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Securities Act of 1933

See Also:
Primary Market
Securities Exchange Act of 1934
Investment Banks
Secondary Market
Initial Public Offering (IPO)

Securities Act of 1933

The Securities Act of 1933 was a landmark decision in the United States to regulate the issuance of newly issued shares into the market – an initial public offering. The act is also there for companies to register before the issuance as to ensure reliability.

Securities Act of 1933 Meaning

The Securities Act of 1933 followed the stock market crash in 1929. It was a movement to regulate the markets as to not mislead investors. Furthermore, the idea requires due diligence so that the best possible information would hit the market. The 1933 Securities Act was also meant to do away with insider information. By requiring this information to be provided pre-issuance investors presented with the opportunity to buy shares of the firm, during the investment banker’s road show, can make well informed decisions. The due diligence required by the 1933 Securities Act is to have a full audit and compliance with Generally Accepted Accounting Principles (GAAP). Without registration and a following of the 1933 Securities Act rules a firm cannot be listed on a U.S. stock exchange until the requirements are satisfied.

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securities act of 1933

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securities act of 1933

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Preferred Stocks (Preferred Share)

Preferred Stocks (Preferred Share) Definition

Like common stock, shares of preferred stocks (preferred share) represent ownership of a public corporation. However, unlike common stock, preferred stock typically does not give the owner voting rights.

Preferred stock usually pays a dividend. But due to its preferred status, preferred stockholders will receive dividend payments before common stockholders. For example, if, for whatever reason, the company does not have enough cash to meet all of its dividend payment obligations, the common stockholders will not begin to receive dividends until after all of the preferred stockholders have received their dividends.

Likewise, if the company were to go out of business and liquidate its assets, preferred stockholders have seniority over common stock holders. Preferred stockholders have a higher ranking claim to the liquidated assets than common stockholders. Common stockholders will not have access to liquidated assets until all of the preferred stock holders have been paid off.

Preferred stock may have a convertible provision, allowing it to be exchanged for shares of common stock under certain specified circumstances.


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Preferred Stocks

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Preferred Stocks

See Also:
Company Valuation
Fixed Income Securities
Arrears
Subscription (Preemptive) Rights

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Earnings per Share (EPS)

See Also:
Price Earnings Growth Ratio Analysis
Price Earnings Ratio Analysis
Gross Profit Margin Ratio Analysis
Net Profit Margin Analysis
Financial Ratios

Earnings per Share (EPS) Definition

The earnings per share or EPS is the amount of profit that accrues to each shareholder based on their percentage ownerships or amount of shares owned within the company.

Earnings per Share (EPS) Explained

The earnings per share ratio is often a good measure of how a company is doing from year to year and is used by many investors in the market. However, companies know that the EPS is often a measure of how they are handling their businesses. This leads several companies to manipulate the EPS ratio. The ratio can be manipulated if the company were to buy or sell its own shares in the market, referred to as Treasury Stock. The net income aspect can also be manipulated through the recognition of revenue as well as other ways.

Earnings per Share (EPS) Formula

The EPS equation is as follows:
(Net Income – Preferred Dividends)/Shares Outstanding

Earnings per Share (EPS) Example

Tim is trying to calculate the EPS for Wawadoo Inc. He was given the following information to solve the problem.

Operating Income – $350,000
Interest expense – $20,000
Tax rate – 34%
Shares outstanding – 100,000 common (no preferred)

Tim will make the EPS calculation as follows:
$350,000 – (350,000 * .34) – $20,000 = $211,000 = Net Income
$211,000/100,000 = $2.11/share = EPS

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earnings per share

 

earnings per share

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