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1) The legal document provided to potential investors describing details of the securities to be issued is called:

a. shelf registration

b. prospectus

c. formal filing

d. compliance statement


2) The investment firms that act as intermediaries between the issuer of securities and the general public are called:

a. underwriters

b. brokers

c. dealers

d. investment advisors


3) Underwriters provide which of the following services?

I. Advising on the best method to issue securities.

II. Advertising the issuance amongst their investing clients.

III. Providing guarantees to buy excess securities in some cases.

IV. Setting the offer price.

a. I and II

b. I and III

c. II and IV

d. All are true.


4) Which of these guidelines do the most firm managers adhere to when setting dividend policy?

a. Dividend smoothing has priority over investing in positive NPV projects.

b. Dividend increases have priority over share repurchases.

c. Dividend cuts should be avoided at all costs.

d. We aim to increase dividends every year regardless of performance.


5) What corporate action reduces the number of shares owned by all shareholders by the same proportion?

a. rights offer

b. liquidation distribution

c. reverse share split

d. share split


6) What corporate action reduces the number of shares outstanding as well as the firm's total equity?

a. tender offer repurchase

b. bonus shares

c. reverse share split

d. share split


7) Earnings growth tends to _________ dividend growth and earnings are ________ volatile than dividends over time.

a. lead; more

b. lag; more

c. lead; less

d. lag; less


8) A company that is cutting its dividend while increasing its share repurchase program by an equivalent dollar amount is sending which signal to investors?

a. The firm expects to be less profitable in the future.

b. Management considers its shares currently overvalued.

c. Management wants to attract income-oriented investors.

d. None of these answers.


9) Which one of the following is the most likely to be financed with venture capital?

a. Replacing debt with equity.

b. Financing the takeover of a competitor.

c. Producing a minimum viable product.

d. Building a new factory overseas.

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1) The legal document provided to potential investors describing details of the securities to be issued is called: a.shelf registration b.prospectus
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