Answered: Firms raise capital from investors by…

Firms raise capital from investors by issuing shares in the primary markets. Does this imply that corporate financial managers can ignore trading of previously issued shares in the secondary market?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 4QTD

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Firms raise capital from investors by issuing shares in the primary markets. Does this imply that corporate financial managers can ignore trading of previously issued shares in the secondary market?

Approach to decide on the efficient procurement and investment of funds for the day-to-day operations of a business. Financial management aims at profit maximization, and it includes financing and capital budgeting.

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Which is false about long-term sources of a firm’s capital? a. Preferred shares are securities whose intrinsic value is based on prospective earnings b. Some types of bank loans may require collateral from potential debtors c. Retained earnings are internal sources of funding that can be utilized for expansion d. All types of corporations may issue equity securities to the public
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
a. What are the risks and rewards of investing in the stock market as compared to the bond market?b. “Because corporations do not actually raise any funds in secondary markets, they are less important to the economy than primary markets.” Comment.
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Which of the following statements is most correct? Group of answer choices Money market transactions include common stock transactions. Preferred stockholders are paid before bondholders but after common stockholders. One of the problems in corporations is that managers often put their own interests ahead of those of the stockholders. U.S. T-bills are considered risky securities. None of the above statements is correct.
How is an investment banker compensated for promoting and facilitating the sale of a company’s shares to the public?
Which of the following does not apply to secondary markets? Group of answer choices Many investors might be unwilling to provide resources to corporations if there is no available mechanism for the future sale of their stocks and bonds to others. Transactions help to establish market prices for additional shares that may be issued in the future. Transactions are important to the efficient allocation of resources in our economy. New resources are provided when shares of stock are sold by the corporation to the initial owners.
Which of the following would not be an appropriate reason for a firm to repurchase its stock: As an investment if management believes the market has undervalued the stock price. In order to have sufficient shares to cover employee stock programs. Solely to boost Earnings Per Share. Both A and B.
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Corporations have come to dominate the business world through their ability to raise large amounts of capital by sale of ownership shares to anonymous outside investors. Is this true or false?
What is a Rights Issue?(a) The sale of rights to a bond coupon. (b) The right of shareholders to have the company buy back their shares. (c) It is where the firm raises additional equity capital after the IPO. (d) It is a sale of priority rights to creditors in the event of the company being wound up.
Which of the following is correct a. In a leveraged recapitalization, a firm uses its excess cash to buyback shares b. In an LBO, a firm borrows and repurchases its shares thereby reducng the number of shares outstanding. c. In a leveraged recapitalization, a change of ownership occurs as the firm is sold d. In an LBO, debt is a major component of the financing and a change of control occurs. e. In an LBO, managers use excess cash to repurchase shares