Question 1

The market value of equity equals

Accepted Answer

A) (Market price)× (# of shares outstanding). 
B) (Market price)× (# of treasury shares). 
C) (Market price)× (# of authorized shares). 
D) (Par value)× (# of shares outstanding). 
A) (Market price)× (# of shares outstanding). 
B) (Market price)× (# of treasury shares). 
C) (Market price)× (# of authorized shares). 
D) (Par value)× (# of shares outstanding).

Question 2

Which of the following characteristics do not apply to financial intermediaries?
I.they raise money from investors;
II.they invest in financial assets;
III.they mainly invest in real assets

Accepted Answer

A) I only 
B) I and II only 
C) II only 
D) III only 
A) I only 
B) I and II only 
C) II only 
D) III only

Question 3

The rare event in which a firm's existing directors and management compete with outsiders for the effective control of the corporation is called a

Accepted Answer

A) majority vote. 
B) supermajority amendment. 
C) proxy contest. 
D) merger. 
A) majority vote. 
B) supermajority amendment. 
C) proxy contest. 
D) merger.

Question 4

In the case of Facebook, which has issued Class A and Class B shares,
I.both classes of shares have the same cash-flow rights;
II.both classes of shares have the same control rights;
III.both classes of shares have different cash-flow rights;
IV.both classes of shares have different control rights

Accepted Answer

A) I and II only 
B) II and III only 
C) I and IV only 
D) III and IV only 
A) I and II only 
B) II and III only 
C) I and IV only 
D) III and IV only

Question 5

Which type of voting allows minority shareholders to allocate their votes in a manner to increase the chance of electing a director?

Accepted Answer

A) Majority voting 
B) Cumulative voting 
C) Representative voting 
D) Executive voting 
A) Majority voting 
B) Cumulative voting 
C) Representative voting 
D) Executive voting

Question 6

If you own 1,000 shares of common stock of a firm and there are five directors being elected, what is the maximum number of votes you can cast for a particular director under majority voting?

Accepted Answer

A) 5,000 
B) 1,000 
C) 200 
D) 5 
A) 5,000 
B) 1,000 
C) 200 
D) 5

Question 7

When completing a large debt issue, financial managers of large firms will usually consider the following questions:
I.Should the firm borrow short term or long term?
II.Should the firm issue fixed- or floating-rate debt?
III.Should the firm borrow in foreign currency?

Accepted Answer

A) I only 
B) II only 
C) III only 
D) I, II, and III 
A) I only 
B) II only 
C) III only 
D) I, II, and III

Question 8

Indicate the major sources of financing available to corporations.

Accepted Answer

The major sources of financing

Question 9

Briefly discuss some of the features that would increase the value of a corporate bond.

Accepted Answer

There are several important features tha

Question 10

Exploitation of minority shareholders by majority shareholders is called

Accepted Answer

A) a reverse stock split. 
B) tunneling. 
C) financial engineering. 
D) proxy fighting. 
A) a reverse stock split. 
B) tunneling. 
C) financial engineering. 
D) proxy fighting.

Question 11

Debt that comes due after one year is called long-term debt.

Accepted Answer

A) True 
 B)False

Question 12

If a bond is junior or subordinated, it

Accepted Answer

A) has a higher priority status than specified creditors. 
B) has been issued because the company is in default. 
C) must give preference to senior creditors in the event of default. 
D) is secondary to equity. 
A) has a higher priority status than specified creditors. 
B) has been issued because the company is in default. 
C) must give preference to senior creditors in the event of default. 
D) is secondary to equity.

Question 13

As a provider of funds to a corporation, owning which of the following corporate securities will give you the most control rights?

Accepted Answer

A) Short-term bank loan 
B) Long-term bond 
C) Preferred stock 
D) Common stock 
A) Short-term bank loan 
B) Long-term bond 
C) Preferred stock 
D) Common stock

Question 14

A grant of authority allowing someone else to vote shares of stock that you own is called

Accepted Answer

A) repurchase agreement. 
B) proxy voting. 
C) share repurchase. 
D) repurchase agreement and share repurchase. 
A) repurchase agreement. 
B) proxy voting. 
C) share repurchase. 
D) repurchase agreement and share repurchase.

Question 15

Generally, nonfinancial U.S. corporations have financed their capital expenditures through

Accepted Answer

A) issuance of new equity. 
B) issuance of debt. 
C) increases in working capital. 
D) internally generated cash. 
A) issuance of new equity. 
B) issuance of debt. 
C) increases in working capital. 
D) internally generated cash.

Question 16

The single European currency established by the European Union is called the euro.

Accepted Answer

A) True 
 B)False

Question 17

The following are characteristics of preferred stock except it
I.pays fixed dividends;
II.can demand payments of cumulative dividends;
III.has voting rights

Accepted Answer

A) I only 
B) I and II only 
C) III only 
D) II only 
A) I only 
B) I and II only 
C) III only 
D) II only

Question 18

A warrant is a type of option.

Accepted Answer

A) True 
 B)False

Question 19

If you own 1,000 shares of stock and you can cast 5,000 votes for a particular director, then the stock features

Accepted Answer

A) cumulative voting. 
B) straight voting. 
C) majority voting. 
D) proxy voting. 
A) cumulative voting. 
B) straight voting. 
C) majority voting. 
D) proxy voting.

Question 20

The change in a firm's retained earnings is

Accepted Answer

A) the amount of cash that the firm has saved up. 
B) the difference between the market price of the stock and the book value. 
C) the difference between the net income earned and the dividends paid during a year. 
D) the amount of directly contributed equity capital in excess of par value. 
A) the amount of cash that the firm has saved up. 
B) the difference between the market price of the stock and the book value. 
C) the difference between the net income earned and the dividends paid during a year. 
D) the amount of directly contributed equity capital in excess of par value.

Exam 14: An Overview of Corporate Financing

The market value of equity equals

Which of the following characteristics do not apply to financial intermediaries? I.they raise money from investors; II.they invest in financial assets; III.they mainly invest in real assets

The rare event in which a firm's existing directors and management compete with outsiders for the effective control of the corporation is called a

In the case of Facebook, which has issued Class A and Class B shares, I.both classes of shares have the same cash-flow rights; II.both classes of shares have the same control rights; III.both classes of shares have different cash-flow rights; IV.both classes of shares have different control rights

Which type of voting allows minority shareholders to allocate their votes in a manner to increase the chance of electing a director?

If you own 1,000 shares of common stock of a firm and there are five directors being elected, what is the maximum number of votes you can cast for a particular director under majority voting?

When completing a large debt issue, financial managers of large firms will usually consider the following questions: I.Should the firm borrow short term or long term? II.Should the firm issue fixed- or floating-rate debt? III.Should the firm borrow in foreign currency?

Indicate the major sources of financing available to corporations.

Briefly discuss some of the features that would increase the value of a corporate bond.

Exploitation of minority shareholders by majority shareholders is called

Debt that comes due after one year is called long-term debt.

If a bond is junior or subordinated, it

As a provider of funds to a corporation, owning which of the following corporate securities will give you the most control rights?

A grant of authority allowing someone else to vote shares of stock that you own is called

Generally, nonfinancial U.S. corporations have financed their capital expenditures through

The single European currency established by the European Union is called the euro.

The following are characteristics of preferred stock except it I.pays fixed dividends; II.can demand payments of cumulative dividends; III.has voting rights

A warrant is a type of option.

If you own 1,000 shares of stock and you can cast 5,000 votes for a particular director, then the stock features

The change in a firm's retained earnings is

Introduction to Corporate Finance

How to Calculate Present Values

Valuing Bonds

The Value of Common Stocks

Net Present Value and Other Investment Criteria

Making Investment Decisions With the Net Present Value Rule

Introduction to Risk and Return

Portfolio Theory and the Capital Asset Pricing Model

Risk and the Cost of Capital

Project Analysis

How to Ensure That Projects Truly Have Positive Npvs

Agency Problems and Investment

Efficient Markets and Behavioral Finance

How Corporations Issue Securities

Payout Policy

Does Debt Policy Matter

How Much Should a Corporation Borrow

Financing and Valuation

Understanding Options

Valuing Options

Real Options

Credit Risk and the Value of Corporate Debt

The Many Different Kinds of Debt

Leasing

Managing Risk

Managing International Risks

Financial Analysis

Financial Planning

Working Capital Management

Mergers

Corporate Restructuring

Governance and Corporate Control Around the World

Filters