Question 1

When bonds are selling at par value,the bonds are known as fixed-rate bonds.

Accepted Answer

A) True 
 B)False

Question 2

One way that investors contribute capital to the firm is by:

Accepted Answer

A)  plowing back money into retained earnings. 
B)  paying less than par value for the stock. 
C)  receiving dividends and reinvesting them on their own. 
D)  increasing the amount of treasury stock. 
A)  plowing back money into retained earnings. 
B)  paying less than par value for the stock. 
C)  receiving dividends and reinvesting them on their own. 
D)  increasing the amount of treasury stock.

Question 3

The purpose of a sinking fund is to:

Accepted Answer

A)  reduce the par value of stock over time. 
B)  take advantage of the tax break on preferred stock. 
C)  periodically retire debt prior to final maturity. 
D)  allow risky corporations to avoid bankruptcy. 
A)  reduce the par value of stock over time. 
B)  take advantage of the tax break on preferred stock. 
C)  periodically retire debt prior to final maturity. 
D)  allow risky corporations to avoid bankruptcy.

Question 4

Earnings this year for Plasti-tech Inc.were $200,000,of which $60,000 it decided to plow back and 10 % was depreciation.Plasti-tech's internally generated funds are:

Accepted Answer

A)  $40,000. 
B)  $60,000. 
C)  $80,000. 
D)  $140,000. 
A)  $40,000. 
B)  $60,000. 
C)  $80,000. 
D)  $140,000.

Question 5

Long-term debt refers to those liabilities that:

Accepted Answer

A)  have established a sinking fund for repayment. 
B)  are not callable at the option of the firm. 
C)  are secured by specific collateral. 
D)  have a maturity of more than one year remaining. 
A)  have established a sinking fund for repayment. 
B)  are not callable at the option of the firm. 
C)  are secured by specific collateral. 
D)  have a maturity of more than one year remaining.

Question 6

Canadian non-financial firms' average value of debt-to-equity ratios:

Accepted Answer

A)  have fallen slightly over the past 10 years. 
B)  have risen substantially over the past 10 years. 
C)  have risen slightly over the past 10 years. 
D)  have fallen substantially over the past 10 years. 
A)  have fallen slightly over the past 10 years. 
B)  have risen substantially over the past 10 years. 
C)  have risen slightly over the past 10 years. 
D)  have fallen substantially over the past 10 years.

Question 7

Preferred stockholders:

Accepted Answer

A)  have full voting rights. 
B)  receive a fixed dividend. 
C)  have priority over debt holders if the company goes out of business. 
D)  All of the choices are correct. 
A)  have full voting rights. 
B)  receive a fixed dividend. 
C)  have priority over debt holders if the company goes out of business. 
D)  All of the choices are correct.

Question 8

What does it mean to say that financing is a zero-NPV transaction?

Accepted Answer

Financial markets have a tendency of bei

Question 9

Which of the following is the holder of a warrant allowed to do prior to a specified date?

Accepted Answer

A)  convert debt into a specified number of shares. 
B)  sell common shares at a predetermined price. 
C)  exchange stock for bonds at a specified price. 
D)  purchase shares at a predetermined price. 
A)  convert debt into a specified number of shares. 
B)  sell common shares at a predetermined price. 
C)  exchange stock for bonds at a specified price. 
D)  purchase shares at a predetermined price.

Question 10

Book value is a (an)________ measure,while market value is a (an)________ measure.

Accepted Answer

A)  inward-looking; outward-looking 
B)  more accurate; less accurate 
C)  forward-looking; backward-looking 
D)  backward-looking; forward-looking 
A)  inward-looking; outward-looking 
B)  more accurate; less accurate 
C)  forward-looking; backward-looking 
D)  backward-looking; forward-looking

Question 11

Bonds that have been sold only to a limited number of institutional investors are considered:

Accepted Answer

A)  secured bonds. 
B)  convertible bonds. 
C)  private placements. 
D)  indexed bonds. 
A)  secured bonds. 
B)  convertible bonds. 
C)  private placements. 
D)  indexed bonds.

Question 12

ABC Corporation has fallen upon hard times and dividends on their non-cumulative,preferred stock have not been paid for three years.Which of the following is true?

Accepted Answer

A)  common shareholders must now receive three years' worth of dividends. 
B)  preferred shareholders must now receive three years' worth of dividends. 
C)  the corporation must fold if preferred shareholders are not paid. 
D)  common shareholders have not received dividends for three years. 
A)  common shareholders must now receive three years' worth of dividends. 
B)  preferred shareholders must now receive three years' worth of dividends. 
C)  the corporation must fold if preferred shareholders are not paid. 
D)  common shareholders have not received dividends for three years.

Question 13

Which of the following statements is correct concerning stock dividends?

Accepted Answer

A)  common stock dividends cannot be paid if preferred stock dividends are in arrears. 
B)  preferred stock dividends cannot be paid if common stock dividends are in arrears. 
C)  neither common nor preferred dividends can be paid if accrued interest is in arrears. 
D)  no stock dividends can be paid if the firm has no cash. 
A)  common stock dividends cannot be paid if preferred stock dividends are in arrears. 
B)  preferred stock dividends cannot be paid if common stock dividends are in arrears. 
C)  neither common nor preferred dividends can be paid if accrued interest is in arrears. 
D)  no stock dividends can be paid if the firm has no cash.

Question 14

A company's board of directors is primarily an agent of the company's:

Accepted Answer

A)  management. 
B)  employees. 
C)  shareholders. 
D)  management and employees. 
A)  management. 
B)  employees. 
C)  shareholders. 
D)  management and employees.

Question 15

Additional paid-in capital refers to:

Accepted Answer

A)  a firm's retained earnings. 
B)  a firm's treasury stock. 
C)  the difference between the issue price and the par value. 
D)  funds borrowed from a bank or bondholders. 
A)  a firm's retained earnings. 
B)  a firm's treasury stock. 
C)  the difference between the issue price and the par value. 
D)  funds borrowed from a bank or bondholders.

Question 16

Retained earnings will decrease when stock is repurchased as treasury stock.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following are bonds whose coupon rate is tied to a price index?

Accepted Answer

A)  pay-in-kind bonds 
B)  indexed bonds 
C)  reverse floaters 
D)  asset-backed bonds 
A)  pay-in-kind bonds 
B)  indexed bonds 
C)  reverse floaters 
D)  asset-backed bonds

Question 18

The majority of an established firm's capital is generated:

Accepted Answer

A)  internally. 
B)  externally. 
C)  through issuance of new shares. 
D)  through funded debt. 
A)  internally. 
B)  externally. 
C)  through issuance of new shares. 
D)  through funded debt.

Question 19

Which of the following statements is correct for a firm with 100,000 outstanding shares and earnings per share of $6 if retained earnings were just adjusted downward by $50,000?

Accepted Answer

A)  A $5.50 dividend per share was paid 
B)  A $6.50 dividend per share was paid 
C)  net earnings equal $650,000 
D)  total dividends paid equal $50,000 
A)  A $5.50 dividend per share was paid 
B)  A $6.50 dividend per share was paid 
C)  net earnings equal $650,000 
D)  total dividends paid equal $50,000

Question 20

A company is about to issue new shares of stock.If the par value per share is $4.00,the price of the new shares will most likely be:

Accepted Answer

A)  Less than $4.00. 
B)  Equal to $4.00. 
C)  Greater than $4.00. 
D)  Equal to the capital surplus. 
A)  Less than $4.00. 
B)  Equal to $4.00. 
C)  Greater than $4.00. 
D)  Equal to the capital surplus.

Exam 14: Introduction to Corporate Financing and Governance

When bonds are selling at par value,the bonds are known as fixed-rate bonds.

One way that investors contribute capital to the firm is by:

The purpose of a sinking fund is to:

Earnings this year for Plasti-tech Inc.were $200,000,of which $60,000 it decided to plow back and 10 % was depreciation.Plasti-tech's internally generated funds are:

Long-term debt refers to those liabilities that:

Canadian non-financial firms' average value of debt-to-equity ratios:

Preferred stockholders:

What does it mean to say that financing is a zero-NPV transaction?

Which of the following is the holder of a warrant allowed to do prior to a specified date?

Book value is a (an)________ measure,while market value is a (an)________ measure.

Bonds that have been sold only to a limited number of institutional investors are considered:

ABC Corporation has fallen upon hard times and dividends on their non-cumulative,preferred stock have not been paid for three years.Which of the following is true?

Which of the following statements is correct concerning stock dividends?

A company's board of directors is primarily an agent of the company's:

Additional paid-in capital refers to:

Retained earnings will decrease when stock is repurchased as treasury stock.

Which of the following are bonds whose coupon rate is tied to a price index?

The majority of an established firm's capital is generated:

Which of the following statements is correct for a firm with 100,000 outstanding shares and earnings per share of $6 if retained earnings were just adjusted downward by $50,000?

A company is about to issue new shares of stock.If the par value per share is $4.00,the price of the new shares will most likely be:

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Venture Capital, IPOs, and Seasoned Offerings

Debt and Payout Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters

Book value is a (an) measure,while market value is a (an) measure.