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

A stock represents 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.

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Question 2
Free
Multiple Choice

Preferred shareholders

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A

typically have the same voting rights as common shareholders.

B

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

C

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

D

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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A

residual claim

B

preferred margin

C

cumulative provision

D

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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A

more; can

B

less; can

C

more; cannot

D

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)

Choose correct answer/s
A
secondary offering.
B
initial public offering.
C
seasoned equity offering.
D
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

Choose correct answer/s
A
a proxy.
B
shelf registration.
C
a margin call.
D
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.

Choose correct answer/s
A
1
B
3
C
7
D
25
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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.

Choose correct answer/s
A
upward pressure
B
downward pressure
C
no additional pressure
D
none of the above
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Question 11
Multiple Choice

The purpose of a lockup provision is to

Choose correct answer/s
A
keep individual investors from buying and selling stock.
B
prevent downward pressure on the stock's price.
C
increase the number of outstanding shares.
D
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.

Choose correct answer/s
A
10
B
20
C
30
D
50
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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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A
flipping.
B
skiing.
C
flopping.
D
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

Choose correct answer/s
A
flipping.
B
spinning.
C
laddering.
D
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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A
well
B
poorly
C
about the same as the S&P 500 index
D
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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A
far below the prevailing market price.
B
far above the prevailing market price.
C
at the prevailing market price.
D
at the offer price of the IPO.
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Question 18
Multiple Choice

____ represents ownership of a foreign stock.

Choose correct answer/s
A
ADR
B
SEAQ
C
Nasdaq
D
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)

Choose correct answer/s
A
stock repurchase.
B
secondary stock offering.
C
initial rights issue.
D
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)

Choose correct answer/s
A
stock repurchase.
B
secondary stock offering.
C
initial rights issue.
D
initial public offering (IPO).
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