FIN 301 Stocks Chapter 8

True or false: Cumulative voting means board members are elected one at a time, with each shareholder casting his or her allotted votes for each seat on the board.

False

With ________ voting, the directors are elected one at a time and the only way to guarantee a seat is to own 50 percent plus one share.

Straight

One reason corporations use staggered boards is that _____.

it makes takeover attempts less likely to be successful

The goal of many successful organizations is a(n) ______ rate of growth in dividends.

steady

A zero-growth model for stock valuation is distinguished by a ____.

Constant dividend amount

Preferred stock has preference over common stock in the _____.

payment of dividends and distribution of corporate assets

A stock with dividend priority over common stock is called a _______ stock.

preferred

When the stock being valued does not pay dividends,

the dividend growth model can still be used.

A share of common stock is _____ difficult to value in practice than a bond.

more

True or false: It can be advantageous to have a staggered board because it provides "institutional memory."

True

Mota Motors has eight directors on its board, two of whom go up for election each year. This is an example of a: a staggered board b managed board c voting rights board d proxy board

a staggered board

Which of the following are expected cash flows to investors in stocks? a Fees b Dividends c Capital gains d Interest

b Dividends c Capital gains

Which one of the following is true about dividend growth patterns? a Dividends always grow at a differential rate. b Dividends may grow at a constant rate. c Dividends never grow. d Dividends always grow at a constant rate.

b Dividends may grow at a constant rate.

Which of the following entities declares a dividend? a The CFO b Existing shareholders c The board of directors d The management of the company

c The board of directors

A benchmark PE ratio can be determined using: a the constant-growth model b Bank of Canada estimates c the PEs of similar companies d a company's own historical PEs

c the PEs of similar companies d a company's own historical PEs

In a __________ board, only a fraction of the directorships are up for election at any one time.

staggered

Suppose Bob owns 20 shares and Vikki owns 30 shares in Good Company, and there are five members of the board of directors. Under which voting arrangement can Bob assure himself of a board member that represents his interests?

Cumulative voting

Which of the following are features of common stock? a It receives dividends every quarter. b It generally has voting rights. c It has no special preference in receiving dividends. d It receives interest semi-annually. e It has no special preference in bankruptcy.

b It generally has voting rights. c It has no special preference in receiving dividends. e It has no special preference in bankruptcy.

When voting for the board of directors, the number of votes a shareholder is entitled to is generally determined as follows: a one vote per shareholder b one vote for every 100 shares held c one vote per share held d one vote per proxy

c one vote per share held

A _________ is a payment by a corporation to shareholders, made in either cash or stock.

dividend

Common stock has no special preference either in receiving _______ or in bankruptcy

dividends

When voting for the board of directors, the number of votes a shareholder is entitled to is usually _______ vote per share held.

one

(T/F) For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed.

False

Which of the following are reasons why it is more difficult to value common stock than it is to value bonds? a All bond and stock cash flows are guaranteed to be paid. b The life of a common stock is essentially forever. c Common stock cash flows are not known in advance d The rate of return required by the market is not easily observed.

b The life of a common stock is essentially forever. c Common stock cash flows are not known in advance d The rate of return required by the market is not easily observed.

WinWin Corporation has five board members, and each shareholder gets one vote per share. The company uses a straight board voting procedure. How does this arrangement affect minority shareholders? a Each minority shareholder would have one preferred board member. b No minority shareholder would have enough votes to win any seat on the board. c Minority shareholders don't vote in such an arrangement. d Corporations always have one board member designated to protect the interests of minority shareholders.

b No minority shareholder would have enough votes to win any seat on the board.