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An initial public offering (IPO) occurs:
- When a public company issues new shares of stock.
- When an investor buys a particular stock for the first time.
- The first time a company borrows money in the form of a note payable.
- The first time a firm issues shares of stock in the public market.
e. The first time a firm borrows money in the form of a corporate bond
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- You are a consultant working with various companies that are considering incorporating and listing shares on a stock exchange. One of your clients asks you about the various acronyms she has been hearing in conjunction with financial analysis. Explain the following acronyms and how they measure different things but may complement each other: EPS (earnings per share), EBITDA (earnings before interest, taxes, depreciation, and amortization), and NOPAT (net operating profit after taxes).Which of the following statements is true? The outstanding number of shares is the maximum number of shares that can be issued by a corporation. The shares that are in the hands of the stockholders are said to be outstanding. It is very unlikely that corporations will have more than one class of stock outstanding. Preferred stock is stock that has been retired.Which of the following statements about IPOs is (are) True: (i) An IPO refers to the first time a firm issues bonds to be bought by the public. (ii) An IPO refers to the first time a firm issues shares to be bought by the public. (iii) A secondary offering IPO is when a firm becomes public by allowing previous investors and founders to sell part (or all) of their shares.
- Firms that are quoted on the stock market can raise money by issuing shares. These are sold on the ‘primary stock market’. People who own the shares receive a ‘dividend’ on them, normally paid six-monthly. The amount varies with the profitability of the company.People or institutions that buy these shares, however, may not wish to hold on to them for ever. This is where the ‘secondary stock market’ comes in. It is where existing shares are bought and sold. There are stock markets, primary and secondary, in all the major countries of the world.There are 2292 companies (as of October 2016) whose shares and other securities are listed on the London Stock Exchange and trading in them takes place each weekday. The prices of shares depend on demand and supply. For example, if the demand for Tesco shares at any one time exceeds the supply on offer, the price will rise until demand and supply are equal. Share prices fluctuate throughout the trading day and sometimes price changes can be…In calculating earnings per share, a company uses the treasury stock method when a. it recognizes the assumed impact of exercising outstanding warrants. b. it develops a methodology to handle the premium paid on exercised share options. c. it needs to value the cash received for a convertible bond. d. it needs to value treasury stock repurchased during the year.The directors of Merchant Corporation are considering the issuance of a stock dividend. They have asked you to discuss the proposed action by answering the following questions. Instructions a. What is a stock dividend? How is a stock dividend distinguished from a stock split (1) from a legal standpoint, and (2) from an accounting standpoint? b. For what reasons does a corporation usually declare a stock dividend? A stock split? c. Discuss the amount, if any, of retained earnings to be capitalized in connection with a stock dividend.
- In some circumstances, corporations will buy back their own stock – called Treasury Stock. Identify three reasons why a company may choose to do so.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 taxesIn what way is a preferred stock usually more similar to a bond than to a common stock? O a. Preferred stockholders are more risky than common stocks O b. Preferred stockholders elect the board of directors of the organization O c. Preferred bondholders participate in the growth of the company through increases in dividends and stock prices O d. Preferred stockholders are typical entitled fixed payments O e. If the company were to go into liquidation, preferred stockholders will be entitled to payments after common stockholders are paid-off
- Generally, an initial public offering is: Group of answer choices an offer to potential investors of preference shares to newly list a company on a stock exchange. an offer to potential investors of ordinary shares to newly list a company on a stock exchange. an offer to potential investors of company debentures to newly list a company on a stock exchange. an offer to potential investors of unsecured notes to newly list a company on a stock exchangeWhen a corporation originally issues sh ares to the investing public to raise capital, it is known as: O NYSE a bond issuance IPO O venture capital 4Indicate whether the following statements are true or false. If the statement is false, explainwhy.a. If a firm repurchases its stock in the open market, the shareholders who tender thestock are subject to capital gains taxes.b. If you own 100 shares in a company’s stock and the company’s stock splits two-forone,you will own 200 shares in the company following the split.c. Some dividend reinvestment plans increase the amount of equity capital available tothe firm.d. The Tax Code encourages companies to pay a large percentage of their net income inthe form of dividends.e. If your company has established a clientele of investors who prefer large dividends,the company is unlikely to adopt a residual dividend policy.f. If a firm follows a residual dividend policy, holding all else constant, its dividendpayout will tend to rise whenever the firm’s investment opportunities improve.
