Corporate actions: NISM Series XV notes and practice questions

Q1. Which term is described here? A buyback is the repurchase of a company's own shares, reducing the share count and returning cash to shareholders, through tender offer or open market.

1. Return on capital employed
2. Seasonality
3. Share buyback
4. Income statement

Q2. Which statement best describes “Delisting”?

1. Delisting is the removal of a company's securities from an exchange, either voluntarily or compulsorily.
2. The Capital Asset Pricing Model states that expected return equals the risk-free rate plus beta times the market risk premium.
3. Correlation measures how two assets move together, from −1 to +1; lower correlation gives greater diversification benefit.
4. A stock split reduces the face value and increases the number of shares in the same ratio, leaving market capitalisation unchanged.

Q3. Which term is described here? An open offer requires an acquirer who crosses the 25% trigger or acquires control to offer to buy shares from public shareholders under SEBI takeover rules.

1. Book value
2. Resistance
3. Open offer
4. Breakout

Q4. Which statement best describes “Dividend payout ratio”?

1. Earnings are high quality when they are backed by cash flows, repeatable and not inflated by one-offs or aggressive accounting.
2. Substitutes limit the prices an industry can charge, as customers can switch to alternatives.
3. The dividend payout ratio is the share of profit paid as dividends; the rest is retained for growth.
4. Asset turnover is revenue divided by total assets and shows how efficiently assets generate sales.

Q5. Which statement best describes “Record date”?

1. Transparent, timely and consistent disclosure builds trust; poor or selective disclosure is a warning sign.
2. Intrinsic value is the estimated true worth of a security based on fundamentals, which may differ from market price.
3. The record date is the date on which a shareholder must be on the company's register to be eligible for a corporate benefit.
4. The cost of carry includes storage, insurance and financing costs, and links futures prices to spot prices.

Q6. Which statement best describes “Dividend yield”?

1. Face value is the nominal value of a security, while the issue price is what investors pay at the time of issue, which may differ.
2. Fiscal policy is the government's use of taxation and spending to influence the economy.
3. Corporate governance is the system of rules and practices by which a company is directed and controlled, protecting shareholders' interests.
4. Dividend yield is the annual dividend per share divided by the share price and shows income return.