Preferred shareholders

From a cost perspective, preferred stock is a less desirable source of capital for a firm than bonds.

A ______ requires that dividends cannot be paid on common stock until all current and previously omitted dividends are paid on preferred stock.

Firms assume ______ risk when they issue preferred stock than when they issue bonds. The payment of dividends on preferred stock ______ be omitted without the firm being forced into bankruptcy.

When a corporation first decides to issue stock to the public, it engages in a(n)

A firm can best avoid the time lag between registering new securities with the SEC and actually selling them by

The process by which the lead underwriter solicits indications of interest by institutional investors in an IPO at various possible ______ prices is referred to as ___________.

To the extent that shares sold during an IPO are discounted from their appropriate price, the proceeds that the issuing firm receives from the IPO are lower than it deserves.

The transaction costs to the issuing firm in an IPO is usually _____ percent of the funds raised.

If many investors quickly sell an IPO stock in the secondary market, there will be ______ on the stock's price.

The purpose of a lockup provision is to

When the lockup period expires, the share price commonly

IPOs tend to occur more primarily during recessions.

The initial (one-day) return of IPOs in the United States has averaged about _____ percent over the last 30 years.

The practice of purchasing IPO stock at the offer price and selling the stock shortly afterward is called

________ occurs when an investment bank allocates share from an IPO to corporate executives who may be considering an IPO or other business that will require the help of an investment bank.

When brokers encourage investors to place bids for IPO shares on the first day that are above the offer price this is referred to as

On average, IPOs of firms tend to perform ___________ over a period of a year or longer.

A firm that wants to engage in a secondary stock offering does not need to file the offering with the SEC.

A firm will typically attempt to sell shares from a secondary offering

Buy and sell orders on the OTC market are completed by

A(n) ______ is a certificate which represents ownership of a foreign stock.

The first-time issuance of shares by a specific firm to the public is referred to as a(n)

A new stock issuance by a specific firm that already has stock outstanding is referred to as a(n)

Managers of firms may consider a stock repurchase or even a leveraged buyout when they believe their stock is ____________ by the market, or a secondary stock offering when they believe their stock is ____________ by the market.

The largest organized exchange, listing the largest firms, is the

__________ are employed by brokerage houses and execute orders for clients on the floor of the NYSE.

Unlike the organized exchanges, the OTC market does not have a trading floor.

Firms listed as “pink sheets” on the OTC market

The prevailing price per share divided by the firm’s earnings per share is known as the

The __________________________ is a price-weighted average of stock prices of 30 large U.S. firms.

The __________________________ is a value-weighted index of stock prices of 500 large U.S. firms.

Sudden favorable news about the performance of a firm will make investors believe that the firm’s stock is ________ at its prevailing price.

Analysts periodically communicate with high-level managers of the firms whose stock they rate.

Shareholders can most easily measure a firm’s performance by monitoring changes in its __________ over time.

Which of the following is not true regarding the Sarbanes-Oxley Act?

An example of shareholder activism is

______________ are acquisitions that require substantial amounts of borrowed funds.

__________ are not barriers to corporate control to eliminate agency problems.

Listing stock on a foreign stock exchange

American Depository Receipts (ADRs) are similar to

__________ are portfolios of international stocks created and managed by various financial institutions.

__________ sell shares to investors and use the proceeds to invest in portfolios of international stocks created and managed by portfolio managers.

When a firm buys some of its shares that it had previously issued, this is referred to as a:

Whenever __________ exceeds __________, the stock price will be driven __________.

Which of the following is not a form of shareholder activism?

Initial public offerings (IPOs) tend to occur more frequently during bearish (weak) stock markets.

Initial public offerings (IPOs) perform _______ on the day following the IPO and _______ for periods of a year or longer after the IPO.

Which of the following is not a part of the over-the-counter market?

A firm has a current stock price of $15.32. The firm's annual dividend is $1.14 per share. The firm’s dividend yield is

If the secondary market is inactive, then the shares would be illiquid.

Private firms that need a large equity investment but are not yet in a position to go public may attempt to obtain funding from a venture capital (VC) fund.

Venture capital (VC) funds receive money from wealth investors and from pension funds that need to receive their money back in one year or less.

Venture capital (VC) funds commonly serve as advisors to the businesses in which they invest.

Venture capital (VC) funds usually invest in publicly-traded businesses.

Venture capital (VC) funds typically plan to exit from their original investment within a period of about one year.

The phrase “leaving money on the table” refers to investors who pay more for a stock in the secondary market than was paid by those investors who were able to buy shares at the initial (offer) price on the IPO date.

Underwriters sell most of the shares of an IPO to institutional investors.

The total cost of engaging in an IPO is usually about 1 percent of the total proceeds.

Since the Sarbanes-Oxley Act of 2002, the initial returns resulting from an IPO have generally been smaller.

In general, secondary offerings cause an immediate increase in the market price of the stock.

Electronic stock exchanges that execute stock transactions electronically are referred to as electronic communications networks (ECNs).

As a result of the Sarbanes-Oxley Act, firms were able to reduce their costs of compiling and reporting financial information.

As a result of the Sarbanes-Oxley Act, there was a reduced likelihood of fraudulent financial reporting by firms.

The legal protection of shareholders varies substantially among countries.

Common law countries such as the U.S., Canada, and the United Kingdom allow for more legal protection than civil law countries such as France or Italy.

The government enforcement of securities laws varies among countries.

The laws of the financial information that must be provided by public companies is similar among all developed countries.

Electronic communications networks (ECNs) are passive funds that track a specific index.

A VC fund typically plans to exit from its original investment within about four to seven years.

Like VC funds, private equity funds commonly take over businesses and manage them.

Normally, only the owners of preferred stock are permitted to vote on certain key matters concerning the firm, such as the election of the board of directors.

If investors become dissatisfied with a firm’s performance, they can compete with management in soliciting proxy votes in what is known as a proxy fight.

Initial public offerings (IPOs) tend to occur more frequently during bullish stock markets.

According to financial research, there is evidence that the stock price associated with an IPO typically rises on the first day but then declines over time.

Shelf-registration allows firms quick access to funds without repeatedly being slowed by the registration process.

In addition to the Nasdaq market, the OTC market has another segment known as “pink sheets,” where smaller stocks are traded.

The Dow Jones Industrial Average (DJIA) is a value-weighted average of stock prices of 30 large U.S. firms.

Research studies have found that the share prices of target firms and of acquiring firms react very positively to announcements of an acquisition.

If managers believe that their firm’s stock price is weak because it is undervalued by the market, they may consider repurchasing a portion of the shares that are outstanding.

International exchange-traded funds (ETFs) represent international indexes that reflect composites of stocks for particular countries; shares of the index can be purchased or sold, thereby allowing investors to invest directly in a stock index representing any one of several countries.

Which of the following is not true with respect to venture capital (VC) funds?

Assume a firm that is valued at $800 million with 6 million shares of stock outstanding. This firm’s stock should have a price of $_______ per share.

The owners of common stock are permitted to vote on the

Which of the following is not true with respect to preferred stock?

Which of the following is false with respect to initial public offerings (IPOs)?

To discourage flipping, some securities firms make _________ shares of future IPOs available to institutional investors that retain shares for a ________ period of time.

There is strong evidence that IPOs of firms perform ________ on average over a period of a year or longer.

Firms are more willing to issue new stock in a secondary stock offering when the market price of their outstanding shares is relatively

“Pink sheets” are traded on the

The annual dividend on Grozky, Inc. stock is $5 per share and the stock’s prevailing price is

$93.13 per share. Thus, the stock’s dividend yield is __________ percent.

Which of the following is not a provision specified in the Sarbanes-Oxley Act?

Which of the following is not a form of shareholder activism?

Which of the following is not a barrier to corporate control?