___________________________
Stock Offerings and Investor Monitoring
1. A ______ requires that dividends cannot be paid on common stock until all current and previously omitted dividends are paid on preferred stock.
A) residual claim
B) preferred margin
C) cumulative provision
D) liquidation claim
ANSWER: C
2. 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.
A) more; can
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B) less; can
C) more; cannot
D) less; cannot
ANSWER: B
3. A firm can best avoid the time lag between registering new securities with the SEC and actually selling them by
A) use of proxy.
B) shelf-registration.
C) use of a margin call.
D) use of preemptive rights.
ANSWER: B
4. Buy and sell orders on the OTC market are completed by
A) auction on the trading floor.
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B) sealed competitive bids.
C) noncompetitive bids.
D) a telecommunications network.
ANSWER: D
5. A(n) ______ is a certificate which represents ownership of a foreign stock.
A) ADR
B) SEAQ
C) Nasdaq
D) AMEX
ANSWER: A
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6. to as a(n)
The first-time issuance of shares by a specific firm to the public is referred
A) stock repurchase.
B) secondary stock offering.
C) initial rights issue.
D) initial public offering (IPO).
ANSWER: D
7. A new stock issuance by a specific firm that already has stock outstanding is
referred to as a(n)
A) stock repurchase.
B) secondary stock offering.
C) initial rights issue.
D) initial public offering (IPO).
ANSWER: B
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8. Managers of firms may consider a stock repurchase or even a leveraged
buyout when they believe their stock is ____________ by the market, or a secondary stock offering when they believe their stock is ____________ by the market.
A) undervalued; undervalued
B) overvalued; overvalued
C) undervalued; overvalued
D) overvalued; undervalued
E) none of the above
ANSWER: C
9. The prevailing price per share divided by the firm’s earnings per share is
known as the
A) dividend yield.
B) price-earnings ratio.
C) fully diluted earnings per share.
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D) annual dividend.
ANSWER: B
10. The ____________________is a price-weighted average of stock prices of 30
large U.S. firms.
A) Dow Jones Industrial Average
B) Standard and Poor’s 500
C) New York Stock Exchange Index
D) NASDAQ
ANSWER: A
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11. U.S. firms.
The ____________________is a value-weighted index of stock prices of 500 large
A) Dow Jones Industrial Average
B) Standard and Poor’s 500
C) New York Stock Exchange Index
D) NASDAQ
ANSWER: B
12. Sudden favorable news about the performance of a firm will make investors
believe that the firm’s stock is __________at its prevailing price.
A) overvalued
B) fixed
C) appropriate
D) undervalued
ANSWER: D
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13. Shareholders can most easily measure a firm’s performance by monitoring
changes in its __________ over time.
A) share price
B) employee job descriptions
C) Board of Directors
D) asset size
ANSWER: A
14. An example of shareholder activism is
A) communication with the firm.
B) engaging in a proxy contest.
C) filing a lawsuit against the board.
D) all of the above.
ANSWER: D
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15. funds.
_______________are acquisitions that require substantial amounts of borrowed
A) Stock repurchases
B) Corporate controls
C) Leveraged buyouts
D) Stock splits
ANSWER: C
16. problems.
_______________are not barriers to corporate control to eliminate agency
A) Leveraged buyouts
B) Antitakeover amendments
C) Poison pills
D) Golden parachutes
ANSWER: A
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17. Listing stock on a foreign stock exchange
A) enhances the stock’s liquidity.
B) may increase the firm’s perceived financial standing.
C) may protect a firm against hostile takeovers.
D) all of the above
ANSWER: D
18. because
American Depository Receipts (ADRs) are attractive to U.S. investors
A) U.S. analysts do not follow them.
B) companies represented by ADRs are required to file financial statements
consistent with those in the United States.
C) both A and B.
D) reliable quotes on ADR prices are sporadically available.
ANSWER: C
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19. _______________are portfolios of international stocks created and managed by
various financial institutions.
A) International mutual funds
B) American Depository Receipts
C)
World Equity Benchmark Shares
D) Initial Public Offerings
ANSWER: A
20. _____ sell shares to investors and use the proceeds to invest in portfolios of
international stocks created and managed by portfolio managers.
A) International mutual funds
B) American Depository Receipts
C) World Equity Depository Receipts
D) Initial Public Depository Receipts
ANSWER: A
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21. Assume a firm that is valued at $800 million with 6 million shares of stock
outstanding. This firm’s stock should have a price of $_______ per share.
A) 133.33
B) 6.00
C) 80.00
D) none of the above
ANSWER: A
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22. __________.
Whenever ____________ exceeds __________, the stock price will be driven
A) supply; demand; up
B) demand; supply; down
C) demand; supply; up
D) none of the above
ANSWER: C
23. Which of the following is not a form of shareholder activism?
A) investors communicating their concerns to other investors in an effort to
place more pressure on the firm’s managers or its board members
B) poison pill contests
C) shareholder lawsuits
D) All of the above are forms of shareholder activism.
ANSWER: D
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24. Initial public offerings (IPOs) tend to occur more frequently during bearish
stock markets.
A) True
B) False
ANSWER: B
25. Initial public offerings (IPOs) perform _______ on the day following the IPO
and _______ for periods of a year or longer after the IPO.
A) well; poorly
B) poorly; well
C) well; well
D) poorly; poorly
ANSWER: A
26. Which of the following is not a part of the over-the-counter market?
A) the Nasdaq National Market
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B) the Nasdaq Small Cap Market
C) the OTC Bulletin Board
D) yellow Sheets
E) All of the above are part of the over-the-counter market.
ANSWER: D
27. A firm has a current stock price of $15.32. The firm’s annual dividend is
$1.14 per share. The firm’s dividend yield is
A) .74 percent.
B) 1.34 percent.
C) 7.44 percent.
D) 1.14 percent.
ANSWER: C
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