Fin 301 Final Exam
Shelf registration allows a firm to register multiple issues at one time with the SEC and then sell those registered shares anytime during the subsequent:
2 years
Which one of the following statements is correct?
Dividend payments are paid by a highly concentrated and relatively small set of large companies.
A firm has paid a quarterly dividend of $1.36 per share for the last five years. Which one of the following outcomes is most likely to cause the company to reduce the amount of its next dividend payment?
Loss of a major customer which lowers the overall company's outlook for the next few years
According to __________blank, the value of a company is unrelated to its capital structure.
M&M Proposition I, with no tax
A firm recently registered 340,000 shares of stock under SEC Rule 415. The company plans to sell 200,000 shares this year and the remaining 140,000 shares next year. What type of registration did the firm use?
Shelf registration
A firm has excess cash that is not needed for operations and has opted to buy some of its outstanding shares. What is this process of buying shares called?
Stock repurchase
What is the information content effect?
The financial market's reaction to a change in the amount of a company's dividend
A firm declared a dividend of $1.25 per share on Friday, March 17. The dividend will be paid on Friday, April 14, to shareholders of record as of Friday, March 31. Which one of the following dates is the ex-dividend date?
Thursday, March 30
When selecting a venture capital firm, which one of the following characteristics is probably the least important?
Underwriting experience
M&M Proposition I1 with no tax supports the argument that
a company's debt-equity ratio is completely irrelevant.
Underwriters generally:
accept the risk of selling the new securities in exchange for the gross spread.
A firm's dividend policy has typically resulted in a low dividend yield, and that circumstance is expected to continue. As a result, the majority of the firm's shareholders are individuals who prefer capital gains over cash dividends for tax reasons. The fact that most of these shareholders have similar characteristics is referred to as the __________ effect.
clientele
According to pecking-order theory:
companies stockpile internally generated cash.
The raising of small amounts of capital from a large number of people is known as:
crowdfunding
A preliminary prospectus is sometimes called a:
red herring
When an issuer offers new securities to the general public, the issuer must file a(n) __________blank with the SEC to disclose all material information about the issuer.
registration statement
The Securities and Exchange Commission:
reviews registration statements to ensure they comply with current laws and regulations.
What is a seasoned equity offering?
sale of newly issued equity shares by a firm that is currently publicly owned
According to __________, a company borrows up to the point where the marginal benefit of the interest tax shield derived from increased debt is just equal to the marginal expense of the resulting increase in financial distress costs.
the static theory of capital structure
A firm's stock has recently sold for as little as $11.28 per share and as much as $19.32 per share. The difference between these two share prices is called the:
trading range.
In general, the capital structures of U.S. firms:
vary significantly across industries.
The value of a firm is maximized when the:
weighted average cost of capital is minimized.
The absolute priority rule determines:
which parties receive payment first in a bankruptcy proceeding.
Which one of the following outcomes is the best justification for a reverse stock split?
Avoid delisting
When a firm announces an upcoming seasoned stock offering, the market price of the firm's existing shares tends to:
decrease
A reverse stock split is defined as a(n):
decrease in the number of shares outstanding without affecting total owners' equity
A stock split:
decreases the market value per share.
A syndicate can best be defined as a:
group of underwriters sharing the risk of selling a new issue of securities.
According to the pecking-order theory, firms prefer to use __________ before any other form of financing.
internal funds
The business risk of a company:
is positively related to the company's cost of equity.
The fact that flotation costs can be significant is an argument for:
maintaining a low dividend policy and rarely issuing extra dividends.
The capital structure that maximizes the value of a company also:
minimizes the cost of capital.
