Question : 73.What the most important federal law regarding the issue of : 1325730

 

 

73.What is the most important federal law regarding the issue of new securities?

a.Securities Act of 1923

b.Securities Act of 1933

c.Securities Act of 1943

d.Securities Act of 1953

 

 

 

74.Which of the following is NOT a benefit of going public for a private firm?

a.New capital for the company.

b.Publicly traded stock for acquisitions

c.Personal wealth and liquidity

d.Low managerial cost in issuing the IPO.

 

 

 

75.Which of the following key financial decisions depends upon the capital budgeting process of a particular firm?

a.How much capital must the company raise each year?

b.How much of the needed capital must be raised externally rather than through retained earnings?

c.How much of the external funding should be raised through borrowing from a bank or another financial intermediary, and how much capital should be raised by selling securities directly to investors?

d.What proportion of the external funding should be structured as common stock, preferred stock or long-term debt?

 

 

 

76.While external funding needs can be approximated by subtracting cash dividend payments from cash flow from operations, the decision is not simple because

a.dividend policy is not fixed

b.there are legal costs to raising capital externally than by retaining internal cash flow

c.The Securities Act of 1933 only allows external capital to be raised during certain months of the year. If a firm needs funds at another time it must use internal sources.

d.None of the above

e.both (a) and (b)

 

 

 

77.Conflicts of interest exist in the investment banking industry. In 2002 ten of the top U.S. investment banking firms agreed to pay a total of $1.4 billion in fines and they are also required to

a.use the Dutch auction process for any new IPOs.

b.use the English auction process for any new IPOs.

c.purchase independent research from third parties.

d.all of the above

 

 

 

78.Shelf registration is popular because:

a.the securities can ‘remain on the shelf’ for a decade before they expire.

b.Only one SEC registration needs to be filed for the securities a company “places on the shelf.”

c.Firms can take issue securities “off the shelf” in response to changes in market conditions.

d.all of the above

e.Both (b) and (c)

 

 

 

79.Once a firm becomes publicly traded it must

a.report any material change in operations, ownership and financing

b.hold general shareholders’ meetings at least once a year

c.use the shelf registration process to issue any new securities

d.all of the above

e.(a) and (b) only

 

 

 

80.Which of the following statements is true?

a.Generally the IPO market collectively raises about half as much external capital as very large corporations in the U.S.

b.IPOs generally represent less than 10% of all new common equity raised yearly by U.S. corporations.

c.There is little competition in the U.S. stock markets for IPO listings.

d.All of the above statements are true.

e.Only statements (a) and (c) are true.

 

 

 

81.The drawbacks of going public include all but:

a.financial costs of an IPO such as printing, accounting and legal costs and the underwriter’s discount.

b.managerial costs of an IPO such as new time constraints upon top executives

c.the emphasis by the new owners upon the firm’s stock price.

d.life in a fishbowl in the sense that certain information about the firm’s internal affairs must now be released to the public.

e.all of the above are potential drawbacks to going public

 

 

 

82.Which of the following statements is true?

a.When a firm performs a spin-off the total stock value of the parent firm should drop by approximately the market value of the new public spin-off.

b.A reverse LBO is also known as a second IPO.

c.Tracking stocks are designed to track the earnings of wholly-owned subsidiaries.

d.all of the above statements are true

e.Only statements (a) and (c) are true.

 

 

 

83.Analysis of long-run performance of IPOs:

a.clearly shows returns in line with non-IPO equity returns

b.is rather controversial and challenges the notion that investors are rational and that financial markets are efficient

c.has not been performed

d.all of the above

e.Both (b) and (c)

 

 

 

84.Which of the following statements is true?

a.Rule 144A was instituted to decrease liquidity and increase issuing costs in the private-placement market.

b.Rule 144A was instituted to increase liquidity and decrease issuing costs in the private-placement market.

c.Rule 144A was instituted to increase liquidity and decrease issuing costs in the public-placement market.

d.Rule 144A was instituted to decrease liquidity and increase issuing costs in the public-placement market.

 

 

 

85.Which of the following statements concerning non-U.S. IPOs is false?

a.They are, on average, much smaller than those on the Nasdaq or NYSE.

b.They offer significant first-day returns.

c.It is difficult, on average, to find enough interested investors for non-U.S. IPOs.

d.Taxation issues such as capital gains tax rules significantly impact how issues are priced and which investors are targeted for the offer.

e.All of the above statements are true.

 

 

 

86.Some top U.S. multi-national firms have listed their stock in numerous stock markets outside the U.S. Which of the following are reasons for issuing a stock internationally?

a.It broadens the ownership base and helps a company integrate itself into the local business scene.

b.It increases local press coverage and serves as corporate advertising.

c.It can make corporate acquisitions easier because shares can be used as an acceptable method of payment.

d.all of the above are viable reasons

e.Only (a) and (b) are viable reasons