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.
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- For capital raising
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- Which of the following is true of a stock dividend? A. It is a liability. B. The decision to issue a stock dividend resides with shareholders. C. It does not affect total equity but transfers amounts between equity components. D. It creates a cash reserve for shareholders.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.Indicate whether the following statements are (True) or (False) and correct the false statements: Primary and secondary markets are markets for short-term and long-term securities, respectively. Public offering is the sale of a new security issue, typically bonds or preferred stock, directly to an investor or group of investors. When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to increase the firm's profitability.
- Which of the following statements correctly describe characteristics of preference shares? Group of answer choices A. The required return on preference equity is expected to be less than the required return from ordinary equity. B. None of the other statements are correct C. A participating preference share participates in the interest payments paid to debtholders. D. Preference shares are called “hybrid” securities because they display characteristics of both short-term and long-term debt.Financial risk refers to the: Multiple Choice possibility that interest rates will increase. risk of owning equity securities. the risk that the share price may not reflect all known information general business risk of the firm. risk faced by equity holders of firms with debt.Which of the following statements is false? A. Mutual funds are pool investor funds to purchase financial instruments and thus reduce risks through diversification. B. Initial public offering (IPO) occurs when firm issues stock in the public market for the first time. C. The difference between current assets and non-current assets equals to working capital. D. Owner’s equity is the residual interest in assets that remains after subtracting an entity’s liabilities.
- Which of the following statements is not true of the fair-value method of accounting for marketable securities? Select one: A. The investment account is recorded at current fair value on the balance sheet. B. Interim changes in the investments’ fair value may or may not affect income depending on the securities’ classification. C. This method is used when the reporting company generally owns less than 20% of the investee company. D. Dividends are treated as a return of the capital invested. E. None of the aboveWhich of the following correctly indicates how the issue price of common stock shares would be valued when a corporation makes a follow-on issue? Market forces determine the selling price, as it is marketed by the selling group The highest expected issue price per share that can be obtained while still selling of all of the shares is selected The highest expected issue price per share that can be obtained, regardless of the selling group's ability to market the shares, is selected The market price of existing shares is used as guidanceUnder which condition an external equity financing can be advantageous? Group of answer choices When a firm wishes to raise additional capital by selling a portion of the existing owners' stock while maintaining control of the firm When a firm's capital structure contains more equity than debt All of the above When common stock becomes less risky to the firm than fixed-income securities
- Which of the following statements is not true about preferred stock? A.The rate of dividend is usually fixed B.Stockholders' usually have a preference as to dividends C. Stockholders always have a voting right D. Stockholders' usually have a preference as to assets upon liquidation of the corporationWhich of the following statements regarding long-term financing methods is most CORRECT? Group of answer choices: Preferred stock generally has a higher component cost of capital to the firm than common stock. None of these statements are correct. All unpaid cumulative preferred dividends must be paid before any dividends can be paid on the firm’s common stock. The after-tax cost of preferred stock is typically at the same level as that of debt. Convertibles bring in additional funds when they are converted.Discuss whether the director’s view (Miss Kay) that issuing traded bonds will decrease the weighted average cost of capital ATC Bhd and thereby increase the value of the company. Discussion should consider from the viewpoint of:i. Traditionalii. Modigliani & Milleriii. Market imperfectionsiv. Pecking order theory