Financial Management

261. In terms of decreasing return to the investor, the proper ranking would be:

  1. common stock, long-term government debt, preferred stock
  2. long-term government debt, common stock, preferred stock
  3. preferred stock, common stock, secured debt
  4. common stock, secured debt, treasury bills
Correct answer: (D)
common stock, secured debt, treasury bills

262. Most of the firm's shareholders will prefer:

  1. floating dividends that vary with the firm's performance
  2. stable dividends over time
  3. that funds be reinvested as retained earnings
  4. stock dividends
Correct answer: (B)
stable dividends over time

263. A corporation will typically pay moderate dividends in:

  1. Development-Stage I
  2. Growth-Stage II
  3. Expansion-Stage III
  4. Maturity-Stage IV
Correct answer: (C)
Expansion-Stage III

264. Dividends are quoted –––––––––, but paid ––––––––– :

  1. quarterly, annually
  2. annually, quarterly
  3. annually, semi-annually
  4. annually, monthly
Correct answer: (B)
annually, quarterly

265. The difference between futures and forwards is:

  1. that forwards are standardized and futures customized contracts
  2. that most forwards are exercised and most futures closed out before expiry
  3. that futures predetermine the price of an underlying commodity, but a forward price is flexible
  4. 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:

  1. the conversion ratio/face value of the bond
  2. the conversion ratio times the face value of the bond
  3. the common share price/conversion ratio
  4. 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:

  1. calling the bond
  2. offering bonus shares of stock as an incentive
  3. decreasing the conversion price over time
  4. 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:

  1. Turn to a white knight
  2. Sell the crown jewels
  3. Adopt a shareholders rights plan
  4. 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:

  1. earnings
  2. dividends
  3. growth potential
  4. 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:

  1. earnings
  2. dividends
  3. book value exchanged
  4. market value exchanged
Correct answer: (D)
market value exchanged
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