2-1 Discussion Intermediate Accounting 3

Discuss the benefits and drawbacks, to the shareholders of a company, of a public listing on a stock exchange compared to private equity finance as a way of disposing their shares.

For what reason might a company purchase treasury stock? To increase shareholder liquidity To execute an acquisition through a share exchange To increase the number of outstanding shares of stock To reduce future income taxes

Which of the following is an appropriate goal for the firm? Select one:  a. All of these b. In secondary markets, outstanding shares of stock are bought and sold among investors. c. An active secondary market causes firms to sell their new debt or equity issues at a higher cost of funds. d. A secondary market allows investors to share their risk and return e. For an investor, the function of secondary markets is to provide profitability for the shares of securities they own.

Which of the following statements is false? Group of answer choices Stocks are long-term securities issued by corporations. Common stock is the residual interest in the firm and gives the owner dividend rights, voting rights, liquidation rights, and preemptive rights. Common stock promises a dividend payment but usually does not give voting rights. Bonds are less risky than stocks.

For which of the following purposes is it LEAST logical for a company to issue equity securities on the primary market?   a. For capital raising b. For liquidity improvement c. For increasing the return on equity d. None of the options. All of the given purposes support primary shares issuance.

For which of the following purposes is it LEAST logical for a company to issue equity securities on the primary market?   For capital raising For liquidity improvement   For increasing the return on equity   None of the options. All of the given purposes support primary shares issuance.

Evaluate the following statement: “Issuing convertible securities is ameans by which a firm can sell common stock for more than the existingmarket price.”

Which of the following describes preferred stock? a. Stock that sells for a very high price b. Stock that is sold to employees of the company as a performance incentive c. Stock which gives shareholders certain preferences and advantages over common stock d. Stock that is purchased by the corporation for investment purposes

Capital stock is a major part of a corporation’s equity. The term capital stock embraces both com- mon and preferred stock. Required: Identifythebasicrightsinherentinownershipofcommonstockandexplainhowownersexercisethem. Describe preferred stock. Discuss various preferences often afforded preferred stock. In the analysis and interpretation of equity securities of a corporation, it is important to understand certain terminology. Define and describe the following equity items:(1) Treasurystock (2) Stockright (3) Stockwarrant

1. Choose the best definition for a Stock? A. Being a creditor to a company B. Robin Hood C. Ownership shares of a company D. Voting shares in a company E. Ownership shares of a public company   2. When investing in stocks, there are two ways in which you can have a positive return. What are the components of this return called? A. Dividends and Capital Loss B. Robin Hood C. Coupon and Capital Gains D. Coupon and Capital Loss E. Dividends and Capital Gains

Discuss risks and returns characteristics of investing in ordinary shares and corporatebonds from the perspective of an investor.

A corporation might have treasury stock listed on their financials for all the following reasons except: A. they wish to control the market price B. they wish to be a majority stockholder C. they wish to limit dividend payments D. they wish to avoid takeover

In your opinion, should a public listed company pay attention to themarket price of its common stocks traded on secondary markets?Justify your answers.

The excess of issue price over par of common stock is termed a(n) a. income O b. premium C. discount O d. deficit

What would you expect to happen to an all-equityfirm’s stock price if its management announceda recapitalization under which debt would beissued and used to repurchase common stock?

An example of indirect finance is when the company issues new shares of stock Select one:TrueFalse