ELEMENTS OF PREFERRED STOCKS

1. ELEMENTS OF PREFERRED STOCKS • NO OWNERSHIP CLAIM • NO VOTING RIGHTS UNLESS DIVIDENDS ARE MISSED • CLAIM ON ASSETS AFTER BOND HOLDERS AND BEFORE COMMON STOCK HOLDERS • PAR VALUE MEANINGFUL SINCE IT IS BASE FOR PAYMENT OF DIVIDENDS • DIVIDENDS— • ANNUAL DIVIDEND STATED AS DOLLAR AMOUNT OR A PERCENTAGE OF PAR VALUE • MUST BE DECLARED BY BOARD • PAID FROM AFTER-TAX EARNINGS—NOT TAX DEDUCTIBLE TO FIRM • DIVIDEND TAXABLE TO SHAREHOLDER • MAY BE CUMULATIVE • MATURITY—UNLESS CALLABLE OR CONVERTIBLE, STAYS IN EXISTANCE UNLESS BACKRUPCY OR MERGER

2. ELEMENTS OF COMMON STOCKS • REPRESENTS AN OWNERSHIP INTEREST • BOARD OF DIRECTORS OVERSEES THE FIRM ON BEHALF OF THE SHAREHOLDERS AND ENFORCES THE CORPORATE CHARTER • VOTING RIGHTS FOR BOARD MEMBERS AND OTHER IMPORTANT ISSUES ALLOWED BY THE CORPORATE CHARTER • LOWEST CLAIM ON ASSETS AND CASH FLOW • PAR VALUE IS MEANINGLESS • DIVIDENDS- • MUST BE DECLARED BY BOARD • PAID OUT FROM AFTER-TAX EARNINGS—NOT TAX DEDUCTIBLE TO FIRM • TAXABLE WHEN RECEIVED BY SHAREHOLDERS • CAN VARY OVER TIME • STOCKS NEVER MATURE—EXIST UNTIL BANKRUPTCY OR MERGER

3. STOCK TERMS • TICKER SYMBOL • NASDAQ • NYSE • ROUND LOT • ODD LOT • 52-WEEK RANGE • TRADING VOLUME • DIVIDEND RE-INVESTMENT PLAN • DIVIDEND PAYOUT RATION • SPECIAL DIVIDEND • STOCK DIVIDEND • STOCK SPLIT • REVERSE SPLIT • SHARE REPURCHASE • STOCK OPTIONS • RESTRICTED STOCK • S&P 500 • DJIA • MARKET CAPITALIZATION • EPS • P/E RATIO • DIVIDEND YIELD • INSTITUTIONAL OWNERSHIP • BETA • ANALYSTS’ RECOMMENDATIONS

4. VALUATION OF STOCKS • PRESENT VALUE OF FUTURE CASH FLOWS • DISCOUNT RATE USED IS REQUIRED RATE OF RETURN ON THE INVESTMENT • IMPACT OF DOMESTIC AND GLOBAL ECONOMIC FACTORS • INFLATION • RISK PREMIUMS • IMPACT OF COMPETITION • IMPACT OF SALES AND EXPENSE GROWTH • MANAGEMENT CONFIDENCE