Question 1

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 2

Some preferred shares are participating preferreds and this may allow for an increase in the preferred share dividend when the common share dividend equals the preferred share dividend.

Accepted Answer

A) True 
 B)False

Question 3

Advantages that the American Depositary 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 US GAAP or IFRS 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)  Have annual reports and financial statements presented in French,Spanish and Mandarin. 
A)  Unlike direct foreign stock,ADRs have financial statements presented in a US GAAP or IFRS 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)  Have annual reports and financial statements presented in French,Spanish and Mandarin.

Question 4

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 5

If SED's shares trade ex-rights at $51.75,carry a subscription price of $48 a share,and can be purchase by shareholders in a ratio of 5 rights per share,SED's rights trade at ______.

Accepted Answer

A)  $0.75 
B)  $1.75 
C)  $3.75 
D)  $4.50 
A)  $0.75 
B)  $1.75 
C)  $3.75 
D)  $4.50

Question 6

A rights offering:

Accepted Answer

A)  gives a firm a built-in market for new securities. 
B)  will likely lead to considerably higher distribution costs. 
C)  will increase the shareholder's total valuation. 
D)  is the least expensive way to raise capital. 
A)  gives a firm a built-in market for new securities. 
B)  will likely lead to considerably higher distribution costs. 
C)  will increase the shareholder's total valuation. 
D)  is the least expensive way to raise capital.

Question 7

Bondholders never have any control over the actions of a firm.

Accepted Answer

A) True 
 B)False

Question 8

Current shareholders are a built-in market for raising capital at a cost below that of underwriting a new issue.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following are benefits of a rights offering?

Accepted Answer

A)  Rights offerings increase return on equity. 
B)  Rights offerings substantiate higher debt to equity ratios. 
C)  Rights offerings decrease earnings per share. 
D)  Rights offerings raise capital for the firm. 
A)  Rights offerings increase return on equity. 
B)  Rights offerings substantiate higher debt to equity ratios. 
C)  Rights offerings decrease earnings per share. 
D)  Rights offerings raise capital for the firm.

Question 10

Under normal operating conditions the board of directors elected by:

Accepted Answer

A)  the common shareholders. 
B)  the preferred shareholders. 
C)  the bondholders. 
D)  the board of directors. 
A)  the common shareholders. 
B)  the preferred shareholders. 
C)  the bondholders. 
D)  the board of directors.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

If the market value of a stock when the shares are trading ex-rights is $57 and 9 rights are required to buy one share of stock at the subscription price of $45,then the rights are worth $1.33.

Accepted Answer

A) True 
 B)False

Question 13

Share classes may differ in both voting rights and dividend rights.

Accepted Answer

A) True 
 B)False

Question 14

Floating rate preferred stock allows shareholders to receive more or less than the quoted dividend based on the firm's success.

Accepted Answer

A) True 
 B)False

Question 15

Shares purchased through a rights offering usually carry lower margin requirements.

Accepted Answer

A) True 
 B)False

Question 16

"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 common stock 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 common stock 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.

Question 17

Share classes are similar to bond ratings in that they are used to rank the performance of different corporation's stock.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Fritz Corporation has 800,000 shares of preferred stock and 1,800,000 shares of common stock.The cumulative preferred stock has a stated dividend of $2.50 per share.Under normal conditions,Kreisler pays out 30% of earnings available to common shareholders,however,because of a severe recession,Fritz retained all earnings last year.This year,Fritz earned net income of $6.4 million.

Accepted Answer

Calculate the divide

Question 20

You are a shareholder in Trees N Things (TNT)and you would like to elect 6 of the 11 members of the Board of Directors.If there are 3.5 million shares outstanding what is the minimum number of shares required to elect your slate of directors under cumulative voting?

Accepted Answer

A)  2,000,001 
B)  3,000,001 
C)  1,909,091 
D)  1,750,001 
A)  2,000,001 
B)  3,000,001 
C)  1,909,091 
D)  1,750,001

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

Some preferred shares are participating preferreds and this may allow for an increase in the preferred share dividend when the common share dividend equals the preferred share dividend.

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

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)

If SED's shares trade ex-rights at $51.75,carry a subscription price of $48 a share,and can be purchase by shareholders in a ratio of 5 rights per share,SED's rights trade at ______.

A rights offering:

Bondholders never have any control over the actions of a firm.

Current shareholders are a built-in market for raising capital at a cost below that of underwriting a new issue.

Which of the following are benefits of a rights offering?

Under normal operating conditions the board of directors elected by:

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

If the market value of a stock when the shares are trading ex-rights is $57 and 9 rights are required to buy one share of stock at the subscription price of $45,then the rights are worth $1.33.

Share classes may differ in both voting rights and dividend rights.

Floating rate preferred stock allows shareholders to receive more or less than the quoted dividend based on the firm's success.

Shares purchased through a rights offering usually carry lower margin requirements.

"Preemptive rights" means that:

Share classes are similar to bond ratings in that they are used to rank the performance of different corporation's stock.

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

You are a shareholder in Trees N Things (TNT)and you would like to elect 6 of the 11 members of the Board of Directors.If there are 3.5 million shares outstanding what is the minimum number of shares required to elect your slate of directors under cumulative voting?

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

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

Some preferred shares are participating preferreds and this may allow for an increase in the preferred share dividend when the common share dividend equals the preferred share dividend.

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

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)

If SED's shares trade ex-rights at $51.75,carry a subscription price of $48 a share,and can be purchase by shareholders in a ratio of 5 rights per share,SED's rights trade at ______.

A rights offering:

Bondholders never have any control over the actions of a firm.

Current shareholders are a built-in market for raising capital at a cost below that of underwriting a new issue.

Which of the following are benefits of a rights offering?

Under normal operating conditions the board of directors elected by:

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

If the market value of a stock when the shares are trading ex-rights is $57 and 9 rights are required to buy one share of stock at the subscription price of $45,then the rights are worth $1.33.

Share classes may differ in both voting rights and dividend rights.

Floating rate preferred stock allows shareholders to receive more or less than the quoted dividend based on the firm's success.

Shares purchased through a rights offering usually carry lower margin requirements.

"Preemptive rights" means that:

Share classes are similar to bond ratings in that they are used to rank the performance of different corporation's stock.

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

You are a shareholder in Trees N Things (TNT)and you would like to elect 6 of the 11 members of the Board of Directors.If there are 3.5 million shares outstanding what is the minimum number of shares required to elect your slate of directors under cumulative voting?

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