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Series 86 Wrong Q questions and answers verified 2024
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Series 86 Wrong Q questions and answers verified 2024
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Series 86 Wrong QEV/Sale
1) Retail companies with different leverage
2) EBITDA negative because of high-start-up costs
What is a dividend?
A sum of money paid regularly by a company to its shareholders out of its
profits
May be paid out as cash or in the form of reinvestment in additional stock.
What is Preferred Dividend?
1) Preferred dividends refer to the cash dividends that a company pays out to
its preferred shareholders.
2) One benefit of preferred stock is that it typically pays higher dividend rates
than common stock of the same company.
3) A company declares all of its future preferred dividend obligations in
advance, and so must allocate funds for that
purpose where they accumulate in arrears.
,4) Preferred dividends must be paid out of net income before any common
share dividend is considered.
Deferred Tax Liability
Is a listing on a company's balance sheet that records taxes that are owed but
are not due to be paid until a future date.
Deferred Tax Asset
Such a line item asset can be found when a business overpays its taxes.
What is preferred stock?
1) Is a different type of equity that represents ownership of a company and the
right to claim income from the company's operations.
2) Preferred stockholders have a higher claim on distributions (e.g. dividends)
than common stockholders.
3) Preferred stockholders usually have no or limited voting rights in corporate
governance.
Dilutive to Shareholders
1) Conversion of bonds or preferred stock into common stock
2) Issuing in-the-money warrants, preemptive rights, or employee stock
options
3) M&A purchases using stock
4) Issuing new shares of common stock (non-restricted)
,Not Dilutive to Shareholders
1) Stock splits and dividends
2) Reverse stock splits
3) M&A purchases using cash
4) Stock Buy Backs
What increases ROE?
1) Increasing prices without a corresponding increase in costs (increases
profit margin
2) Increasing units sold while maintaining price (increases turnover)
3) Issuing bonds (increasing leverage while adding to financial risk);
4) Effecting a stock buyback
What decreases ROE?
Issuing additional stock while reducing financial leverage and ROE
Invested Capital
Total Assets (9) - Non-Interest-Bearing Current Liabilities (11 + 12) - Excess
Cash
ROIC
, EBIT(1-T)/total invested capital
What happens when you declare a cash dividend?
1) Dividends payable increase
2) Retained earnings are reduced
What happens when you pay a cash dividend?
1) Current assets is reduced (cash)
2) Current liabilities (dividends payable) is reduced.
1) What happens to WC when you declare a cash dividend?
Reduced
What happens to WC when you declare a cash dividend ?
Increased
Retained Earnings
The amount of profit a company has left over after paying all its direct &
indirect costs, income taxes, and its dividends to shareholders.
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