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Match Each of the Following Terms with the Appropriate Definitions

Question 132

Matching

Match each of the following terms with the appropriate definitions:

Premises:

Responses:

Market value

The earning of a higher return on common stock by paying dividends on preferred stock or interest on debt at a rate that is less than the rate of return earned with the assets from issuing preferred stock or debt.

Cumulative preferred stock

The value assigned to a share of stock by the corporate charter when the stock is authorized.

Book value per common share

The difference between the par value of stock and its issue price when it is issued at a price above par value.

Premium on stock

The price at which stock is bought or sold in the market.

Preferred stock

No-par stock to which the directors assign a stated value per share; this amount becomes the minimum legal capital.

Stated value stock

Stock that gives its owners a priority status over common stockholders in one or more ways, such as the payment of dividends or the distribution of assets.

Financial leverage

A preferred stock that has the right to be paid both the current and all prior periods' unpaid dividend before any dividend is paid to common stockholders.

Call price

The equity of a corporation.

Stockholders' equity

Stockholders equity applicable to common shares divided by the number of common shares outstanding.

Par value

The amount that must be paid to call and retire a preferred share.

Premises:

Market value

Cumulative preferred stock

Book value per common share

Premium on stock

Preferred stock

Stated value stock

Financial leverage

Call price

Stockholders' equity

Par value

Responses:

The value assigned to a share of stock by the corporate charter when the stock is authorized.

The difference between the par value of stock and its issue price when it is issued at a price above par value.

The price at which stock is bought or sold in the market.

No-par stock to which the directors assign a stated value per share; this amount becomes the minimum legal capital.

Stock that gives its owners a priority status over common stockholders in one or more ways, such as the payment of dividends or the distribution of assets.

A preferred stock that has the right to be paid both the current and all prior periods' unpaid dividend before any dividend is paid to common stockholders.

The equity of a corporation.

Stockholders equity applicable to common shares divided by the number of common shares outstanding.

The amount that must be paid to call and retire a preferred share.

Correct Answer:

Premises:

Responses:

Market value

Cumulative preferred stock

Book value per common share

Premium on stock

Preferred stock

Stated value stock

Financial leverage

Call price

Stockholders' equity

Par value