Chapter 7 Finance Quiz Review

________ are financial instruments that allow stockholders to purchase additional shares at a price below the market price, in direct proportion to their number of owned shares.Select one:a. Proxy statementsb. Preemptive rightsc. Rights offeringd. Treasury stocks c. Rights offering
Preferred stockholders ________.Select one:a. have preference over bondholders in the case of liquidationb. do not have preference over bondholders in the case of liquidationc. do not have preference over common stockholders in the case of liquidationd. have preference over creditors in the case of liquidation b. do not have preference over bondholders in the case of liquidation
Holders of equity capital ________.Select one:a. own the firmb. receive guaranteed incomec. have loaned money to the firmd. receive interest payments a. own the firm
According to the efficient market hypothesis, prices of actively traded stocks ________.Select one:a. can only be over-valued in an efficient marketb. do not differ from their true values in an efficient marketc. can only be under-valued in an efficient marketd. can be under- or over-valued in an efficient market b. do not differ from their true values in an efficient market
Which of the following is an advantage for a firm to issue common stock over long-term debt?Select one:a. the tax deductibility of dividends which lowers the cost of equity financingb. the cost of equity financing being less than the cost of debt financingc. no maturity date on which the par value of the issue must be repaidd. 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
ADRs are ________.Select one:a. securities, backed by Securities Exchange Commission (SEC), that permit all investors to hold shares of U.S. companies and trade them in U.S. marketsb. securities, backed by Securities Exchange Commission (SEC), that permit U.S. investors to hold shares of non-U.S. companies and trade them in international markets.c. securities, backed by American depositary shares (ADSs), that permit non-U.S. investors to hold shares of U.S. companies and trade them in U.S. marketsd. securities, backed by American depositary shares (ADSs), that permit U.S. investors to hold shares of non-U.S. companies and trade them in U.S. markets d. securities, backed by American depositary shares (ADSs), that permit U.S. investors to hold shares of non-U.S. companies and trade them in U.S. markets
Which of the following is typically a feature of common stock?Select one:a. Most common stocks are callable.b. Common stocks have a maturity value.c. Common stocks may or may not pay dividends. d. Most common stocks are cumulative. c. Common stocks may or may not pay dividends.
From a corporation’s point of view, a disadvantage of issuing preferred stock is ________.Select one:a. that the dividends are not tax-deductibleb. that it increases financial leveragec. its excellent merger securityd. that it has to give fixed payments as well as voting rights to the holders a. that the dividends are not tax-deductible
A proxy statement is a statement transferring ________.Select one:a. the votes of a stockholder to another partyb. the ownership of a stockholder to another partyc. the votes of a bondholder to the another partyd. the ownership of a bondholder to another party a. the votes of a stockholder to another party
Which of the following is a difference between common stock and bonds?Select one:a. Bondholders have a voice in management; common stockholders do not.b. Dividend paid to stockholders is tax-deductible but interest paid to bondholders are not.c. Stocks have a stated maturity but bonds do not.d. Bondholders have a senior claim on assets and income relative to stockholders. d. Bondholders have a senior claim on assets and income relative to stockholders.

Leave a Reply

Your email address will not be published. Required fields are marked *