the following statements about preferred stock is true?
Preferred stockholders have priority over common stockholders in receiving dividends.
ExplanationPreferred stockholders have dividend priority over common stockholders.
#4
What happens to the total stockholders' equity when a company repurchases its own shares?
Total stockholders' equity decreases.
ExplanationStock repurchase reduces total stockholders' equity.
#5
What is the effect of a stock dividend on a company's equity accounts?
Increase in common stock and decrease in retained earnings.
ExplanationStock dividend boosts common stock but reduces retained earnings.
#6
Which financial statement reports the changes in equity accounts over a specific period?
Statement of stockholders' equity
ExplanationStatement of stockholders' equity details changes in equity accounts over a period.
#7
What is a stock split?
Issuing additional shares of stock to existing shareholders without charge.
ExplanationStock split involves issuing additional shares to existing shareholders without charge.
#8
How does a stock dividend differ from a stock split?
A stock dividend increases the number of shares outstanding, while a stock split decreases it.
ExplanationStock dividend increases shares outstanding, while a stock split decreases them.
#9
What is the effect of a stock split on the market price per share?
It decreases the market price per share.
ExplanationStock split reduces the market price per share.
#10
What does the price-to-earnings (P/E) ratio indicate about a company?
The company's profitability relative to its market value.
ExplanationP/E ratio shows the company's profitability relative to its market value.
#11
What does the debt-to-equity ratio measure?
The proportion of debt financing relative to equity financing.
ExplanationDebt-to-equity ratio measures the proportion of debt financing relative to equity financing.
#12
What is the significance of a high price-to-book (P/B) ratio?
The company's stock is overvalued.
ExplanationA high P/B ratio suggests the company's stock is overvalued.
#13
How does a stock repurchase impact earnings per share (EPS)?
It increases EPS.
ExplanationStock repurchase tends to increase earnings per share (EPS).
#14
What is the impact of a stock split on the par value of shares?
It has no impact on the par value per share.
ExplanationStock split does not affect the par value per share.
#15
What does a high dividend yield indicate about a company?
The company is returning a significant portion of earnings to shareholders.
ExplanationHigh dividend yield suggests the company returns a significant portion of earnings to shareholders.