Question 1

Firm X has 150,000 outstanding shares and 9 directors. Joe Stone owns 37,500 shares of firm X. How many directors can Joe elect with cumulative voting?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
A)  0 
B)  1 
C)  2 
D)  3

Question 2

Participating preferred stock is advantageous to common shareholders.

Accepted Answer

A) True 
 B)False

Question 3

The type of shareholder voting has become less important with the influence of takeover, leveraged buyouts, and other challenges to management control.

Accepted Answer

A) True 
 B)False

Question 4

Preferred stock dividends are a deductible expense for a corporation.

Accepted Answer

A) True 
 B)False

Question 5

A share is said to sell "ex-rights":

Accepted Answer

A)  when the period in which the subscription privilege is to be exercised has expired. 
B)  when transfer of share ownership no longer carries with it the privilege of subscription. 
C)  after the rights have all been exercised and the new issue is completely sold. 
D)  after the terms of the subscription have been made public. 
A)  when the period in which the subscription privilege is to be exercised has expired. 
B)  when transfer of share ownership no longer carries with it the privilege of subscription. 
C)  after the rights have all been exercised and the new issue is completely sold. 
D)  after the terms of the subscription have been made public.

Question 6

Which of the following is not a very common feature of preferred stock?

Accepted Answer

A)  Cumulative dividends 
B)  Voting rights 
C)  Call feature 
D)  Conversion feature 
A)  Cumulative dividends 
B)  Voting rights 
C)  Call feature 
D)  Conversion feature

Question 7

Why do companies tend to issue preferred stock less then commons stock and bonds?

Accepted Answer

A)  Flotation cost of preferred stock is low compared to bonds. 
B)  Preferred dividends are considered regular (fixed) obligations but are not tax-deductible. 
C)  Preferred shareholders are entitled to receive stipulated dividends before common shareholders. 
D)  Preferred stock typically has cumulative dividends. 
A)  Flotation cost of preferred stock is low compared to bonds. 
B)  Preferred dividends are considered regular (fixed) obligations but are not tax-deductible. 
C)  Preferred shareholders are entitled to receive stipulated dividends before common shareholders. 
D)  Preferred stock typically has cumulative dividends.

Question 8

The floating rate feature on preferred stock causes more volatility in its price.

Accepted Answer

A) True 
 B)False

Question 9

Preferred stock is often sold by companies:

Accepted Answer

A)  wanting to balance their capital structures. 
B)  that have a small amount of debt relative to equity. 
C)  looking for the taxable advantages of preferred dividends over common share dividends. 
D)  that want to reduce dividend payments and avoid bankruptcy. 
A)  wanting to balance their capital structures. 
B)  that have a small amount of debt relative to equity. 
C)  looking for the taxable advantages of preferred dividends over common share dividends. 
D)  that want to reduce dividend payments and avoid bankruptcy.

Question 10

Occasionally, a company will have several classes of common stock, with each class carrying different rights to dividends and income.

Accepted Answer

A) True 
 B)False

Question 11

A firm has 200,000 outstanding shares and 11 directors. Doug owns 15,500 shares of this firm. How many directors can Doug elect with cumulative voting?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
A)  0 
B)  1 
C)  2 
D)  3

Firm X has 150,000 outstanding shares and 9 directors. Joe Stone owns 37,500 shares of firm X. How many directors can Joe elect with cumulative voting?

Participating preferred stock is advantageous to common shareholders.

The type of shareholder voting has become less important with the influence of takeover, leveraged buyouts, and other challenges to management control.

Preferred stock dividends are a deductible expense for a corporation.

A share is said to sell "ex-rights":

Which of the following is not a very common feature of preferred stock?

Why do companies tend to issue preferred stock less then commons stock and bonds?

The floating rate feature on preferred stock causes more volatility in its price.

Preferred stock is often sold by companies:

Occasionally, a company will have several classes of common stock, with each class carrying different rights to dividends and income.

A firm has 200,000 outstanding shares and 11 directors. Doug owns 15,500 shares of this firm. How many directors can Doug elect with cumulative voting?

The Goals and Functions of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Underwriting

Long-Term Debt and Lease Financing

Dividend Policy and Retained Earnings

Derivative Securities

External Growth Through Mergers

International Financial Management

Filters

Exam 17: Common and Preferred Stock Financing

Firm X has 150,000 outstanding shares and 9 directors. Joe Stone owns 37,500 shares of firm X. How many directors can Joe elect with cumulative voting?

Participating preferred stock is advantageous to common shareholders.

The type of shareholder voting has become less important with the influence of takeover, leveraged buyouts, and other challenges to management control.

Preferred stock dividends are a deductible expense for a corporation.

A share is said to sell "ex-rights":

Which of the following is not a very common feature of preferred stock?

Why do companies tend to issue preferred stock less then commons stock and bonds?

The floating rate feature on preferred stock causes more volatility in its price.

Preferred stock is often sold by companies:

Occasionally, a company will have several classes of common stock, with each class carrying different rights to dividends and income.

A firm has 200,000 outstanding shares and 11 directors. Doug owns 15,500 shares of this firm. How many directors can Doug elect with cumulative voting?

The Goals and Functions of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Underwriting

Long-Term Debt and Lease Financing

Dividend Policy and Retained Earnings

Derivative Securities

External Growth Through Mergers

International Financial Management

Filters