Financial Management

251. All of the following are typically key roles of the investment dealer except:

  1. underwriter
  2. market maker
  3. broker
  4. advisor to the firm
Correct answer: (C)
broker

252. The main function of syndicate members is:

  1. acting as the agent of the firm
  2. selling shares to the public
  3. determining the spread
  4. wholesaling shares to brokers and dealers
Correct answer: (D)
wholesaling shares to brokers and dealers

253. One of the main reasons an initial public offering (IPO) may do well in the after market is:

  1. stabilization by the underwriters
  2. stabilization by the firm
  3. public misconceptions of the firm's value
  4. the security was underpriced
Correct answer: (D)
the security was underpriced

254. New equity financing is primarily done by way of a:

  1. public offering
  2. private offering
  3. rights offering
  4. leveraged offering
Correct answer: (A)
public offering

255. The par value of a bond is:

  1. the initial or face value of the bond
  2. the yield to maturity
  3. the stated interest payment
  4. the value of the bond as traded on security markets.
Correct answer: (A)
the initial or face value of the bond

256. Bond yields are quoted in all of the following ways except:

  1. coupon rate
  2. current yield
  3. yield to maturity
  4. debt yield
Correct answer: (D)
debt yield

257. Leasing offers all of the following advantages except:

  1. leases are an expense item that cannot be capitalized
  2. the provisions of a lease may be less restrictive than a bond indenture
  3. there may be no down payment requirement
  4. creditor claims may be restricted on real property
Correct answer: (A)
leases are an expense item that cannot be capitalized

258. The ultimate ownership of the firm resides:

  1. with management
  2. with common shareholders
  3. with preferred shareholders
  4. with bondholders
Correct answer: (B)
with common shareholders

259. The most important voting issue for common shareholders is:

  1. election of the board of directors
  2. dividend policy
  3. proxy assignment
  4. adoption of the annual report
Correct answer: (A)
election of the board of directors

260. With cumulative dividends:

  1. preferred stock may participate over and above the quoted yields
  2. the preferred shareholder is assured of receiving a dividend every year
  3. preferred dividends accumulate and must be paid in full
  4. the firm's obligation to its shareholders is lessened
Correct answer: (C)
preferred dividends accumulate and must be paid in full
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