Stocks Beginner: The Stock Prospectus

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1.
All of the following are situations in a prospectus that may indicate trouble, except for which?
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Management is compensated with stock options. When management is compensated with stock options, it benefits personally when the company grows–a potentially good sign. The other listed factors may mean trouble for the company.
2.
Where in a prospectus would you look to find out how many shares of stock were included in the company's offering?
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All of the other sections. The cover, summary, and "Description of Capital Stock" sections each include the number of new shares being offered.
3.
Where can you get a stock prospectus?
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All of the other options. You can obtain a prospectus from the company, its underwriters, or on the Internet (EDGAR).
4.
The stock prospectus is an abridged version of the information a company files with the _______.
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Securities and Exchange Commission. The prospectus must be filed with the SEC, which enforces securities disclosure provisions.
5.
The Securities and Exchange Commission requires that prospectuses be written in plain English.
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False. The SEC is encouraging companies to use plain English, but dense legal and fiscal lingo can still be found in prospectuses.