BUSI 320 Read & Interact Chapter 17 Assignment solutions complete answers

BUSI 320 Read & Interact Chapter 17 Assignment solutions complete answers 

 

The rights offering is priced at a        meaning that the new shares are priced        the market price.

 

The control of the firm is legally the responsibility of the

 

In terms of legal distinctions, a corporation is directly controlled by its

 

As the owners of the firm, common stockholders have the right to vote for the

 

Preemptive rights offerings are especially popular in the continent of      .

 

A type of convertible preferred that allows a company to force conversion from convertible preferred stock into convertible debt are called convertible      preferred.

 

If a firm has negative earnings for the year the preferred dividend is most likely to be $     .

 

The everyday operations of the firm are the responsibility of the

 

A call provision is advantageous to the _____ of preferred shares.

 

Preemptive rights protect the shareholder by ______.

 

The par value of a preferred share of stock is used to calculate the _____ of the preferred shares.

 

A rights offering confers the right to purchase 1 share at $20 at a ratio of old to new of 17 to 2. A shareholder currently holding 34 shares can purchase ___ of new share for a total cost of ____.

 

What is a major risk of investing in ADRs?

 

If you purchase a stock that has gone ex-rights, a right ________ been included with the purchase of stock.

 

Which asset class has the greatest risk and the greatest expected return?

 

If a company has a poison pill trigger of 30% and another entity has surpassed 30% ownership, what happens?

 

What are the advantages of ADR's to the American investor?

 

The auction rate preferred dividend is reset through a periodic    .

 

A rights offering conveys the right to purchase one new share at $15 per share for every 8 shares held. The stock is currently trading at $20 per share. The average value of the share is theoretically $   . (round to the nearest cent).

 

Floating rate preferred stock has a cash flow stream that is _____.

 

When a bank issues an ADR what is occurring?

 

A company has 30,000 shares outstanding and a board of 7 directors up for re-election. An individual investor owns 12,000 shares. The investor can elect     directors under cumulative voting and exactly     under majority rule.

 

The loss in equity value from the sale of equity at a below market price is called    .

 

A company that issues preferred stock is attempting to    .

 

The number of shares that can be purchased in the rights offering is    

 

Cumulative voting is beneficial to _________

 

A company has 30,000 shares outstanding and a board of 7 directors. A single investor must hold _____ shares in order to elect a single director under cumulative voting.

 

A company is able to raise more capital through a rights offering because __________

 

Preferred stockholders receive dividends _________ common stockholders and these dividends are not mandatory.

 

A firm's earnings before interest is $700,000, interest to creditors is $150,000, dividends to preferred stockholders is $100,000, and dividends to common stockholders is $200,000. The amount of earning retained in the business is ______?

 

Pressure from _______ outside the organization can be exerted on the firm to maintain certain financial standards of performance.

 

Members of the board may serve on a number of the corporation's committees, including

 

The primary advantage of preferred stock as an investment is its treatment for ______ purposes

 

A company has 50,000 shares outstanding and a board of 5 directors. An individual investor owns 1,200 shares. The investor can elect _____ directors under cumulative voting and _____ directors under majority rule voting.

 

Which of the following has a legal, enforceable claim to either dividends or interest payments?

 

Which of the following may have voting rights only when a violation of their agreement exists and a subsequent acceleration of their rights takes place.

 

Ownership of the firm resides in

 

Common stockholders may cast their ballots or assign a __________ to management or some outside contesting group.

 

The control of the firm is the responsibility of the

 

The common stockholders’ residual claim to the income can take the form of

 

 

1.
all income remaining after paying the creditors and preferred stockholders is referred to as the common stockholders'
 
 
2.
the American taxpayer relief act of 2013, left most of the Bush era tax cuts in place but (raised or lowered) the rates on very high-income tax payers
 
 
3.
As owners of the firm, common stockholders have the right to vote for the...
 
 
4.
as the price of common stock falls below the conversion value______
 
 
5.
Basic earnings per share ________ the effect of convertible securities and warrants. Diluted earnings per share ________ basic earnings per share for the effect of convertible securities and warrants
 
 
6.
Common stock can be classified as a derivative security T/F
 
 
8.
the common stockholders' residual claim to the income can take the form of
 
 
9.
a company can force the conversion of a convertible debt issue by including a ________ provision that allows the company to buy back the issue at _______ value
 
 
11.
a company that issues a convertible debenture will be able to ______ capital at a lower cost if the company believe its stock is ________ valued
 
 
13.
a company would use a futures contract to hedge against the prices of key inputs_____ and the prices of outputs_____
 
 
14.
compared to a traditional equity sale, rights offerings tend to have investment banking fees that are
 
 
15.
the conversion value of a convertible bond is _______
 
 
16.
the conversion value of a convertible bond is the value of the ________ if the bond were to be converted _______
 
 
17.
a convertible bond has a ________ value but no upside limitation
 
 
18.
a convertible securest is most often a _______ that is convertible into _______
 
 
19.
convertible securities are desirable as financing vehicle because they can be ______ whereas the only way to induce the exercise of warrants is to have a ________ provision
 
 
20.
a convertible security is most often
 
 
21.
a derivative is a security whose price is ________ from an _________ security
 
 
22.
dividend policy of larger firms, with a broad base of stockholders, could be _________ by stockholders who are spoiled by past dividend payments
 
 
23.
dividends are relevant to investors because they resolve ______ in the minds of the investors
 
 
24.
employee stock options allow employees to _____ shares at a price that is _________ the market price if the options are in the money. As shareholder value is created, the options become ________ valuable
 
 
25.
employee stock options are used to
 
 
26.
firms with relatively easy access to financial markets with a record of good performance may sell new common stock to pay dividends now. management may justify this action in order to maintain
 
 
27.
a firm that maintains a relatively stable dividend payout hopes to
 
 
29.
how are preferred stock dividends and interest treated for taxation purposes
 
 
30.
how does the use of a transfer agent for a dividend reinvestment plan benefit the stockholder
 
 
31.
if a company has a cumulative preferred stocking its capital structure and it has not paid preferred and command dividends in 3 years, it must
 
 
32.
in a futures contract both the buyer and seller have the _______ to complete a transaction at a ________ date for a fixed price
 
 
33.
the issue of the relevance of dividend policy relates to
 
 
34.
it can be hypothesized that stockholders' might apply a _______ discount rate and assign a ________ valuation to retained earning as opposed to dividends
 
 
36.
management may desire to maintain control by not paying dividends for fear of _______ the cash position of the firm
 
 
 
 
 
 
 
 
 
 
 

37.
most rights offerings are successful because if the shareholders do not participate in the offering, the investment banker _______ the remaining rights and _______ the shares in the open market
 
 
38.
the opportunity costs of using stockholder funds is known as
 
 
39.
an option provides the holder the _____ but not the ______ to buy or sell a security at a ______ price over a period of time
 
 
40.
ordinary dividends
 
 
41.
a participation provision allows preferred stock holders to
 
 
44.
the primary argument for the relevance of the dividend policy is that stockholders' needs and preferences go beyond the ________ principle of retained earnings
 
 
45.
the primary purpose of a stock split is to
 
 
46.
a proxy provides management or some outside contesting group with the power to
 
 
47.
the purchaser of a call option has the right but not to obligation to _______ and the purchases of a put option has the right, but not the obligation to ________
 
 
48.
the purchaser of a convertible bond often receives an interest rate that is ________ market and must also pay a _______ above the conversion value meaning the investor would receive _______ shares in conversion than could be currently purchases in the open market
 
 
49.
a qualified dividend is a subset of an ________ dividend
 
 
50.
qualified dividends
 
 
51.
retained earnings fails to portray the ________ position of the firm
 
 
52.
a revenue stock split has the opposite effect of a
 
 
53.
the rights offering is priced at a ____________ meaning the new shares are priced ___________ the market price
 
 
54.
short term capital gains are taxed at
 
 
55.
a stockholder who owned 100 shares of a stock when a one for two reverse stock split took place would now own how many shares
 
 
56.
a stockholder wo owned 100 shares of stock when a one for two reverse stock split took place would see their earnings per share
 
 
57.
a stock repurchase theoretically (increases or decreases) the price of the stock
 
 
58.
a warrant is the option to
 
 
59.
a warrant is the ________ to ________ shares from a corporation at an ________ price over a specified period of time
 
 
60.
warrants are sometimes issued with _______ with the intentions of providing access to _______ markets that would otherwise be unavailable
 
 
61.
warrants that are in the money have an exercise price that is ______ the stock price and warrants that are out of the money have an exercise price that is _______ the stock price
 
 
 
 
 
 
 
 
 

62.
what are reasons for a company to issue a warrant?
 
 
63.
what committees can members of the board serve on?
 
 
64.
what type of dividend reinvestment plan benefits the company with increased cash flow because dividends paid are returned to the company
 
 
65.
what type of dividend reinvestment plan benefits the stockholder, but does not increase the cash flow of the company
 
 
67.
when calculating diluted earnings per share for a company with warrants outstanding, adjustments are made to the ________ of the earnings per share ratio but not the ________
 
 
69.
Who has voting rights on a consistent basis?
 
 
 

 

 
 
 
Which of the following have voting rights on a consistent basis?
 
 
 
common stockholders have a legal, enforceable claim to dividends
 
 
 
How are preferred stock dividends and interest treated for taxation purposes?
 
 
 
If a company has cumulative preferred stock in its capital structure and has not paid preferred and common stock dividends in 3 years, it must ______.
 
 
 
A participation provision allows preferred stockholders to _______.
 
 
 
The common stockholders' residual claim to the income can take the for of
 
 
 
A company initiates a rights offering to all common shareholders to purchase shares at a 40% discount. All current shareholders take part and purchase the shares at the discounted price. What effect does this transition have on the value of a shareholders portfolio?
 
 
 
Companies use preemptive rights as a way to raise equity capital from their current shareholders.
 
 
 
An ADR allows U.S. shareholders to purchase shares in foreign companies.
 
 
 
Preferred stock can have conversion features that allow either the investor or the issuer to convert preferred shares to common stock or debt.
 
 
 
 
 
 
 
 
 

 

1.
An ADR allows ____ shareholders to purchase shares in ______ companies
 
 
6.
A company has 60,000 shares outstanding and a board of 5 directors. a single investor must hold 10001 shares in order to elect a single director under cumulative voting
 
 
7.
A company initiates a rights offering to all common shareholders to purchase shares at a 40% discount. All current shareholders take part to purchase the shares at the discounted price. What effect does this transaction have on the value of a shareholder's total portfolio?
 
 
8.
A firm's earning before interest is $700,000, interest to creditors is $150,000, dividends to preferred stockholders is $100,000, and dividends to common stockholders is $200,000. The common stockholders' residual claim to the income is 450000
 
 
9.
A firm's earnings before interest is $500,000, interest to creditors is $100,000, and dividends to preferred stockholders is $50,000. The common stockholders' residual claim to the income is _____?
 
 
11.
The floating interest rate on auction-rate preferred stock is set by a(n) ______
 
 
13.
How are preferred stock dividends and interest treated for taxation purposes?
 
 
16.
The loss in equity value from the sale of equity at a below market price is called _____
 
 
18.
Most rights offering are successful because if shareholders do not participate in the offering, the investment banker _____ the rights remaining rights and _____ the shares in the open market.
 
 
19.
participation provision allows preferred stock holders to _____
 
 
24.
The primary purpose of a poison pill is to _____ another company from accumulating _____ than 50% of a company's stock
 
 
25.
The primary responsibility of the board of directors is for the ______ of the corporation
 
 
26.
A right offering conveys the right to purchase 2 share for every 17 share held at $20 per share. The stock is currently trading at $30 per share. The average price of the share is theoretically _____ and the value of the right is theoretically _____ (round to the nearest cent)
 
 
27.
The right offering is priced at a _____ meaning the new shares are priced _____ the market price.
 
 
29.
True or false: common stockholders have a legal, enforceable claim to dividends
 
 
30.
True or false: Companies use preemptive rights as a way to raise equity capital from their current shareholders
 
 
31.
Under majority voting, all of a company's directors are elected by any shareholder or group on shareholders voting ____ than 50% of the common stock
 
 
34.
While preferred stock is a long-term investment, auction-rate preferred stock is often used for _____ term investing
 
 
35.
Why would a company prefer to purchase preferred stock over bonds