Stock Offerings And Investor Monitoring

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Question 1

Free

Multiple Choice

Which of the following statements is incorrect?

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A stock represents partial ownership in a corporation.

Like debt securities, common stock is issued by firms to obtain funds.

Stocks are issued by corporations to raise short-term funds.

The secondary stock market enables investors to sell stocks that they had previously purchased.

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Question 2

Free

Multiple Choice

Preferred shareholders

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typically have the same voting rights as common shareholders.

do not share the ownership of the firm with common shareholders.

typically participate in the profits of the firm beyond the stated fixed annual dividend.

may not receive a dividend every year.

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Question 3

Free

True/False

From a cost perspective, preferred stock is a less desirable source of capital for a firm than bonds.

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True

False

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Question 4

Free

Multiple Choice

A ____ prevents dividends from being paid on common stock until all current and previously omitted dividends are paid on preferred stock.

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residual claim

preferred margin

cumulative provision

liquidation claim

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Question 5

Free

Multiple Choice

Firms assume risk when they issue preferred stock than when they issue bonds. The payment of dividends on preferred stock be omitted without the firm being forced into bankruptcy.

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more; can

less; can

more; cannot

less; cannot

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Question 6

Multiple Choice

When a corporation first decides to issue stock to the public, it engages in a(n)

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secondary offering.

initial public offering.

seasoned equity offering.

none of the above

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Question 7

Multiple Choice

A firm can avoid the time lag between registering new securities with the SEC and actually selling them by using

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a proxy.

shelf registration.

a margin call.

preemptive rights.

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Question 8

True/False

To the extent that shares sold during an IPO are discounted from their appropriate price, the proceeds that the issuing firm receives from the IPO are less than it deserves.

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True

False

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Question 9

Multiple Choice

The transaction costs to the issuing firm in an IPO are usually ____ percent of the funds raised.

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Question 10

Multiple Choice

If many investors quickly sell an IPO stock in the secondary market, there will be ____ on the stock's price.

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upward pressure

downward pressure

no additional pressure

none of the above

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Question 11

Multiple Choice

The purpose of a lockup provision is to

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keep individual investors from buying and selling stock.

prevent downward pressure on the stock's price.

increase the number of outstanding shares.

allocate a larger proportion of stock to institutional investors.

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Question 12

Multiple Choice

The initial (one-day) return of IPOs in the United States has averaged about ____ percent over the last 30 years.

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Question 13

Multiple Choice

The practice of purchasing IPO stock at the offer price and selling the stock shortly afterward is called

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flipping.

skiing.

flopping.

none of the above

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Question 14

Multiple Choice

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

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flipping.

spinning.

laddering.

none of the above

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Question 15

Multiple Choice

On average, IPOs of firms tend to perform ____ over a period of a year or longer.

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well

poorly

about the same as the S&P 500 index

none of the above

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Question 16

True/False

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

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True

False

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Question 17

Multiple Choice

A firm will typically attempt to sell shares from a secondary offering

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far below the prevailing market price.

far above the prevailing market price.

at the prevailing market price.

at the offer price of the IPO.

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Question 18

Multiple Choice

____ represents ownership of a foreign stock.

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ADR

SEAQ

Nasdaq

AMEX

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Question 19

Multiple Choice

The first-time issuance of shares by a specific firm to the public is referred to as a(n)

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stock repurchase.

secondary stock offering.

initial rights issue.

initial public offering (IPO).

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Question 20

Multiple Choice

A new stock issuance by a specific firm that already has stock outstanding is referred to as a(n)

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stock repurchase.

secondary stock offering.

initial rights issue.

initial public offering (IPO).

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Stock Offerings And Investor Monitoring

Which of the following statements is incorrect?

Preferred shareholders

From a cost perspective, preferred stock is a less desirable source of capital for a firm than bonds.

A ____ prevents dividends from being paid on common stock until all current and previously omitted dividends are paid on preferred stock.

Firms assume ____ risk when they issue preferred stock than when they issue bonds. The payment of dividends on preferred stock ____ be omitted without the firm being forced into bankruptcy.

When a corporation first decides to issue stock to the public, it engages in a(n)

A firm can avoid the time lag between registering new securities with the SEC and actually selling them by using

To the extent that shares sold during an IPO are discounted from their appropriate price, the proceeds that the issuing firm receives from the IPO are less than it deserves.

The transaction costs to the issuing firm in an IPO are usually ____ percent of the funds raised.

If many investors quickly sell an IPO stock in the secondary market, there will be ____ on the stock's price.

The purpose of a lockup provision is to

The initial (one-day) return of IPOs in the United States has averaged about ____ percent over the last 30 years.

The practice of purchasing IPO stock at the offer price and selling the stock shortly afterward is called

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

On average, IPOs of firms tend to perform ____ over a period of a year or longer.

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

A firm will typically attempt to sell shares from a secondary offering

____ represents ownership of a foreign stock.

The first-time issuance of shares by a specific firm to the public is referred to as a(n)

A new stock issuance by a specific firm that already has stock outstanding is referred to as a(n)

Firms assume risk when they issue preferred stock than when they issue bonds. The payment of dividends on preferred stock be omitted without the firm being forced into bankruptcy.