61) What are earnings per share equal to?
A) the last dividend payment made
B) total dividend payments plus retained earnings divided by outstanding stock shares
C) the amount by which the stock’s market price has increased in the last year
D) revenues divided by the number of stockholders
62) A bond’s coupon payment divided by the bond’s current price is equal to the bond’s
A) dividend yield.
B) current yield.
C) price-earnings ratio.
D) maturity value.
63) In 2011, the dividend yield on Microsoft (MSFT) stock rose from 1.97% to 3.10%. Which of the following would have generated that result?
A) The closing price of Microsoft stock rose.
B) Microsoft announced an increase in the dividend it would pay per share.
C) The price-earnings ratio rose.
D) Microsoft issued bonds with a coupon rate equal to 3.10%.
64) When Zynga, the company behind the social games CityVille and Words With Friends, sold stock to the public for the first time in December 2011, funds were being raised in a ________ market, and when those newly issued shares are resold to other buyers, the sales take place in a ________ market.
A) primary; primary
B) primary; secondary
C) secondary; primary
D) secondary; secondary
Article Summary
Starting as a Chicago antique store that sold sandwiches on the side, Potbelly has grown from this 1977 beginning into a company which today operates approximately 300 sandwich shops in the United States. In October 2013, Potbelly sold stock for the first time through an initial public offering (IPO), with shares jumping in price from the initial offering price of $14 to more than $32 on the same day. Since 2011, Potbelly has seen an increase in in both sales and revenue, and earned a profit of $2.8 million in the first half of 2013.
Source: Matt Krantz, “Potbelly IPO shares more than double on open,” USA Today, October 4, 2013.
65) When Potbelly sold stock to the public in its IPO, it did so through the NASDAQ market. This was an example of Potbelly raising funds through
A) reinvesting retained earnings.
B) a financial intermediary.
C) dividend reinvestment.
D) a financial market.
66) When Potbelly sold stock to the public in its IPO, it did so through the NASDAQ market. This was an example of Potbelly using ________ to raise funds.
A) indirect finance
B) direct finance
C) bonds
D) corporate governance
67) Generally with bond ratings, the lower the rating, the ________ the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
68) If you purchase a share of stock from your friend who initially purchased the stock three years ago, your purchase of the stock represents a transaction in the secondary financial market.
69) Direct finance includes the sale by a corporation of stocks or bonds, but does not include borrowing money from a bank.
70) If you purchase a share of stock from your friend who initially purchased the stock three years ago, your purchase of the stock represents a transaction in the primary financial market.
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