Question 1

Explain some of the means by which a select group of shareholders can retain control over a corporation while still raising equity capital outside of their group.

Accepted Answer

Some of the means include stra

Question 2

Which one of these applies to floating-rate bonds?

Accepted Answer

A) Bondholders can generally redeem their bonds at par at any time. 
B) Coupon payments are variable while the par value is fixed. 
C) Interest adjustments are accrued and paid on the maturity date. 
D) Coupon payments are fixed but the par value is variable. 
E) Bondholders frequently are granted a put provision at the current market price. 
A) Bondholders can generally redeem their bonds at par at any time. 
B) Coupon payments are variable while the par value is fixed. 
C) Interest adjustments are accrued and paid on the maturity date. 
D) Coupon payments are fixed but the par value is variable. 
E) Bondholders frequently are granted a put provision at the current market price.

Question 3

When shareholders are granted preemptive rights,they obtain the right:

Accepted Answer

A) to elect members to the board of directors. 
B) to share proportionally in regular and liquidating dividends. 
C) of first refusal for their proportionate percentage of new shares offered. 
D) to receive dividends prior to any preferred shareholders. 
E) to resell their shares to the issuer at any time at a predetermined price. 
A) to elect members to the board of directors. 
B) to share proportionally in regular and liquidating dividends. 
C) of first refusal for their proportionate percentage of new shares offered. 
D) to receive dividends prior to any preferred shareholders. 
E) to resell their shares to the issuer at any time at a predetermined price.

Question 4

A blanket mortgage is securitized by:

Accepted Answer

A) the sinking fund. 
B) the borrower's inventory. 
C) all the borrower's real property. 
D) the good faith and credit of the borrower. 
E) the borrower's inventories and accounts receivables. 
A) the sinking fund. 
B) the borrower's inventory. 
C) all the borrower's real property. 
D) the good faith and credit of the borrower. 
E) the borrower's inventories and accounts receivables.

Question 5

Bond issuers will call bonds when it is favorable for them to do so.The benefit the issuer receives is a cost to the bondholders.Explain some of the ways in which bondholders are protected from calls.

Accepted Answer

The call provision may have a deferral p

Question 6

The term financial deficit is defined as the:

Accepted Answer

A) loss realized on bonds that are sold for less than their purchase price. 
B) amount needed to fund all interest payments on currently outstanding debt. 
C) total amount of cash flow required from all sources to meet the needs of the uses of cash. 
D) amount of cash flow that must be funded internally. 
E) uses of cash flow minus the cash flow available from internal sources. 
A) loss realized on bonds that are sold for less than their purchase price. 
B) amount needed to fund all interest payments on currently outstanding debt. 
C) total amount of cash flow required from all sources to meet the needs of the uses of cash. 
D) amount of cash flow that must be funded internally. 
E) uses of cash flow minus the cash flow available from internal sources.

Question 7

Which characteristic does not apply to Eurobonds?

Accepted Answer

A) Commonly traded from London 
B) Always denominated in euros 
C) Always denominated in a single currency 
D) Generally denominated in the issuer's home currency 
E) Issued in multiple countries 
A) Commonly traded from London 
B) Always denominated in euros 
C) Always denominated in a single currency 
D) Generally denominated in the issuer's home currency 
E) Issued in multiple countries

Question 8

Which one of these is a positive covenant?

Accepted Answer

A) The firm must maintain a current ratio of 1.2 or better. 
B) The firm will not issue any debt with higher seniority. 
C) The firm cannot be acquired in a friendly takeover. 
D) No dividend increases will be allowed. 
E) The market debt-equity ratio cannot exceed .60. 
A) The firm must maintain a current ratio of 1.2 or better. 
B) The firm will not issue any debt with higher seniority. 
C) The firm cannot be acquired in a friendly takeover. 
D) No dividend increases will be allowed. 
E) The market debt-equity ratio cannot exceed .60.

Question 9

There are three directors' seats up for election.If you own 1,000 shares of stock and have been granted a total of 3,000 votes to cast in a single election,then the firm uses the voting procedure referred to as:

Accepted Answer

A) cumulative voting. 
B) absolute priority voting. 
C) sequential voting. 
D) straight voting. 
E) market share voting. 
A) cumulative voting. 
B) absolute priority voting. 
C) sequential voting. 
D) straight voting. 
E) market share voting.

Question 10

Preferred stock dividends:

Accepted Answer

A) become a debt of the firm if unpaid. 
B) can be deferred indefinitely. 
C) are only paid if common stock dividends are also paid. 
D) have priority over debt interest payments but not common stock dividends. 
E) are a tax-deductible business expense. 
A) become a debt of the firm if unpaid. 
B) can be deferred indefinitely. 
C) are only paid if common stock dividends are also paid. 
D) have priority over debt interest payments but not common stock dividends. 
E) are a tax-deductible business expense.

Question 11

Rembrandt bonds are associated with which country(ies)?

Accepted Answer

A) The Netherlands 
B) Switzerland 
C) Germany 
D) Belgium 
E) Austria and Hungary 
A) The Netherlands 
B) Switzerland 
C) Germany 
D) Belgium 
E) Austria and Hungary

Question 12

Assuming control of a corporation would be hardest to obtain if the firm uses which type of voting?

Accepted Answer

A) Cumulative voting with annual elections for each seat 
B) Cumulative voting with an annual board 
C) Straight voting with a staggered board 
D) Cumulative voting with a staggered board 
E) Straight voting with annual elections for each seat 
A) Cumulative voting with annual elections for each seat 
B) Cumulative voting with an annual board 
C) Straight voting with a staggered board 
D) Cumulative voting with a staggered board 
E) Straight voting with annual elections for each seat

Question 13

Firms may prefer to issue cumulative preferred stock rather than debt for which reason?

Accepted Answer

A) If there is no current taxable income,preferred stock dividends are automatically voided. 
B) Preferred stock has no voting rights but debt does. 
C) Preferred dividends provide a tax shield but debt does not. 
D) Corporate investors can receive a tax break on dividends. 
E) Dividend payments are tax deductible,interest on debt is not. 
A) If there is no current taxable income,preferred stock dividends are automatically voided. 
B) Preferred stock has no voting rights but debt does. 
C) Preferred dividends provide a tax shield but debt does not. 
D) Corporate investors can receive a tax break on dividends. 
E) Dividend payments are tax deductible,interest on debt is not.

Question 14

Explain the main differences between debt and equity.

Accepted Answer

∙ Debt generally does not provide any vo

Question 15

A classified board is one which has:

Accepted Answer

A) representation from various classes of stock. 
B) terms that expire at different times. 
C) both employee and non-employee directors. 
D) directors elected solely by one class of shareholders. 
E) directors that have been assigned differing numbers of votes per seat. 
A) representation from various classes of stock. 
B) terms that expire at different times. 
C) both employee and non-employee directors. 
D) directors elected solely by one class of shareholders. 
E) directors that have been assigned differing numbers of votes per seat.

Question 16

The written agreement between a corporation and its bondholders might contain a prohibition against paying dividends in excess of current earnings.This prohibition is an example of a(n):

Accepted Answer

A) maintenance of security provision. 
B) collateral restriction. 
C) affirmative indenture. 
D) negative covenant. 
E) put provision. 
A) maintenance of security provision. 
B) collateral restriction. 
C) affirmative indenture. 
D) negative covenant. 
E) put provision.

Question 17

Bulldog bonds are associated with which country?

Accepted Answer

A) Spain 
B) Great Britain 
C) France 
D) Germany 
E) Morocco 
A) Spain 
B) Great Britain 
C) France 
D) Germany 
E) Morocco

Exam 15: Long-Term Financing

Explain some of the means by which a select group of shareholders can retain control over a corporation while still raising equity capital outside of their group.

Which one of these applies to floating-rate bonds?

When shareholders are granted preemptive rights,they obtain the right:

A blanket mortgage is securitized by:

Bond issuers will call bonds when it is favorable for them to do so.The benefit the issuer receives is a cost to the bondholders.Explain some of the ways in which bondholders are protected from calls.

The term financial deficit is defined as the:

Which characteristic does not apply to Eurobonds?

Which one of these is a positive covenant?

There are three directors' seats up for election.If you own 1,000 shares of stock and have been granted a total of 3,000 votes to cast in a single election,then the firm uses the voting procedure referred to as:

Preferred stock dividends:

Rembrandt bonds are associated with which country(ies)?

Assuming control of a corporation would be hardest to obtain if the firm uses which type of voting?

Firms may prefer to issue cumulative preferred stock rather than debt for which reason?

Explain the main differences between debt and equity.

A classified board is one which has:

The written agreement between a corporation and its bondholders might contain a prohibition against paying dividends in excess of current earnings.This prohibition is an example of a(n):

Bulldog bonds are associated with which country?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Lessons From Market History

Return, risk, and the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers,acquisitions,and Divestitures

Financial Distress

International Corporate Finance

Filters