Financial Management
261. In terms of decreasing return to the investor, the proper ranking would be:
- common stock, long-term government debt, preferred stock
- long-term government debt, common stock, preferred stock
- preferred stock, common stock, secured debt
- common stock, secured debt, treasury bills
Correct answer: (D)
common stock, secured debt, treasury bills
262. Most of the firm's shareholders will prefer:
- floating dividends that vary with the firm's performance
- stable dividends over time
- that funds be reinvested as retained earnings
- stock dividends
Correct answer: (B)
stable dividends over time
263. A corporation will typically pay moderate dividends in:
- Development-Stage I
- Growth-Stage II
- Expansion-Stage III
- Maturity-Stage IV
Correct answer: (C)
Expansion-Stage III
264. Dividends are quoted –––––––––, but paid ––––––––– :
- quarterly, annually
- annually, quarterly
- annually, semi-annually
- annually, monthly
Correct answer: (B)
annually, quarterly
265. The difference between futures and forwards is:
- that forwards are standardized and futures customized contracts
- that most forwards are exercised and most futures closed out before expiry
- that futures predetermine the price of an underlying commodity, but a forward price is flexible
- that forwards are on currencies, and futures on interest rates
Correct answer: (B)
that most forwards are exercised and most futures closed out before expiry
266. The conversion price is equal to:
- the conversion ratio/face value of the bond
- the conversion ratio times the face value of the bond
- the common share price/conversion ratio
- face value of the bond/conversion ratio
Correct answer: (C)
the common share price/conversion ratio
267. One of the main ways of forcing conversion is:
- calling the bond
- offering bonus shares of stock as an incentive
- decreasing the conversion price over time
- none of the above are correct
Correct answer: (A)
calling the bond
268. The takeover tender offer could have at least one of the following occur:
- Turn to a white knight
- Sell the crown jewels
- Adopt a shareholders rights plan
- All of the above
Correct answer: (D)
All of the above
269. In determining the price to be paid for an acquisition, management should consider:
- earnings
- dividends
- growth potential
- all of the above should be considered
Correct answer: (D)
all of the above should be considered
270. In a stock-for-stock exchange, shareholders of the acquired firm are most concerned with:
- earnings
- dividends
- book value exchanged
- market value exchanged
Correct answer: (D)
market value exchanged