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Question
Which one of the following statements concerning debt issues is correct?
A. Firms often pay higher interest rates on term loans than on public issues of debt.
B. The only difference between a term loan and a private placement is the size of the issue.
C. A prospectus is required for equity issues but not for debt issues.
D. The flotation costs of issuing debt tend to be more expensive than for issuing equity.
E. Direct long-term loans must be registered with the SEC.
Answer
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Related questions
Q:
Which one of the following statements is correct?
A. If a firm decreases its inventory period, its accounts receivable period will also decrease.
B. The longer the cash cycle, the more cash a firm typically has available to invest.
C. A firm would prefer a negative cash cycle over a positive cash cycle.
D. Decreasing the inventory period will also decrease the payables period.
E. Both the operating cycle and the cash cycle must be positive values.
Q:
Suppose that Martin Metal Products changes its policy and starts requiring all of its customers to pay within 20 days rather than the 30 days that it currently allows. Which one of the following will result from this change?
A. Increase in receivables period
B. Increase in inventory period
C. Decrease in cash cycle
D. Increase in operating cycle
E. Increase in accounts payable period
Q:
Which one of the following firms is most apt to have the shortest inventory period?
A. General merchandise retail store
B. Hardware store
C. Furniture store
D. Locomotive manufacturer
E. Delicatessen
Q:
Which one of the following industries is most apt to have the shortest operating cycle?
A. Toy store
B. Car manufacturer
C. Local restaurant
D. Furniture store
E. Plastics manufacturer
Q:
Which one of the following statements is true, all else constant?
A. A decrease in the accounts receivable turnover rate decreases the cash cycle.
B. Paying a supplier within the discount period, rather than waiting until the end of the normal credit period, will decrease the cash cycle.
C. The cash cycle can never be negative.
D. An increase in the inventory turnover rate will decrease the cash cycle.
E. The payables period must be shorter than the receivables period.
Q:
Which one of the following is a use of cash?
A. Selling inventory at cost
B. Paying a supplier for inventory you purchased last month
C. Borrowing money from a local bank
D. Collecting payment from a customer
E. Selling a fixed asset such as a piece of machinery
Q:
Sherpa Movers has just gone public. Under a firm commitment agreement, the firm received $34.40 for each of the 3.5 million shares sold. The initial offering price was $37 per share, and the stock rose to $43 per share in the first few minutes of trading. Sherpa Movers paid $896,000 in legal and other direct costs and $225,000 in indirect costs. What was the flotation cost as a percentage of the funds raised? A. 22.91 percentB. 23.85 percentC. 24.49 percentD. 26.17 percentE. 28.60 percent
Q:
The Bread Basket needs to raise $38 million to expand its operations nationally. The company will sell new shares of common stock using a general cash offering. The underwriters charge a 7.65 percent spread, the administrative costs are $395,000, and the offer price is $26 per share. How many shares of stock must be sold for The Bread Basket to receive the total funds it desires?
A. 1,599,059 shares
B. 1,638,311 shares
C. 1,647,222 shares
D. 1,814,141 shares
E. 1,833,333 shares
Q:
Nu Tech wants to raise $21 million to purchase equipment by issuing new securities. Management estimates the issue will cost the firm $320,000 for accounting, legal, and other costs. The underwriting spread is 7.5 percent and the issue price is $21 per share. How many shares of stock must be sold if Nu Tech is to receive sufficient funds to purchase all the desired equipment?
A. 1,008,010 shares
B. 1,021,121 shares
C. 1,097,555 shares
D. 1,102,048 shares
E. 1,110,333 shares
Q:
The Jam Jar would like to sell 1,100 shares of stock using the Dutch auction method. The bids received are as follows:Bidder D will receive _____ shares and pay a price per share of ______.A. 0; $0B. 700; $37.00C. 272; $37.00D. 272; $38.75E. 700; $38.75
Q:
Northern Air would like to sell 700 shares of stock using the Dutch auction method. The bids received are as follows:Bidder B will receive _____ shares and pay a price per share of _____.A. 0; $0B. 69; $42.25C. 69; $42.00D. 210; $42.00E. $300; $40.00
Q:
If the market price of existing publicly traded shares declines due to the announcement of a seasoned issue of stock, the decline is referred to as which one of the following?
A. Spread
B. Direct underwriting cost
C. Underpricing
D. Direct issue cost
E. Abnormal return
Q:
Phil and Terry started a new business three years ago. Two years ago, they incorporated the business and issued themselves each 20,000 shares of stock. Last year, they took the company public in an initial public offering (IPO) and issued an additional 100,000 shares of stock at that time. The offer price was $14 a share, the spread was 8 percent, and the lockup period was six months. The stock closed at $17 a share at the end of the first day of trading. During the first six months of trading, the stock had a price range of $13 to $23 per share. During the second six months of trading, the stock sold between $15 and $21 per share. Both Tracie and Amy purchased 100 shares at the offer price. Given this, which one of the following statements is correct? Ignore trading costs and taxes.
A. Tracie could have earned a maximum profit of 100($23 - 17) on her investment.
B. Phil could have sold 5,000 shares at $23 per share.
C. The underwriters earned a spread equal to 8 percent of $17.
D. The maximum price at which Terry could have sold shares is $21.
E. Amy paid 108 percent of $14 per share to purchase her 100 shares.
Q:
What is the difference between a tender offer and a targeted repurchase?
Q:
You are having a discussion with one of your classmates on dividend policy. Your classmate states that dividend policy is totally irrelevant. Write a response to this statement justifying that in the real-world dividend policy does matter.
Q:
Lester's Meat Market has 7,000 shares of stock outstanding at a price per share of $11. What will the price per share be if the firm declares a 3-for-5 reverse stock split?
A. $6.60
B. $7.50
C. $11.00
D. $15.00
E. $18.33
Q:
Mueller Brothers has 38,000 shares of stock outstanding at a price per share of $59. How many shares will be outstanding if the firm does a 3-for-2 stock split?
A. 24,000 shares
B. 25,333 shares
C. 55,667 shares
D. 57,000 shares
E. 61,000 shares
Q:
Cookies and More has 8,000 shares of stock outstanding at a market price of $13.60 per share. What will the price per share be after the firm declares a 10 percent stock dividend? Ignore taxes and market imperfections.
A. $12.24
B. $12.36
C. $13.60
D. $14.96
E. $15.00
Q:
Zacariah's Nursery has 6,000 shares of stock outstanding at a market price of $20 a share. The earnings per share are $1.54. The firm has total assets of $315,000 and total liabilities of $186,000. Today, the firm is paying an annual cash dividend of $0.80 a share. Ignore taxes. What will the earnings per share be after the dividend is paid?
A. $0.31
B. $0.74
C. $1.54
D. $20.70
E. $21.02
Q:
Neal Fabricators just liquidated its poorest performing division and realized net proceeds from the transaction of $2.6 million. The firm has 180,000 shares of stock outstanding at a market price of $64 a share. Which one of the following is the best estimate of the stock's post-dividend price per share if the firm distributes the entire liquidation proceeds in the form of a liquidating dividend? Ignore taxes and market imperfections.
A. $49.56
B. $51.38
C. $53.40
D. $58.79
E. $64.00
Q:
Keyser Trucking just paid its annual regular cash dividend of $1.22 a share, along with a special dividend of $0.25 a share. The company follows a policy of increasing its dividend by 2 percent annually. Which one of the following is the best estimate of the firm's next annual dividend payment?
A. $1.22
B. $1.24
C. $1.49
D. $1.50
E. $1.54
Q:
Mercury Homes just declared a 4-for 3 stock split. Which of the following occurred as a result of this split?
I. number of shares outstanding increased by 1/3
II. number of shares outstanding decreased by 1/4
III. price per share increased by 1/3
IV. price per share decreased by 1/4
A. I only
B. I and III only
C. I and IV only
D. II and III only
E. II and IV only
Q:
Which one of the following is basically equivalent to a 2-for-1 stock split?
A. 20 percent stock dividend
B. 25 percent stock dividend
C. 50 percent stock dividend
D. 100 percent stock dividend
E. 200 percent stock dividend
Q:
Lexington Stables just declared a 15 percent stock dividend. Which one of the following increased by 15 percent as a result of this dividend?
A. Book value of firm's equity
B. Shareholders' wealth
C. Number of shares outstanding
D. Firm's cash balance
E. Stock price
Q:
Chelsie Enterprises declared a dividend to shareholders of record on Monday, February 8, that is payable on Friday, February 26. Carla knows that her dividend check normally arrives three business days after the check is written. On which one of the following days should she expect to receive her dividend check?
A. Wednesday, February 10
B. Thursday, February 11
C. Monday, March 1
D. Tuesday, March 2
E. Wednesday, March 3
Q:
Tuesday, December 1, is the ex-dividend date for Alpha stock. Which one of the following dates is the record date? Assume there are no banking holidays to consider.
A. Friday, November 27
B. Monday, November 30
C. Wednesday, December 2
D. Thursday, December 3
E. Friday, December 4
Q:
Which one of the following dates is the date on which the board of directors votes to pay a dividend?
A. Record date
B. Declaration date
C. Ex-dividend date
D. Payment date
E. Settlement date
Q:
This morning, Lambert Materials bought 10,000 of its outstanding shares in the open market. What type of transaction was this?
A. Stock payout
B. Stock distribution
C. Stock dividend
D. Stock repurchase
E. Stock reversal
Q:
The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following?
A. Share price levels
B. Risk level
C. Short-term versus long-term investments
D. Rates of return
E. Dividends
Q:
The ex-dividend date is defined as _____ day(s) before the date of record.
A. three business
B. three
C. two business
D. two
E. one