Financial Management
81. Under a pre-emptive right provision:
- holders of common stock must be given the first option to purchase new shares
- common shareholders have a pre-emptive right to dividends
- preferred shareholders have the first option on new common shares
- dilution of existing positions is encouraged
Correct answer: (A)
holders of common stock must be given the first option to purchase new shares
82. A preferred issue carrying a call provision will carry:
- a higher yield than non-callable preferred
- a lower yield than non-callable preferred
- the same yield as non-callable preferred
- the same yield as callable debt
Correct answer: (A)
a higher yield than non-callable preferred
83. Wealthier shareholders tend to prefer:
- a high dividend payout ratio
- short term capital gains
- floating rate dividends
- capital appreciation
Correct answer: (D)
capital appreciation
84. In chronological order, which of the following is correct:Refer to text page 703.
- ex-dividend date, holder of record date, payment date
- holder of record date, ex-dividend date, holder of record date
- payment date, ex-dividend date, holder of record date
- holder of record date, payment date, ex-dividend date
Correct answer: (A)
ex-dividend date, holder of record date, payment date
85. The conversion ratio indicates:
- the number of shares of common to which the security may be converted
- the conversion price of the security
- the number of bonds the common share may be converted to
- the number of bonds the preferred share may be converted to
Correct answer: (A)
the number of shares of common to which the security may be converted
86. A warrant may best be defined as:
- an option to sell a specified number of shares at a stated price
- an option to buy a stated number of shares at a stated price
- a convertible security
- a bond derivative
Correct answer: (B)
an option to buy a stated number of shares at a stated price
87. Which of the following is not a non-financial motive for merging:
- the desire to expand management capabilities
- the need to expand marketing capabilities
- the desire for easier access to capital markets
- the acquisition of new products
Correct answer: (C)
the desire for easier access to capital markets
88. If a firm acquires another firm with a higher P/E ratio:
- postmerger earnings per share will be diluted
- a cash acquisition is questionable
- a stock-for-stock exchange should be pursued
- none of the above are correct
Correct answer: (C)
a stock-for-stock exchange should be pursued
89. The arrangement preferred by most business firms and foreign government is:
- the joint venture
- the export arrangement
- the licensing agreement
- the fully owned foreign subsidiary
Correct answer: (A)
the joint venture
90. The spot rate is:
- unrelated to the foreign exchange rate
- the rate of exchange for future delivery
- the rate of exchange for immediate delivery
- the "black market" exchange rate
Correct answer: (C)
the rate of exchange for immediate delivery
Thursday, December 2, 2021