1)Which of theAllowing is an advantage for a firm to issue common stock over long-term debt?
1 point
A) the cost of equity financing being less than the cost of debt financing
B) the primary claim of equityholders on income and assets in the event of liquidation
C) no maturity date on which the par value of the issue must be repaid
D) the tax deductibility of dividends which lowers the cost of equity financing
2) Which of the following is a difference between common stock and bonds?
1 point
A) Bondholders have a voice in management; common stockholders do not.
B) Bondholders have a senior claim on assets and income relative to stockholders.
C) Stocks have a stated maturity but bonds do not.
D) Dividend paid to stockholders is tax-deductible but interest paid to bondholders are not
3) Holders of equity capital ________.
1 point
A) own the firm
B) receive interest payments
C) receive guaranteed income
D) have loaned money to the firm
4)Because equityholders are the last to receive any distribution of assets as a result of bankruptcy proceedings, they expect ________.
1 point
A) fixed dividend payments
B) greater returns from their investment than the return that bondholders expect
C) all profits to be paid out in dividends
D) warrants to be attached to the stock issue
5) If bankruptcy were to occur, ________ would have the first claim on assets.
1 point
A) preferred stockholders
B) unsecured creditors
C) equity stockholders
D) secured debtors
6) Regarding the tax treatment of payments to securities holders, it is TRUE that ________.
1 point
A) interest is usually tax-deductible, while common stock dividends and preferred stock dividends are not tax- deductible
B) interest and preferred stock dividends are tax-deductible, while common stock dividends are not tax-deductible
C) common stock dividends and preferred stock dividends are tax-deductible, while interest is not tax-deductible
D) common stock dividends and preferred stock dividends are tax-deductible, while interest is usually not tax-deductible
7)Which of the following is TRUE of outstanding shares?
1 point
A) A firm cannot sell more shares than the outstanding shares mentioned in the charter.
B) Authorized shares become outstanding shares when they are issued or sold to investors.
C) Outstanding shares are indicated in a firm's corporate charter.
D) Outstanding shares are the shares repurchased by the firm.
8) Shares of stock currently owned by a firm's shareholders are called ________.
1 point
A) authorized shares
B) outstanding shares
C) floating shares
D) treasury shares
9) If a firm has class A and class B common stock outstanding, it usually means that _______
1 point
A) each class receives a different voting rights
B) the par value of each class is different
C) the dividend paid to one of the classes is tax deductible by the corporation
D) the classes have different dividend payments
10) Common stockholders expect to earn a return by receiving ________.
1 point
A) semiannual interest
B) fixed dividend
C) required rate of return
D) annual interest
11)The purpose of nonvoting common stock is to ________.
1 point
A) unlimited the voting power of the management
B) allow the minority interest to elect one director
C) raise capital with giving up more voting control
D) give preference on distribution of earnings to those shareholders who own the stock
12)A preemptive right gives shareholders the right ________.
1 point
A) of one vote for each share owned
B) to give up their vote to another party
C) to maintain their proportionate ownership in the corporation when new common stock is issued
D) to sell their share of stock at a premium
13)A proxy battle is the attempt by ________.
1 point
A) the creditors of a bankrupt corporation to seize assets of the corporation
B) the non-management to elect the board of directors for their new management capability to manage the operations
C) a management group to unseat the existing management and gain control of the firm
D) the employees to form trade unions to influence decisions on behalf of members
14)The attempt by a non-management group to gain control of the management of a firm by soliciting a sufficient number of proxy votes is called a ________.
1 point
A) corporate takeover
B) bankruptcy buyout
C) hostile battle
D) management proceeding
15) In a ________, new shares are sold to the existing shareholders
1 point
A) public placement
B) rights offering
C) public offering
D) rights placement
16)Treasury stock refers to the ________.
1 point
A) stock at a price greater than the par value
B) stock buybacks by the US government
C) repurchase of floating stock
D) authorization of additional shares of stock by the board of directors