Unit 14

Which of the following defines the primary market?

The primary market is where stocks are issued for the first time.

Whether a firm obtains capital by debt or equity financing depends on:

- the size of the firm - the firm's growth prospects - the firm's life-cycle stage

The NYSE differs from the NASDAQ primarily because the NYSE has:

-a physical location -a face-to-face auction market

Financing by wealthy individuals or private investment groups is referred to as ___.

-venture capital -private equity

The fundamental business of the New York Stock Exchange is to attract _______.

order flow

Shares of stock are first brought to the market and sold to investors in the ___ market.

primary

The preliminary prospectus, which contains much of the information found in the registration statement and is distributed to potential investors, is called a(n) ___ ___.

red herring

Entrepreneurs seeking start-up capital must usually rely on ____.

venture capital

The efficient markets hypothesis contends that ____ capital markets such as the NYSE are efficient.

well-organized

Stock price reporting has increasingly moved from traditional print media to the __________ in recent years.

internet

Private equity financing AFTER ground floor financing is termed ___ financing.

mezzanine

A document required by the SEC for new public issues that contains the issuing firm's financial information, financial history, and details of the existing business is known as the ____.

registration statement

An advertisement published in financial newspaper such as the Wall Street Journal used during and after the registration waiting period is called a:

tombstone

Which type of stock price adjustment time path occurs when there is a bubble (price run up) in the path followed by a decline after the market receives information about the stock?

Overreaction and correction

Match each information type to the form of market efficiency that identifies that type of information as being quickly and accurately reflected in stock prices.

all information > strong form efficiency all public information > semi-strong form efficiency historical stock prices > weak form efficiency

A person who brings buyers and sellers together is called a(n) __________.

broker

In an efficient market, firms should expect to receive _____ value for securities they sell.

fair

An efficient market is one in which any change in available information will be reflected in the company's stock price ____

immediately

Which of the following are true about the venture capital (VC) market?

- access to venture capital is very limited - personal contacts are important in gaining access to the VC market

Private equity firms provide financing for firms that otherwise would have difficulty raising capital such as:

- closely held private firms - distressed firms - start-up firms

Which of the following are important considerations when choosing between venture capitalists?

- financial strength - style - exit strategy

NASDAQ has which of these features?

-Computer network of securities dealers -Multiple market maker system

Place the steps involved in issuing securities to the public in chronological order.

1. obtain approval from the firm's board of directors 2. prepare and file a registraiton statement 3. prepare and distribute preliminary prospectus copies 4. determine a selling price 5. prepare and distribute a final prospectus

Which act sets forth the federal regulation for all new interstate securities issues?

The Securities Act of 1933