Ch 15
What is a Prospectus?
A document that describes the details of a proposed security offering along with relevant information about the issuer.
Individual investors might avoid requesting 100 shares in an upcoming IPO because they:
Are more apt to receive shares if the IPO is under allocated.
The total direct cost of underwriting an equity IPO:
Can be as low as 5.5 percent and can be as high as 25 percent of proceeds
The raising of small amounts of capital from a large number of people is known as:
Crowdfunding
Which one of the following statements Is correct?
Dividend payments are highly concentrated in a realtivley small set of large firms
Which one of the following statements concerning venture capitalists is correct?
Exit strategy is a key consideration when selecting a venture capitalist
Before a seasoned stock offering you owned 7,500 shares of a firm that had 500,000 shares outstanding. After the seasoned offering you still owned 7,500 shares but the number of shares outstanding rose to 625,000. Which of the following terms best describes this situation?
Percentage Ownership Dilution
Which of the following statements is correct concerning the direct costs of issuing securities?
There tends to be substantial economies of scale when issuing any type of security.
Trevor is the CEO of Harvest Foods, which is a privately-held corporation. What is the first step he must take if he wishes to take Harvest Foods public?
Gain Board Approval
What is an issue of securities that is offered for sale to the general public on a direct cash basis called?
General cash offer
The Difference between the underwriters cost of buying shares in a firm commitment and the offering price of those securities to the public is the:
Gross spread
An investor is more likely to prefer a high dividend payout if a firm
Has few, if any, Positive net present value projects.
The date on which a shareholder is officially listed as the recipient of stock rights is called the:
Holder of Record date
Existing Shareholders
May or may not have a preemptive right to newly issued shares.
All are supporting arguments in favor of IPO underpricing except
Provides better returns to issuing firms
What is a seasoned equity offering?
Sale of newly issued equity shares by a firm that is currently publicly owned
Revol - Tech is a technology firm with excellent growth prospects. the firm wishes to do something to acknowledge the loyalty of the shareholders but needs all of its avail cash to fund the firms rapid growth, The market price of the stock is currently trading at the upper end of its preferred trading range,. the firms more apt to consider which one of the following in this situation?>
Stock Split
HJ corporation has excess cash and has opted to buy some of its outstanding shares. what is this process of buying called?
Stock repurchase
Which one of the following does not affect the total equity of a firm but does increase the number of shares outstanding?
Stock split
To purchase a share in a rights offering, an existing shareholder generally just needs to:
Submit the required number of rights along with the subscription price.
Which one of the following is a key goal of the aftermarket period?
Supporting the market price for a new securities issue.
Advertisements in a finical newspaper announcing a public offering of securities, along with a list of the investment banks handling the offering, are called:
Tombstones
When selecting a venture capitalist, which one of the following characteristics is probably the least important?
Under writing Experience
Which one of the following statements concerning Venture Capital financing is correct?
Venture Capitalists often require at least a %40 equity position as a condition of financing
Business Aid is funded by a group of wealthy investors for the sole purpose of providing funding for individuals and small firms that are trying to convert their new ideas into viable products. What is this type of funding called?
Venture capital