Intermediate Business Finance, Chapter 14-16 Test

Global capital markets are influenced by Interest rates, Investor confidence, & relative economic growth
Companies list their stock around the globe to increase liquidity for their stockholders and provide opportunities for the sale of new stock in foreign markets
Financial intermediaries serve which of the following purposes? They allow for indirect investment in the capital markets by households, they aid in the flow of funds through the economy, & they help provide allocation of funds to the best investments
Middle- to small-sized companies that are centered in one city or state would most likely be found on the NASDAQ Small Cap Market.
The emergence of trading via ECNs has lowered the cost of trading.
Which of the following is NOT a criterion for an efficient market? Computerized handling of transactions in necessary.
The Securities Exchange Act of 1934 is primarily concerned with regulation of organized exchanges.
Dark pools are considered: areas in the market system where securities are traded and concealed from the public market.
Financial instruments in the capital markets generally fall under which category in the balance sheet? Long-term liabilities and equity
The purpose of secondary trading is to provide liquidity and competition between investments.
The investment banker’s function involves all of the following EXCEPT Always ensuring a company that a given amount of equity can be sold so that long-range financial planning can be made accurately.
The risk function of investment banking is categorized mainly under underwriting function.
Firm X needs to net $12,800,000 from the sale of common stock. Its investment banker has informed the firm that the retail price will be $22 per share, and that Firm X will receive $18.50 per share. Out-of-pocket and underwriting costs are $250,000. How many shares must be sold to achieve the desired net to the issuing firm? (12,800,000+250,000)/18.50 = 705,406
In order to avoid long-term dilution, a corporation should determine whether the necessary additional earnings from the issue are realistic relative to their historic return on assets.
When investment bankers act in the function of “underwriters,” they give a “firm commitment” to purchase the securities from the corporation at a set price.

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