Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The most important feature of the pre emptive right is that the rights

Accepted Answer

A)  may be sold for profit. 
B)  possibly protect the stockholders' shares against dilution. 
C)  may accumulate more votes. 
D)  are non transferable. 
A)  may be sold for profit. 
B)  possibly protect the stockholders' shares against dilution. 
C)  may accumulate more votes. 
D)  are non transferable.

Question 3

Investors are usually in favor of poison pills because they prevent takeovers.

Accepted Answer

A) True 
 B)False

Question 4

A poison pill will raise the potential for maximizing shareholder value because it deters takeover bids.

Accepted Answer

A) True 
 B)False

Question 5

The purpose of cumulative voting is

Accepted Answer

A)  to maintain majority control of the board of directors. 
B)  to allow minority stockholders the possibility of a voice on the board of directors. 
C)  to obstruct unfriendly mergers and takeover efforts. 
D)  to prevent the dilution of common stock through pre emptive rights offerings. 
A)  to maintain majority control of the board of directors. 
B)  to allow minority stockholders the possibility of a voice on the board of directors. 
C)  to obstruct unfriendly mergers and takeover efforts. 
D)  to prevent the dilution of common stock through pre emptive rights offerings.

Question 6

An increasing proportion of shares in the U.S. are owned by

Accepted Answer

A)  individual investors. 
B)  corporations (Treasury stock). 
C)  institutions. 
D)  governments. 
A)  individual investors. 
B)  corporations (Treasury stock). 
C)  institutions. 
D)  governments.

Question 7

Common stockholders have a legal claim to dividend income.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following best represents a benefit of a rights offering for a company?

Accepted Answer

A)  Rights offerings increase return on equity. 
B)  Rights offerings substantiate higher debt-to-equity ratios. 
C)  Rights offerings have lower margin requirements. 
D)  None of these options are true 
A)  Rights offerings increase return on equity. 
B)  Rights offerings substantiate higher debt-to-equity ratios. 
C)  Rights offerings have lower margin requirements. 
D)  None of these options are true

Question 9

To the individual recipient, preferred stock dividends offer no advantage over common stock dividends.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Common stock holders rights include all of the following EXCEPT:

Accepted Answer

A)  Fixed dividend yield 
B)  Voting rights 
C)  First option to purchase new shares 
D)  Residual claim to income 
A)  Fixed dividend yield 
B)  Voting rights 
C)  First option to purchase new shares 
D)  Residual claim to income

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

While of the following is FALSE about the board of directors (BOD) of a firm:

Accepted Answer

A)  are unbiased individuals that help with high-end decisions within the firm. 
B)  represent the owners of the corporation. 
C)  make frequent operating decisions. 
D)  are elected by the shareholders. 
A)  are unbiased individuals that help with high-end decisions within the firm. 
B)  represent the owners of the corporation. 
C)  make frequent operating decisions. 
D)  are elected by the shareholders.

Question 14

Which one of the following statements is false?

Accepted Answer

A)  Poison pills encourages current owners to purchase more stock in the company. 
B)  Poison pills discourage potential high takeover bids. 
C)  Stockholders have to approve the acceptance of poison pill strategies before a corporation can use them. 
D)  Many institutional investors are opposed to the poison pill 
A)  Poison pills encourages current owners to purchase more stock in the company. 
B)  Poison pills discourage potential high takeover bids. 
C)  Stockholders have to approve the acceptance of poison pill strategies before a corporation can use them. 
D)  Many institutional investors are opposed to the poison pill

Question 15

Coase Corp. has 10,000,000 outstanding shares. There are 11 directors on the firm's board. The Becker family owns 2,300,000 shares of Coase Corp. How many directors can the Becker family be assured of electing by themselves if Coase Corp. uses majority voting?

Accepted Answer

A)  Zero 
B)  One 
C)  Two 
D)  Three 
A)  Zero 
B)  One 
C)  Two 
D)  Three

Question 16

The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.

Accepted Answer

A) True 
 B)False

Question 17

American Depository Receipts

Accepted Answer

A)  have annual reports and financial statements presented in English. 
B)  pay dividends in dollars. 
C)  are more liquid and less expensive to buy than foreign stock. 
D)  all of these answers are true. 
A)  have annual reports and financial statements presented in English. 
B)  pay dividends in dollars. 
C)  are more liquid and less expensive to buy than foreign stock. 
D)  all of these answers are true.

Question 18

Stock classes are similar to bond ratings in that they are used to rank the performance of different corporations' stock.

Accepted Answer

A) True 
 B)False

Question 19

A common stockholder cannot force a company into bankruptcy for eliminating the dividend.

Accepted Answer

A) True 
 B)False

Question 20

Kuhns Corp. has 200,000 shares of preferred stock outstanding that is cumulative and 100,000 common stock outstanding. The preferred dividend is $3.00 per share and has not been paid for three years. If Kuhns earned $1 million this year, what could be the maximum payment to the preferred stockholders on a per share basis?

Accepted Answer

A)  $9.00 per share 
B)  $15.00 per share 
C)  $6.00 per share 
D)  $5.00 per share 
A)  $9.00 per share 
B)  $15.00 per share 
C)  $6.00 per share 
D)  $5.00 per share

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

The most important feature of the pre emptive right is that the rights

Investors are usually in favor of poison pills because they prevent takeovers.

A poison pill will raise the potential for maximizing shareholder value because it deters takeover bids.

The purpose of cumulative voting is

An increasing proportion of shares in the U.S. are owned by

Common stockholders have a legal claim to dividend income.

Which of the following best represents a benefit of a rights offering for a company?

To the individual recipient, preferred stock dividends offer no advantage over common stock dividends.

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

Common stock holders rights include all of the following EXCEPT:

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

While of the following is FALSE about the board of directors (BOD) of a firm:

Which one of the following statements is false?

Coase Corp. has 10,000,000 outstanding shares. There are 11 directors on the firm's board. The Becker family owns 2,300,000 shares of Coase Corp. How many directors can the Becker family be assured of electing by themselves if Coase Corp. uses majority voting?

The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.

American Depository Receipts

Stock classes are similar to bond ratings in that they are used to rank the performance of different corporations' stock.

A common stockholder cannot force a company into bankruptcy for eliminating the dividend.

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

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

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

The most important feature of the pre emptive right is that the rights

Investors are usually in favor of poison pills because they prevent takeovers.

A poison pill will raise the potential for maximizing shareholder value because it deters takeover bids.

The purpose of cumulative voting is

An increasing proportion of shares in the U.S. are owned by

Common stockholders have a legal claim to dividend income.

Which of the following best represents a benefit of a rights offering for a company?

To the individual recipient, preferred stock dividends offer no advantage over common stock dividends.

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

Common stock holders rights include all of the following EXCEPT:

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

While of the following is FALSE about the board of directors (BOD) of a firm:

Which one of the following statements is false?

Coase Corp. has 10,000,000 outstanding shares. There are 11 directors on the firm's board. The Becker family owns 2,300,000 shares of Coase Corp. How many directors can the Becker family be assured of electing by themselves if Coase Corp. uses majority voting?

The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.

American Depository Receipts

Stock classes are similar to bond ratings in that they are used to rank the performance of different corporations' stock.

A common stockholder cannot force a company into bankruptcy for eliminating the dividend.

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

Long-Term Debt and Lease Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants, and Derivatives

External Growth Through Mergers

International Financial Management

Filters