Finance Chapter 7

own the firm Holders of equity capital ________.
secured creditors If bankruptcy were to occur, ________ would have the first claim on assets.
voting rights Which of the following typically applies to common stock but not to preferred stock?
the stock market Equity capital can be raised through ________.
residual owners Common stockholders are sometimes referred to as ________.
ADRs 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
preferred stockholders ______ are promised a fixed periodic dividend that must be paid prior to paying any common stock dividends.
cumulative Dividends in arrears that must be paid to the preferred stockholders before payment of dividends to common stockholders are ________.
quasi-debt nature Preferred stock is characterized by ________.
treasury bill Which of the following is a marketable security?
outstanding shares Shares of stock currently owned by a firm’s shareholders are called ________.
dividends Common stockholders expect to earn a return by receiving ________.
proxy battle The attempt by a nonmanagement group to gain control of the management of a firm by soliciting a sufficient number of proxy votes is called a ________.
rights offering ________ 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.
investment banker A(n)________ is hired by a firm to find prospective buyers for its new stock or bond issue
rights offering In a ________, new shares are sold to the existing shareholders.
underwriting syndicate A group formed by an investment banker to share the financial risk associated with underwriting new securities is called a(n) ________.
perpetuity Preferred stock is valued as if it were a ________.
zero-growth model The ________ is utilized to value preferred stock.
book value ________ is the value of a firm’s ownership in the event that all assets are sold for their exact accounting value and the proceeds remaining after paying all liabilities (including preferred stock) are divided among common stockholders.
liquidation value ________ is the actual amount each common stockholder would expect to receive if a firm’s assets are sold for their market value, creditors and preferred stockholders are repaid, and any remaining money is divided among the common stockholders.
P/E multiple ________ is a guide to a firm’s value if it is assumed that investors value the earnings of a given firm in the same way they do the average firm in the industry.
P/E multiple The use of the ________ is especially helpful in valuing firms that are not publicly traded.

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