Question 1

Which of the following statements is false?

Accepted Answer

A)  Once a company goes public, it must satisfy all of the requirements of public companies. 
B)  Organizations such as the relevant provincial Securities and Exchange Commission (SE
C) , the securities exchanges (including the TSX), and the Parliament of Canada adopted new standards that focused on more thorough financial disclosure, greater accountability, and more stringent requirements for the board of directors. 
C)  The major advantage of undertaking an IPO is also one of the major disadvantages of an IPO: when investors diversify their holdings, the equity holders of the corporation become more concentrated. 
D)  Several high profile corporate scandals during the early part of the twenty-first century prompted tougher regulations designed to address corporate abuses. 
A)  Once a company goes public, it must satisfy all of the requirements of public companies. 
B)  Organizations such as the relevant provincial Securities and Exchange Commission (SE
C) , the securities exchanges (including the TSX), and the Parliament of Canada adopted new standards that focused on more thorough financial disclosure, greater accountability, and more stringent requirements for the board of directors. 
C)  The major advantage of undertaking an IPO is also one of the major disadvantages of an IPO: when investors diversify their holdings, the equity holders of the corporation become more concentrated. 
D)  Several high profile corporate scandals during the early part of the twenty-first century prompted tougher regulations designed to address corporate abuses.

Question 2

In Canada,________ usually takes the lead in reviewing and approving the preliminary prospectus.The other provincial securities commissions usually follow ________.

Accepted Answer

A)  the Ontario Securities Commission (OS
C) ; Ontario's decision 
B)  the Toronto Stock Exchange (TSX); TSX's decision 
C)  the Canadian Securities Administrators (CS
A) ; CSA's decision 
D)  the relevant provincial securities commission; the relevant provincial's decision 
A)  the Ontario Securities Commission (OS
C) ; Ontario's decision 
B)  the Toronto Stock Exchange (TSX); TSX's decision 
C)  the Canadian Securities Administrators (CS
A) ; CSA's decision 
D)  the relevant provincial securities commission; the relevant provincial's decision

Question 3

Once a company goes public,it must satisfy all of the requirements and new standards that focused on more thorough ________,________ and more stringent requirements for the board of directors.These standards,in general,were designed to provide better protection for ________.

Accepted Answer

A)  financial disclosure; greater accountability; companies 
B)  financial disclosure; less accountability; investors 
C)  financial disclosure; greater accountability; investors 
D)  financial disclosure; less accountability; companies 
A)  financial disclosure; greater accountability; companies 
B)  financial disclosure; less accountability; investors 
C)  financial disclosure; greater accountability; investors 
D)  financial disclosure; less accountability; companies

Question 4

For many start-ups,the first round of outside private equity financing is often obtained from ________ which may also bring expertise to the firm that the entrepreneur lacks.

Accepted Answer

A)  venture capital firms 
B)  angel investors 
C)  institutional investors 
D)  corporate investors 
A)  venture capital firms 
B)  angel investors 
C)  institutional investors 
D)  corporate investors

Question 5

Use the information for the question(s) below.
During the most recent fiscal year, KD Industries had revenues of $400 million and earnings of $30 million. KD has filed a registration statement with the SEC for its IPO. Before it is offered, KD's investment bankers would like to estimate the value of the company using comparable companies. The investment bankers have assembled the following information based on data for other companies in the same industry that have recently gone public. In each case the ratios are based upon the IPO price.
  
-Based upon the price/earnings ratio,what would be a reasonable value for KD?

Accepted Answer

@#IMG-DLM& Taking the average

Question 6

Use the information for the question(s) below.
You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return.
-Assuming that this is the venture capitalist's first investment in your firm,what percentage of the firm will the venture capitalist own?

Accepted Answer

A)  50% 
B)  40% 
C)  25% 
D)  33% 
A)  50% 
B)  40% 
C)  25% 
D)  33%

Question 7

What will the proceeds from the IPO be if Luther is selling 1.1 million shares ?

Accepted Answer

@#IMG-DLM& By looking at cumulative dema

Question 8

Which of the following statements is false?

Accepted Answer

A)  A venture capital firm is a limited partnership that specializes in raising money to invest in the private equity of young firms. 
B)  Venture capitalists typically control about three-quarters of the seats on a start-up's board of directors, and often represent the single largest voting block on the board. 
C)  The initial capital that is required to start a business is usually provided by the entrepreneur herself and her immediate family. 
D)  Individual investors who buy equity in small private firms are called angel investors. 
A)  A venture capital firm is a limited partnership that specializes in raising money to invest in the private equity of young firms. 
B)  Venture capitalists typically control about three-quarters of the seats on a start-up's board of directors, and often represent the single largest voting block on the board. 
C)  The initial capital that is required to start a business is usually provided by the entrepreneur herself and her immediate family. 
D)  Individual investors who buy equity in small private firms are called angel investors.

Question 9

________ can provide substantial capital for young companies.In return,________ often demand a great deal of control.

Accepted Answer

A)  Institutional investors; institutional investors 
B)  Corporate investors; corporate investors 
C)  Venture capital firms; venture capitalists 
D)  Sovereign wealth funds; sovereign wealth funds 
A)  Institutional investors; institutional investors 
B)  Corporate investors; corporate investors 
C)  Venture capital firms; venture capitalists 
D)  Sovereign wealth funds; sovereign wealth funds

Question 10

Sovereign wealth funds (SWFs)are pools of money controlled ________.

Accepted Answer

A)  by publicly traded corporations 
B)  by private firms 
C)  by a government 
D)  by non-profit organizations 
A)  by publicly traded corporations 
B)  by private firms 
C)  by a government 
D)  by non-profit organizations

Question 11

Which of the following statements regarding firm commitment IPOs is false?

Accepted Answer

A)  If the entire issue does not sell out, the remaining shares must be sold at a lower price and the underwriter must take the loss. 
B)  The underwriter purchases the entire issue (at the offer price) and then resells it at a slightly higher price to interested investors. 
C)  It is the most common underwriting arrangement. 
D)  The underwriter guarantees that it will sell all of the stock at the offer price. 
A)  If the entire issue does not sell out, the remaining shares must be sold at a lower price and the underwriter must take the loss. 
B)  The underwriter purchases the entire issue (at the offer price) and then resells it at a slightly higher price to interested investors. 
C)  It is the most common underwriting arrangement. 
D)  The underwriter guarantees that it will sell all of the stock at the offer price.

Question 12

Which of the following is NOT a common name for a corporation that invests in private companies?

Accepted Answer

A)  Strategic investor 
B)  Corporate partner 
C)  Venture partner 
D)  Strategic partner 
A)  Strategic investor 
B)  Corporate partner 
C)  Venture partner 
D)  Strategic partner

Question 13

In the U.S.over 80% of businesses are ________,but nearly 85% of sales are generated by ________ while in Canada,about 80% of businesses are ________,but more than 60% of incomes before tax are generated by ________.

Accepted Answer

A)  organized as corporations; sole proprietorships or partnerships; either sole proprietorships or partnerships; businesses organized as corporations 
B)  either sole proprietorships or partnerships; businesses organized as corporations; businesses organized as corporations; sole proprietorships or partnerships 
C)  businesses organized as corporations; sole proprietorships or partnerships; businesses organized as corporations; sole proprietorships or partnerships 
D)  either sole proprietorships or partnerships; businesses organized as corporations; either sole proprietorships or partnerships; businesses organized as corporations 
A)  organized as corporations; sole proprietorships or partnerships; either sole proprietorships or partnerships; businesses organized as corporations 
B)  either sole proprietorships or partnerships; businesses organized as corporations; businesses organized as corporations; sole proprietorships or partnerships 
C)  businesses organized as corporations; sole proprietorships or partnerships; businesses organized as corporations; sole proprietorships or partnerships 
D)  either sole proprietorships or partnerships; businesses organized as corporations; either sole proprietorships or partnerships; businesses organized as corporations

Question 14

Use the information for the question(s) below.
You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return.
-The post-money valuation of your firm is closest to:

Accepted Answer

A)  $12.5 million 
B)  $5.2 million 
C)  $10.0 million 
D)  $5.0 million 
A)  $12.5 million 
B)  $5.2 million 
C)  $10.0 million 
D)  $5.0 million

Question 15

Which of the following statements regarding best efforts IPOs is false?

Accepted Answer

A)  For smaller IPOs, the underwriter commonly accepts the deal on this basis. 
B)  The underwriter does not guarantee that the stock will be sold, but instead tries to sell the stock for the best possible price. 
C)  Often these arrangements have an all-or-none clause: either all of the shares are sold in the IPO, or the deal is called off. 
D)  If the entire issue does not sell out, the underwriter is on the hook. 
A)  For smaller IPOs, the underwriter commonly accepts the deal on this basis. 
B)  The underwriter does not guarantee that the stock will be sold, but instead tries to sell the stock for the best possible price. 
C)  Often these arrangements have an all-or-none clause: either all of the shares are sold in the IPO, or the deal is called off. 
D)  If the entire issue does not sell out, the underwriter is on the hook.

Question 16

Part of the registration statement,called the preliminary prospectus,circulates to investors before the stock is offered.This preliminary prospectus is also called a(n)

Accepted Answer

A)  IPO filing. 
B)  10-K filing. 
C)  blue whale. 
D)  red herring. 
A)  IPO filing. 
B)  10-K filing. 
C)  blue whale. 
D)  red herring.

Question 17

In Canada,________ accounted for 32% of private equity funds under management in 2007,up from 28% in 2006.

Accepted Answer

A)  venture capitalists 
B)  corporate investors 
C)  sovereign wealth funds 
D)  institutional investors 
A)  venture capitalists 
B)  corporate investors 
C)  sovereign wealth funds 
D)  institutional investors

Question 18

Which of the following statements is false?

Accepted Answer

A)  The general partners work for the venture capital firm and run the venture capital firm; they are called venture capitalists. 
B)  An important consideration for investors in private companies is their exit strategy - how they will eventually realize the return from their investment. 
C)  When a company founder decides to sell equity to outside investors for the first time, it is common practice for private companies to issue common stock rather than preferred stock to raise capital. 
D)  Institutional investors such as pension funds, insurance companies, endowments, and foundations manage large quantities of money. 
A)  The general partners work for the venture capital firm and run the venture capital firm; they are called venture capitalists. 
B)  An important consideration for investors in private companies is their exit strategy - how they will eventually realize the return from their investment. 
C)  When a company founder decides to sell equity to outside investors for the first time, it is common practice for private companies to issue common stock rather than preferred stock to raise capital. 
D)  Institutional investors such as pension funds, insurance companies, endowments, and foundations manage large quantities of money.

Question 19

Use the information for the question(s) below.
You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return.
-Assuming that this is the venture capitalist's first investment in your firm,the post-money valuation of the angel investor's shares are closest to:

Accepted Answer

A)  $12.5 million 
B)  $4.0 million 
C)  $5.0 million 
D)  $2.5 million 
A)  $12.5 million 
B)  $4.0 million 
C)  $5.0 million 
D)  $2.5 million

Question 20

Underpricing in Canada is ________,but the magnitude is ________ in many other countries.

Accepted Answer

A)  significant; not as large as 
B)  insignificant; not as large as 
C)  insignificant; as large as 
D)  significant; as large as 
A)  significant; not as large as 
B)  insignificant; not as large as 
C)  insignificant; as large as 
D)  significant; as large as

Exam 23: The Mechanics of Raising Equity Capital

Which of the following statements is false?

In Canada,________ usually takes the lead in reviewing and approving the preliminary prospectus.The other provincial securities commissions usually follow ________.

Once a company goes public,it must satisfy all of the requirements and new standards that focused on more thorough ________,________ and more stringent requirements for the board of directors.These standards,in general,were designed to provide better protection for ________.

For many start-ups,the first round of outside private equity financing is often obtained from ________ which may also bring expertise to the firm that the entrepreneur lacks.

What will the proceeds from the IPO be if Luther is selling 1.1 million shares ?

Which of the following statements is false?

________ can provide substantial capital for young companies.In return,________ often demand a great deal of control.

Sovereign wealth funds (SWFs)are pools of money controlled ________.

Which of the following statements regarding firm commitment IPOs is false?

Which of the following is NOT a common name for a corporation that invests in private companies?

In the U.S.over 80% of businesses are ________,but nearly 85% of sales are generated by ________ while in Canada,about 80% of businesses are ________,but more than 60% of incomes before tax are generated by ________.

Which of the following statements regarding best efforts IPOs is false?

Part of the registration statement,called the preliminary prospectus,circulates to investors before the stock is offered.This preliminary prospectus is also called a(n)

In Canada,________ accounted for 32% of private equity funds under management in 2007,up from 28% in 2006.

Which of the following statements is false?

Underpricing in Canada is ________,but the magnitude is ________ in many other countries.

The Corporation

Introduction to Financial Statement Analysis

Arbitrage and Financial Decision Making

The Time Value of Money

Interest Rates

Valuing Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behaviour and Capital Market Efficiency

Financial Options

Option Valuation

Real Options

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modelling: a Case Study

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

Filters

In Canada, usually takes the lead in reviewing and approving the preliminary prospectus.The other provincial securities commissions usually follow .

Once a company goes public,it must satisfy all of the requirements and new standards that focused on more thorough , and more stringent requirements for the board of directors.These standards,in general,were designed to provide better protection for .

can provide substantial capital for young companies.In return, often demand a great deal of control.

In the U.S.over 80% of businesses are ,but nearly 85% of sales are generated by while in Canada,about 80% of businesses are ,but more than 60% of incomes before tax are generated by .

Underpricing in Canada is ,but the magnitude is in many other countries.