Chap 10 part 1

(n) ______ is a certificate which represents owner¬ship of a foreign stock. A) ADR B) SEAQ C) Nasdaq D) AMEX

A

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

A

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

A

The largest organized exchange, listing the largest firms, is the A) New York Stock Exchange. B) American Stock Exchange. C) Midwest Stock Exchange. D) Pacific Stock Exchange

A

The practice of purchasing IPO stock at the offer price and selling the stock shortly afterward is called A) flipping. B) skiing. C) flopping. D) none of the above

A

. If many investors quickly sell an IPO stock in the secondary market, there will be ___________ on the stock's price. A) upward pressure B) downward pressure C) no additional pressure D) none of the above

B

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.

B

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).

B

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 B) less; can C) more; cannot D) less; cannot

B

On average, IPOs of firms tend to perform ___________ over a period of a year or longer. A) well B) poorly C) about the same as the S&P 500 index D) none of the above

B

The ____________________is a value-weighted index of stock prices of 500 large U.S. firms. A) Dow Jones Industrial Average B) Standard and Poor's 500 C) New York Stock Exchange Index D) Nasdaq

B

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. D) annual dividend.

B

The purpose of a lockup provision is to A) keep individual investors from buying and selling stock. B) prevent downward pressure on the stock's price. C) increase the number of outstanding shares. D) allocate a larger proportion of stock to institutional investors.

B

When a corporation first decides to issue stock to the public, it engages in a(n) A) secondary offering. B) initial public offering. C) seasoned equity offering. D) none of the above

B

________ occurs when an investment bank allocates share from an IPO to corporate executives who may be considering an IPO or other business that will require the help of an investment bank. A) Flipping B) Spinning C) Laddering D) none of the above

B

. The transaction costs to the issuing firm in an IPO is usually _____ percent of the funds raised. A) 1 B) 3 C) 7 D) 25

C

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

C

A firm will typically attempt to sell shares from a secondary offering A) far below the prevailing market price. B) far above the prevailing market price. C) at the prevailing market price. D) at the offer price of the IPO.

C

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

C

The process by which the lead underwriter solicits indications of interest by institutional investors in an IPO at various possible _______ prices is referred to as ___________. A) IPO; margin selling B) offer; secondary market building C) offer; bookbuilding D) IPO; bookbuilding

C

The purpose of a lockup provision is to A) keep individual investors from buying and selling stock. B) prevent downward pressure on the stock's price. C) increase the number of outstanding shares. D) allocate a larger proportion of stock to institutional investors.

C

When brokers encourage investors to place bids for IPO shares on the first day that are above the offer price this is referred to as A) flipping. B) spinning. C) laddering. D) none of the above

C

Which of the following statements is incorrect? A) A stock is a certificate representing partial ownership in a corporation. B) Like debt securities, common stock is issued by firms to obtain funds. C) Stocks are issued by corporations to raise short-term funds. D) The secondary stock market enables investors to sell stocks that they had previously purchased.

C

____________ are employed by brokerage houses and execute orders for clients on the floor of the NYSE. A) Specialists B) Commission brokers C) Independent brokers D) Dealers

C

Buy and sell orders on the OTC market are completed by A) auction on the trading floor. B) sealed competitive bids. C) noncompetitive bids. D) a telecommunications network

D

Firms listed as "pink sheets" on the OTC market A) are typically very large. B) satisfy Nasdaq's listing requirements. C) are typically owned by various institutional and individual investors. D) none of the above

D

Preferred shareholders A) typically have the same voting rights as common shareholders. B) do not share the ownership of the firm with common shareholders. C) typically participate in the profits of the firm beyond the stated fixed annual dividend. D) may not receive a dividend every year.

D

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

D

The first-time issuance of shares by a specific firm to the public is referred to as a(n) A) stock repurchase. B) secondary stock offering. C) initial rights issue. D) initial public offering (IPO).

D