Question 1

Dutch auction preferred stock

Accepted Answer

A)  is issued first to the bidder willing to accept the lowest yield. 
B)  matures every seven weeks and is re-auctioned at a subsequent bidding. 
C)  allows corporate investors to take advantage of preferred stock tax benefits. 
D)  all of the other answers are correct. 
A)  is issued first to the bidder willing to accept the lowest yield. 
B)  matures every seven weeks and is re-auctioned at a subsequent bidding. 
C)  allows corporate investors to take advantage of preferred stock tax benefits. 
D)  all of the other answers are correct.

Question 2

Advantages that the American Depository Receipts (ADRs) have over investing in actual shares of a foreign stock include all but the following;

Accepted Answer

A)  Unlike direct foreign stock, ADRs have financial statements presented in a GAAP format. 
B)  Dividends are paid in dollars and easier to collect than actual shares of foreign stock. 
C)  ADRs are more liquid and less expensive than buying foreign stock directly. 
D)  none of the other answers are correct 
A)  Unlike direct foreign stock, ADRs have financial statements presented in a GAAP format. 
B)  Dividends are paid in dollars and easier to collect than actual shares of foreign stock. 
C)  ADRs are more liquid and less expensive than buying foreign stock directly. 
D)  none of the other answers are correct

Question 3

Generally the receipt of corporate bond interest is more valuable than preferred dividends to corporate investors.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Which of the following statements is true with respect to cumulative voting?

Accepted Answer

A)  Cumulative voting permits one votes for a single director. 
B)  Cumulative voting gives minority shareholders less chance of being represented on the board of directors. 
C)  If 6 directors are to be elected and you own 100 shares, you may vote all 600 votes for one director and none for the others. 
D)  none of the other answers are correct 
A)  Cumulative voting permits one votes for a single director. 
B)  Cumulative voting gives minority shareholders less chance of being represented on the board of directors. 
C)  If 6 directors are to be elected and you own 100 shares, you may vote all 600 votes for one director and none for the others. 
D)  none of the other answers are correct

Question 6

The ex-rights date usually takes place after the end of the subscription period.

Accepted Answer

A) True 
 B)False

Question 7

Common shareholders have a residual claim to income, in other words they are last in line.

Accepted Answer

A) True 
 B)False

Question 8

The following are primary purchasers of preferred stock except

Accepted Answer

A)  corporate investors. 
B)  insurance companies. 
C)  pension funds. 
D)  individual investors. 
A)  corporate investors. 
B)  insurance companies. 
C)  pension funds. 
D)  individual investors.

Question 9

The market price of floating rate preferred stock is less volatile than that of regular preferred stock.

Accepted Answer

A) True 
 B)False

Question 10

Given that there are 4,000,000 shares outstanding in a corporation, how many shares will be required for a minority group of shareholders to elect 3 of the 11 members on the board of directors? (Assume cumulative voting required)

Accepted Answer

A)  800,001 
B)  1,000,001 
C)  1,090,910 
D)  1,000,000 
A)  800,001 
B)  1,000,001 
C)  1,090,910 
D)  1,000,000

Question 11

The aftertax cost of debt is cheaper than preferred stock to the issuing corporation.

Accepted Answer

A) True 
 B)False

Question 12

Krager Foods Corp. has 700,000 shares outstanding. General Grocery, one of its subsidiaries, is disgusted with current management practices and is trying to get some of its own people elected to the board of directors. There are 15 directors, and General Grocery controls proxies for 87,501 shares.
A) Under cumulative voting, how many directors can General Grocery elect?
B) How many shares will General Grocery have to acquire in order to elect 8 directors?

Accepted Answer

A)
 B) 8 d

Question 13

American Depository Receipts (ADRs) are

Accepted Answer

A)  receipts sent to foreign shareholders who own American companies. 
B)  proof of ownership for Eurodollar deposits held by Americans. 
C)  certificates that have a legal claim on an ownership interest in a foreign company's common stock. 
D)  certificates in U.S. companies that allow foreign investors to buy shares of American companies. 
A)  receipts sent to foreign shareholders who own American companies. 
B)  proof of ownership for Eurodollar deposits held by Americans. 
C)  certificates that have a legal claim on an ownership interest in a foreign company's common stock. 
D)  certificates in U.S. companies that allow foreign investors to buy shares of American companies.

Question 14

Advantages that the American Depository Receipts (ADRs) have over investing in actual shares of a foreign stock include all but the following;

Accepted Answer

A)  ADRs are an effective barrier to foreign currency risk. 
B)  Unlike direct foreign stock, ADRs have financial statements presented in a GAAP format. 
C)  Dividends are paid in dollars and easier to collect than actual shares of foreign stock. 
D)  ADRs are more liquid and less expensive than buying foreign stock directly. 
A)  ADRs are an effective barrier to foreign currency risk. 
B)  Unlike direct foreign stock, ADRs have financial statements presented in a GAAP format. 
C)  Dividends are paid in dollars and easier to collect than actual shares of foreign stock. 
D)  ADRs are more liquid and less expensive than buying foreign stock directly.

Question 15

Preferred stock is often sold by companies

Accepted Answer

A)  wanting to balance their capital structures. 
B)  that have a large amount of debt relative to equity. 
C)  looking for the taxable advantages of preferred dividends over common share dividends. 
D)  two of the other answers are correct 
A)  wanting to balance their capital structures. 
B)  that have a large amount of debt relative to equity. 
C)  looking for the taxable advantages of preferred dividends over common share dividends. 
D)  two of the other answers are correct

Question 16

Davis Aquatic Corp. has 300,000 shares of preferred stock outstanding that is cumulative. The dividend is $8.00 per share and has not been paid for 2 years. If Davis Aquatic Corp. earned $3 million this year, what could be the maximum payment to the preferred shareholders on a per share basis?

Accepted Answer

A)  $10.00 per share 
B)  $16.00 per share 
C)  $2.00 per share 
D)  $8.00 per share 
A)  $10.00 per share 
B)  $16.00 per share 
C)  $2.00 per share 
D)  $8.00 per share

Question 17

Because of tax considerations, corporations are able to issue preferred stock at a slightly lower yield than debt.

Accepted Answer

A) True 
 B)False

Question 18

The advantage of a rights offering is

Accepted Answer

A)  current shareholders are protected against dilution. 
B)  the firm has a built-in market of knowledgeable investors. 
C)  distribution costs are lower than a public offering. 
D)  all of the other answers are correct. 
A)  current shareholders are protected against dilution. 
B)  the firm has a built-in market of knowledgeable investors. 
C)  distribution costs are lower than a public offering. 
D)  all of the other answers are correct.

Question 19

To the security holder, preferred stock offers the highest risk and the lowest return.

Accepted Answer

A) True 
 B)False

Question 20

"Preemptive rights" means that

Accepted Answer

A)  existing shareholders can prevent management from issuing additional common stock. 
B)  common shareholders can "preempt" preferred shareholders for dividends. 
C)  existing shareholders are guaranteed an opportunity to retain their proportional share of ownership of the firm. 
D)  management can preempt the right of shareholders to receive dividends if earnings are down. 
A)  existing shareholders can prevent management from issuing additional common stock. 
B)  common shareholders can "preempt" preferred shareholders for dividends. 
C)  existing shareholders are guaranteed an opportunity to retain their proportional share of ownership of the firm. 
D)  management can preempt the right of shareholders to receive dividends if earnings are down.

Dutch auction preferred stock

Advantages that the American Depository Receipts (ADRs) have over investing in actual shares of a foreign stock include all but the following;

Generally the receipt of corporate bond interest is more valuable than preferred dividends to corporate investors.

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

Which of the following statements is true with respect to cumulative voting?

The ex-rights date usually takes place after the end of the subscription period.

Common shareholders have a residual claim to income, in other words they are last in line.

The following are primary purchasers of preferred stock except

The market price of floating rate preferred stock is less volatile than that of regular preferred stock.

Given that there are 4,000,000 shares outstanding in a corporation, how many shares will be required for a minority group of shareholders to elect 3 of the 11 members on the board of directors? (Assume cumulative voting required)

The aftertax cost of debt is cheaper than preferred stock to the issuing corporation.

American Depository Receipts (ADRs) are

Advantages that the American Depository Receipts (ADRs) have over investing in actual shares of a foreign stock include all but the following;

Preferred stock is often sold by companies

Davis Aquatic Corp. has 300,000 shares of preferred stock outstanding that is cumulative. The dividend is $8.00 per share and has not been paid for 2 years. If Davis Aquatic Corp. earned $3 million this year, what could be the maximum payment to the preferred shareholders on a per share basis?

Because of tax considerations, corporations are able to issue preferred stock at a slightly lower yield than debt.

The advantage of a rights offering is

To the security holder, preferred stock offers the highest risk and the lowest return.

"Preemptive rights" means that

The Goals and Activities 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 Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

External Growth Through Mergers

International Financial Management

Filters

Exam 17: Common and Preferred Stock Financing

Dutch auction preferred stock

Advantages that the American Depository Receipts (ADRs) have over investing in actual shares of a foreign stock include all but the following;

Generally the receipt of corporate bond interest is more valuable than preferred dividends to corporate investors.

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

Which of the following statements is true with respect to cumulative voting?

The ex-rights date usually takes place after the end of the subscription period.

Common shareholders have a residual claim to income, in other words they are last in line.

The following are primary purchasers of preferred stock except

The market price of floating rate preferred stock is less volatile than that of regular preferred stock.

Given that there are 4,000,000 shares outstanding in a corporation, how many shares will be required for a minority group of shareholders to elect 3 of the 11 members on the board of directors? (Assume cumulative voting required)

The aftertax cost of debt is cheaper than preferred stock to the issuing corporation.

American Depository Receipts (ADRs) are

Advantages that the American Depository Receipts (ADRs) have over investing in actual shares of a foreign stock include all but the following;

Preferred stock is often sold by companies

Davis Aquatic Corp. has 300,000 shares of preferred stock outstanding that is cumulative. The dividend is $8.00 per share and has not been paid for 2 years. If Davis Aquatic Corp. earned $3 million this year, what could be the maximum payment to the preferred shareholders on a per share basis?

Because of tax considerations, corporations are able to issue preferred stock at a slightly lower yield than debt.

The advantage of a rights offering is

To the security holder, preferred stock offers the highest risk and the lowest return.

"Preemptive rights" means that

The Goals and Activities 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 Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

External Growth Through Mergers

International Financial Management

Filters