Stocks Beginner: The Stock Prospectus

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1.
To find out how a company intends to invest the capital it raises by selling stock, which prospectus section should you check?
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Use of Proceeds. The "Use of Proceeds" section spells out how the proceeds from the stock offering are to be used.
2.
All of the following information is available in a stocks preliminary prospectus except _______.
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The offering price. The offering price is not included in the preliminary prospectus, which is published before the price is finalized.
3.
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.
4.
All of the following may be found on the cover of a stock prospectus except _______.
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Risk factors. Risk factors are not spelled out on the cover of the prospectus, but all of the other listed information may be found there.
5.
All of the following are situations in a prospectus that may indicate trouble, except for which?
Choose wisely. There is only one correct answer.
Management is compensated with stock options. When management is compensated with stock options, it benefits personally when the company growsa potentially good sign. The other listed factors may mean trouble for the company.