equities part VI series 7 outline

liquidating value

1. theoretical value of a company's assets if business if bankruptcy occurred
2. book value, per share value if all assets liquidated 

Order of liquidation

1. taxes-all taxes must be paid first
2. secured bondholders-those who have bonds backed by assets such as land
3. secured creditors-those who have sold the company goods, goods are collateral for creditor
4. debenture bondholders-backed only by good name of the company
5. unsecured creditors-those who have provided services to the corporation with no collateral-utility and phone co.
6. subordinated debenture holders-come after all other creditors and bondholders
7. preferred stockholders
8. common stockholders
9. creditors come before stockholders 

Spin off

1. a large corporation creates an independent company through divesture and issues shares of new corporation
2. shares are distributed to existing stockholders of the corporation in proportion to the amount of shares owned by each of the stockholders of the large corporation
3. the existing stockholders now are owners of the large corporation and also owners of the new independent company through the ownership of shares of each of the companies 

Leveraged buyout

1. occurs when a small company buys itself out from a large company
2. achieved by selling shares to prospective owners, issuing debt securities like debenture bonds, secured by assets of the company 

American Depositary Receipts (ADRs)

1.  used to facilitate the trade of foreign securities in American markets
2. U.S. banks issue negotiable receipts which certify a foreign bank is holding the actual shares of a foreign corporation
3. ADR-Nissan Motors
4. the foreign bank who holds the shares of stock has a right and responsibility to pay the current market price when ADRs are closed and must forward all dividends to existing holders of the ADRs
5. a correspondent bank in the U.S. issues ADRs which represent the ownership of shares on deposit in the foreign depoository 
6. the American bank issuing the ADR assumes the responsibility for paying any dividends declared by the foreign country to the ADR holders in American dollars
7. the ADRs are traded in U.S. securities markets in place of the actual foreign company's shares
8. the ADRs are registered with the SEC by the issuer 
9. the holders of ADRs have all the rights of a regular stockholder except for preemptive rights and voting rights
10. ADRs can have a specific ratio of shares of underlying stock per ADR and this ratio is determined by the issuing bank at the time of issue
11. bank determines: it can be 1 share of stock/ADR or 100 shares of stock/ADR
12. If a foreign company declares a dividend it will be declared in the foreign currency of that country-the holding bank will convert the dividend into U.S. dollars and the holder of the ADR will be paid in U.S. dollars
13. All of the following are true of an ADR except: the declared dividends are paid in foreign currency (false)