Question 1

The largest organized exchange, listing the largest firms, is the

Accepted Answer

A)  New York Stock Exchange.
B)  American Stock Exchange.
C)  Midwest Stock Exchange.
D)  Pacific Stock Exchange.E) B) and C)
F) None of the above

Question 2

Which of the following is not true with respect to preferred stock?

Accepted Answer

A)  Preferred stock usually does not allow for significant voting rights.
B)  If the firm does not have sufficient earnings from which to pay the preferred stock dividends, the preferred shareholders may force the firm into bankruptcy.
C)  Normally, the owners of preferred stock do not participate in the profits of the firm beyond the stated fixed annual dividend.
D)  Payment of preferred dividends is not a tax-deductible expense.
E)  All of the above are true.F) D) and E)
G) B) and E)

Question 3

In addition to the Nasdaq market, the OTC market has another segment known as "pink sheets," where smaller stocks are traded.

Accepted Answer

A) True 
 B)False

Question 4

Listing stock on a foreign stock exchange

Accepted Answer

A)  enhances the stock's liquidity.
B)  may increase the firm's perceived financial standing.
C)  may protect a firm against hostile takeovers.
D)  all of the aboveE) None of the above
F) B) and D)

Question 5

Research studies have found that the share prices of target firms and of acquiring firms react very positively to announcements of an acquisition.

Accepted Answer

A) True 
 B)False

Question 6

An example of shareholder activism is

Accepted Answer

A)  communication with the firm.
B)  engaging in a proxy contest.
C)  filing a lawsuit against the board.
D)  all of the aboveE) A) and C)
F) C) and D)

Question 7

Which of the following statements is incorrect?

Accepted Answer

A)  A stock is a certificate representing partial ownership in a corporation.
B)  Like debt securities, common stock is issued by firms to obtain funds.
C)  Stocks are issued by corporations to raise short-term funds.
D)  The secondary stock market enables investors to sell stocks that they had previously purchased.E) A) and B)
F) None of the above

Question 8

Electronic communications networks (ECNs) are passive funds that track a specific index.

Accepted Answer

A) True 
 B)False

Question 9

As a result of the Sarbanes-Oxley Act, firms were able to reduce their costs of compiling and reporting financial information.

Accepted Answer

A) True 
 B)False

Question 10

____ occurs when a securities firm allocates share from an IPO to corporate executives who may be considering an IPO or other business that will require the help of an investment bank.

Accepted Answer

A)  Flipping
B)  Spinning
C)  Laddering
D)  None of the aboveE) B) and C)
F) C) and D)

Question 11

When brokers encourage investors to place bids for IPO shares on the first day that are above the offer price this is referred to as

Accepted Answer

A)  flipping.
B)  spinning.
C)  laddering.
D)  none of the aboveE) None of the above
F) B) and C)

Question 12

Underwriters sell most or all of the shares of an IPO to institutional investors.

Accepted Answer

A) True 
 B)False

Question 13

A firm that wants to engage in a secondary stock offering does not need to file the offering with the SEC.

Accepted Answer

A) True 
 B)False

Question 14

Normally, only the owners of preferred stock are permitted to vote on certain key matters concerning the firm, such as the election of the board of directors.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not true regarding the Sarbanes-Oxley Act?

Accepted Answer

A)  It attempts to force accountants to conform to regular accounting standards in preparing a firm's financial statements.
B)  It requires that only outside board members of a firm be on the firm's audit committee.
C)  It allows public accounting firms to offer nonaudit consulting services to an audit client whether the client's audit committee pre-approves the nonaudit services or not.
D)  It prevents members of a firm's audit committee from receiving consulting of advising fees or other compensation from the firm beyond that earned from serving on the board.E) All of the above
F) None of the above

Question 16

When a corporation makes a secondary offering, it may direct sales of the stock to its existing shareholders by giving them:

Accepted Answer

A)  preemptive rights.
B)  limit orders.
C)  subscription rights.
D)  presumptive rights.E) All of the above
F) A) and B)

Question 17

Assume a firm that is valued at $800 million with 6 million shares of stock outstanding. This firm's stock should have a price of $____ per share.

Accepted Answer

A)  6.00
B)  80.00
C)  133.33
D)  none of the aboveE) B) and C)
F) A) and D)

Question 18

A firm whose stock price has risen:

Accepted Answer

A)  will not have to pay a premium if it acquires another firm.
B)  has an incentive to use its stock as currency to acquire the shares of a target firm.
C)  is likely to be a candidate for a leveraged buyout.
D)  is likely to repurchase some of its shares.E) C) and D)
F) A) and B)

Question 19

"Pink sheets" are traded on the

Accepted Answer

A)  New York Stock Exchange.
B)  American Stock Exchange.
C)  over-the-counter market.
D)  Nasdaq market.E) A) and B)
F) A) and C)

Question 20

A venture capital fund typically plans to exit from its original investment within about four to seven years.

Accepted Answer

A) True 
 B)False

Exam 10: Stock Offerings and Investor Monitoring

A firm whose stock price has risen:

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A venture capital fund typically plans to exit from its original investment within about four to seven years.

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The largest organized exchange, listing the largest firms, is the

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Which of the following statements is incorrect?

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Electronic communications networks (ECNs) are passive funds that track a specific index.

Correct AnswerverifiedShow Answer

As a result of the Sarbanes-Oxley Act, firms were able to reduce their costs of compiling and reporting financial information.

Correct AnswerverifiedShow Answer

Listing stock on a foreign stock exchange

Correct AnswerverifiedShow Answer

An example of shareholder activism is

Correct AnswerverifiedShow Answer

"Pink sheets" are traded on the

Correct AnswerverifiedShow Answer

Which of the following is not true regarding the Sarbanes-Oxley Act?

Correct AnswerverifiedShow Answer

Which of the following is not true with respect to preferred stock?

Correct AnswerverifiedShow Answer

____ occurs when a securities firm allocates share from an IPO to corporate executives who may be considering an IPO or other business that will require the help of an investment bank.

Correct AnswerverifiedShow Answer

Normally, only the owners of preferred stock are permitted to vote on certain key matters concerning the firm, such as the election of the board of directors.

Correct AnswerverifiedShow Answer

In addition to the Nasdaq market, the OTC market has another segment known as "pink sheets," where smaller stocks are traded.

Correct AnswerverifiedShow Answer

Assume a firm that is valued at $800 million with 6 million shares of stock outstanding. This firm's stock should have a price of $____ per share.

Correct AnswerverifiedShow Answer

When a corporation makes a secondary offering, it may direct sales of the stock to its existing shareholders by giving them:

Correct AnswerverifiedShow Answer

When brokers encourage investors to place bids for IPO shares on the first day that are above the offer price this is referred to as

Correct AnswerverifiedShow Answer

Underwriters sell most or all of the shares of an IPO to institutional investors.

Correct AnswerverifiedShow Answer

Research studies have found that the share prices of target firms and of acquiring firms react very positively to announcements of an acquisition.

Correct AnswerverifiedShow Answer

A firm that wants to engage in a secondary stock offering does not need to file the offering with the SEC.

Correct AnswerverifiedShow Answer

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