Question 1

No-liability companies have been created because of:

Accepted Answer

A) the high rate of business failure. 
B) the high rate of business failure in the mining sector. 
C) the need to encourage investment in high-growth companies. 
D) the risk of losing one's investment when a business fails. 
A) the high rate of business failure. 
B) the high rate of business failure in the mining sector. 
C) the need to encourage investment in high-growth companies. 
D) the risk of losing one's investment when a business fails. B

Question 2

Private equity is also known as:

Accepted Answer

A) start-up financing. 
B) venture capital. 
C) turnaround financing. 
D) none of the given options. 
A) start-up financing. 
B) venture capital. 
C) turnaround financing. 
D) none of the given options. B

Question 3

The primary purpose of ______________________ is to reduce agency costs by giving managers and employees an ownership share in the company.

Accepted Answer

employee share plans

Question 4

Dividend reinvestment plans (DRPs)are:

Accepted Answer

A) more popular under the dividend imputation tax system than under the classical tax system. 
B) cheaper than private placements. 
C) limited by the company's profits in their ability to raise capital. 
D) all of the given options. 
A) more popular under the dividend imputation tax system than under the classical tax system. 
B) cheaper than private placements. 
C) limited by the company's profits in their ability to raise capital. 
D) all of the given options.

Question 5

Shares are traded _______ rights when a party who buys a share is also able to participate in the forthcoming rights issue.

Accepted Answer

The answer of Shares are traded _______ rights when a...

Question 6

Before applications by investors can be accepted for unlisted securities,a waiting period is imposed of at least:

Accepted Answer

A) 14 days. 
B) 7 days. 
C) 21 days. 
D) 28 days. 
A) 14 days. 
B) 7 days. 
C) 21 days. 
D) 28 days.

Question 7

Funds from operations can be written as:

Accepted Answer

A) profit after tax + depreciation. 
B) profit before tax - depreciation. 
C) profit before tax + income tax paid. 
D) profit before tax + depreciation. 
A) profit after tax + depreciation. 
B) profit before tax - depreciation. 
C) profit before tax + income tax paid. 
D) profit before tax + depreciation.

Question 8

Dill owns five per cent of the outstanding shares in Pickle Ltd,which has just announced a one for five rights issue with a subscription price of $1.90.The current 'cum rights' price for Pickle shares is $2.20.If the number of outstanding shares in Pickle Ltd is 5000,what is the theoretical value of the right to one new share?

Accepted Answer

A) $0.05 
B) $0.25 
C) $0.30 
D) $0.45 
A) $0.05 
B) $0.25 
C) $0.30 
D) $0.45

Question 9

__________________ is the process of share issuance that involves competitive bidding by market participants.

Accepted Answer

The answer of __________________ is the process of share issuance...

Question 10

Which of the following is not a source of finance for new ventures?

Accepted Answer

A) Loans from banks. 
B) Funds from venture capitalists. 
C) Rights issues. 
D) Initial public offerings (IPOs). 
A) Loans from banks. 
B) Funds from venture capitalists. 
C) Rights issues. 
D) Initial public offerings (IPOs).

Question 11

A measure of internal equity finance is:

Accepted Answer

A) accounting profit. 
B) total revenues. 
C) funds from operations. 
D) profit before tax. 
A) accounting profit. 
B) total revenues. 
C) funds from operations. 
D) profit before tax.

Question 12

Brown Ltd has decided to raise capital by issuing 200 new shares.Marketing Ltd has prepared a report to Brown Ltd listing the following potential investors together with the number of shares each is prepared to purchase at the following price:
 
At what price should Brown issue in order to maximise the amount of capital to be raised?

Accepted Answer

A) $160 
B) $170 
C) $180 
D) >$180 
A) $160 
B) $170 
C) $180 
D) >$180

Question 13

Dill owns five per cent of the outstanding shares in Pickle Ltd,which has just announced a one for five rights issue with a subscription price of $1.90.The current 'cum rights' price for Pickle shares is $2.20.The number of outstanding shares in Pickle Ltd is 5000.Calculate the theoretical ex-rights share price.

Accepted Answer

A) $2.58 
B) $2.25 
C) $2.10 
D) $2.15 
A) $2.58 
B) $2.25 
C) $2.10 
D) $2.15

Question 14

Holders of ordinary shares have a residual interest in the net assets of the issuing company and are therefore exposed to greater risk than other classes of investors.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is false?

Accepted Answer

A) Costs are larger in percentage terms when a smaller amount of capital is raised. 
B) Book-building is more common for large floats and privatisations in Australia than the open pricing mechanism of price setting. 
C) An underwriter may no longer be obligated to take up the shortfall of an issue during times of war. 
D) A possible reason for floating a private company is to realise capital gains. 
A) Costs are larger in percentage terms when a smaller amount of capital is raised. 
B) Book-building is more common for large floats and privatisations in Australia than the open pricing mechanism of price setting. 
C) An underwriter may no longer be obligated to take up the shortfall of an issue during times of war. 
D) A possible reason for floating a private company is to realise capital gains.

Question 16

Typically,a company employs the services of an underwriter:

Accepted Answer

A) if it has pre-marketed its shares before a new share issue. 
B) to issue new shares at a discount. 
C) if the shares are no-liability shares. 
D) to take up any under-subscription of new shares. 
A) if it has pre-marketed its shares before a new share issue. 
B) to issue new shares at a discount. 
C) if the shares are no-liability shares. 
D) to take up any under-subscription of new shares.

Question 17

In practice,there may be an increase in the share price following the announcement by a company of a forthcoming bonus issue.Which of the following is a likely explanation of this phenomenon?

Accepted Answer

A) Companies tend to increase their total dividend payout following a bonus issue. 
B) Bonus issues create wealth for shareholders. 
C) Bonus issues reduce the debt/equity ratio and,therefore,the riskiness of the firm. 
D) Bonus issues increase the dividend payout ratio of companies. 
A) Companies tend to increase their total dividend payout following a bonus issue. 
B) Bonus issues create wealth for shareholders. 
C) Bonus issues reduce the debt/equity ratio and,therefore,the riskiness of the firm. 
D) Bonus issues increase the dividend payout ratio of companies.

Question 18

Total internal equity finance is equal to:

Accepted Answer

A) operating profit before tax less depreciation charges less income tax paid less dividend payments. 
B) revenue less expenses requiring the use of funds plus funds from operations less income tax paid. 
C) operating profit before tax plus depreciation charges less income tax paid less dividend payments. 
D) none of the given options. 
A) operating profit before tax less depreciation charges less income tax paid less dividend payments. 
B) revenue less expenses requiring the use of funds plus funds from operations less income tax paid. 
C) operating profit before tax plus depreciation charges less income tax paid less dividend payments. 
D) none of the given options.

Question 19

A key advantage of equity financing is that the transaction costs are generally lower than those incurred in debt financing.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not a cost of floating a company?

Accepted Answer

A) Brokerage fees. 
B) Underwriters' fees. 
C) Costs incurred in the preparation of an investigating accountant's report. 
D) None of the given options. 
A) Brokerage fees. 
B) Underwriters' fees. 
C) Costs incurred in the preparation of an investigating accountant's report. 
D) None of the given options.

No-liability companies have been created because of:

Private equity is also known as:

The primary purpose of ______________________ is to reduce agency costs by giving managers and employees an ownership share in the company.

Dividend reinvestment plans (DRPs)are:

Shares are traded _______ rights when a party who buys a share is also able to participate in the forthcoming rights issue.

Before applications by investors can be accepted for unlisted securities,a waiting period is imposed of at least:

Funds from operations can be written as:

__________________ is the process of share issuance that involves competitive bidding by market participants.

Which of the following is not a source of finance for new ventures?

A measure of internal equity finance is:

Holders of ordinary shares have a residual interest in the net assets of the issuing company and are therefore exposed to greater risk than other classes of investors.

Which of the following statements is false?

Typically,a company employs the services of an underwriter:

In practice,there may be an increase in the share price following the announcement by a company of a forthcoming bonus issue.Which of the following is a likely explanation of this phenomenon?

Total internal equity finance is equal to:

A key advantage of equity financing is that the transaction costs are generally lower than those incurred in debt financing.

Which of the following is not a cost of floating a company?

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Debt

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Futures Contracts

Options and Contingent Claims

Analysis of Takeovers

International Financial Management

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

Filters

Exam 9: Sources of Finance: Equity

No-liability companies have been created because of:

Private equity is also known as:

The primary purpose of ______________________ is to reduce agency costs by giving managers and employees an ownership share in the company.

Dividend reinvestment plans (DRPs)are:

Shares are traded _______ rights when a party who buys a share is also able to participate in the forthcoming rights issue.

Before applications by investors can be accepted for unlisted securities,a waiting period is imposed of at least:

Funds from operations can be written as:

__________________ is the process of share issuance that involves competitive bidding by market participants.

Which of the following is not a source of finance for new ventures?

A measure of internal equity finance is:

Holders of ordinary shares have a residual interest in the net assets of the issuing company and are therefore exposed to greater risk than other classes of investors.

Which of the following statements is false?

Typically,a company employs the services of an underwriter:

In practice,there may be an increase in the share price following the announcement by a company of a forthcoming bonus issue.Which of the following is a likely explanation of this phenomenon?

Total internal equity finance is equal to:

A key advantage of equity financing is that the transaction costs are generally lower than those incurred in debt financing.

Which of the following is not a cost of floating a company?

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Debt

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Futures Contracts

Options and Contingent Claims

Analysis of Takeovers

International Financial Management

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

Filters