Stock Certificates Represent Evidence of Ownership in an Organization

question 19

Multiple Choice

Stock certificates represent evidence of ownership in an organization. A stock certificate contains which of the following?

• A) Current market value of the stock
• B) The total number of shares issued by the company
• C) The type of stock the investor is buying
• D) The stock symbol and trading exchange of the company

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Definitions:

M&M Proposition II

This financial theory, originating from Modigliani and Miller, states that a firm's cost of equity increases as the firm increases its level of debt financing, holding everything else constant.

Capital Structure

The mix of different forms of financial securities used by a firm to finance its operations, typically consisting of debt and equity.

Levered Firm

A company that has debt in its capital structure, implying that it has taken on borrowing to finance its operations or growth.

Unlevered Firm

A business or company that operates without any debt financing, meaning it does not have any borrowings in its capital structure.