Question 1

To state that net equity issues have been negative indicates that:

Accepted Answer

A)  more shares have been purchased than newly issued. 
B)  new shares have been sold at less than par value. 
C)  issuing stock has been a negative NPV transaction. 
D)  dividend payments have exceeded net income. 
A)  more shares have been purchased than newly issued. 
B)  new shares have been sold at less than par value. 
C)  issuing stock has been a negative NPV transaction. 
D)  dividend payments have exceeded net income.

Question 2

Retained earnings will decrease when stock is repurchased as treasury stock.

Accepted Answer

A) True 
 B)False

Question 3

What will happen to retained earnings when a corporation issues 1,000 shares of $1 par stock for $10 per share?

Accepted Answer

A)  It will increase by $1,000. 
B)  It will increase by $9,000. 
C)  It will decrease by $9,000. 
D)  It will remain unchanged. 
A)  It will increase by $1,000. 
B)  It will increase by $9,000. 
C)  It will decrease by $9,000. 
D)  It will remain unchanged.

Question 4

ABC Corporation has fallen upon hard times and dividends on its noncumulative preferred stock have not been paid for 3 years.Which of the following is true?

Accepted Answer

A)  Common shareholders must now receive 3 years' worth of dividends. 
B)  Preferred shareholders must now receive 3 years' worth of dividends. 
C)  The corporation must fold if preferred shareholders are not paid. 
D)  Common shareholders have not received dividends for 3 years. 
A)  Common shareholders must now receive 3 years' worth of dividends. 
B)  Preferred shareholders must now receive 3 years' worth of dividends. 
C)  The corporation must fold if preferred shareholders are not paid. 
D)  Common shareholders have not received dividends for 3 years.

Question 5

The value of retained earnings on the corporate balance sheet represents the amount of earnings:

Accepted Answer

A)  not paid out in dividends this period. 
B)  that remains in cash. 
C)  over and above corporate income taxes. 
D)  reinvested in the firm since its inception. 
A)  not paid out in dividends this period. 
B)  that remains in cash. 
C)  over and above corporate income taxes. 
D)  reinvested in the firm since its inception.

Question 6

All of the following are types of innovative bonds except:

Accepted Answer

A)  preferred stock. 
B)  asset-backed bonds. 
C)  reverse floaters. 
D)  indexed bonds. 
A)  preferred stock. 
B)  asset-backed bonds. 
C)  reverse floaters. 
D)  indexed bonds.

Question 7

The CEO has "ultimate" control over the company's affairs.

Accepted Answer

A) True 
 B)False

Question 8

In 1987 RJR Nabisco,the food and tobacco giant,had $5 billion of A-rated debt outstanding.In that year the company was taken over,and $19 billion of debt was issued and used to buy back equity.The debt ratio skyrocketed,and the debt was downgraded to a BB rating.The holders of the previously issued debt were furious,and one filed a lawsuit claiming that RJR had violated an implicit obligation not to undertake major financing changes at the expense of existing bondholders.Why did these bondholders believe they had been harmed by the massive issue of new debt? What type of explicit restriction would you have wanted if you had been one of the original bondholders?

Accepted Answer

The extra debt makes it more likely that

Question 9

All large corporations have little debt; it is a necessary condition for maximizing growth.

Accepted Answer

A) True 
 B)False

Question 10

For U.S.firms,what source of capital is used the least?

Accepted Answer

A)  Debt issues 
B)  Internal funds 
C)  Net equity issues 
D)  Bond issues 
A)  Debt issues 
B)  Internal funds 
C)  Net equity issues 
D)  Bond issues

To state that net equity issues have been negative indicates that:

Retained earnings will decrease when stock is repurchased as treasury stock.

What will happen to retained earnings when a corporation issues 1,000 shares of $1 par stock for $10 per share?

ABC Corporation has fallen upon hard times and dividends on its noncumulative preferred stock have not been paid for 3 years.Which of the following is true?

The value of retained earnings on the corporate balance sheet represents the amount of earnings:

All of the following are types of innovative bonds except:

The CEO has "ultimate" control over the company's affairs.

All large corporations have little debt; it is a necessary condition for maximizing growth.

For U.S.firms,what source of capital is used the least?

Goals and Governance of the Corporation

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk,Return,and the Opportunity Cost of Capital

Risk,Return,and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

How Corporations Raise Venture Capital and Issue Securities

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Risk, Return, and Capital Budgeting

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters

Exam 14: Introduction to Corporate Financing

To state that net equity issues have been negative indicates that:

Retained earnings will decrease when stock is repurchased as treasury stock.

What will happen to retained earnings when a corporation issues 1,000 shares of $1 par stock for $10 per share?

ABC Corporation has fallen upon hard times and dividends on its noncumulative preferred stock have not been paid for 3 years.Which of the following is true?

The value of retained earnings on the corporate balance sheet represents the amount of earnings:

All of the following are types of innovative bonds except:

The CEO has "ultimate" control over the company's affairs.

All large corporations have little debt; it is a necessary condition for maximizing growth.

For U.S.firms,what source of capital is used the least?

Goals and Governance of the Corporation

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk,Return,and the Opportunity Cost of Capital

Risk,Return,and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

How Corporations Raise Venture Capital and Issue Securities

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Risk, Return, and Capital Budgeting

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters