Question 1

What is capital budgeting and explain its importance for a company.

Accepted Answer

Capital budgeting is the process of eval...

Question 2

Some of the main principles that form the basis of a stock exchange's listing rules are:

Accepted Answer

A)   sufficient investor interest must be shown to warrant an entity's participation in the markets.
B)   information must be produced according to the highest standards.
C)   minimum standards of quality size, operations and disclosure must be satisfied.
D)   security holders must be consulted on matters of significance except for agreements between the entity and related parties. D

Question 3

Which of the following requirements does NOT apply to a company seeking a public listing on the ASX?

Accepted Answer

A)   The entity must satisfy either the profit test or the net tangible assets test.
B)   The company must have at least 500 holders of a parcel of main class securities valued at least $2000.
C)   The company must lodge a prospectus with the ASX on an annual basis.
D)   The company must have a structure and operation appropriate for a listed entity.

Question 4

Potential investors learn of the information concerning the company and its new issue by being sent a _____ by the broker.

Accepted Answer

A)   registration statement
B)   prospectus
C)   letter of commitment
D)   memorandum offering

Question 5

Discuss the attractions of a private placement for a company.

Accepted Answer

There are a number of advantages-a place...

Question 6

Compared with raising debt through a bank,the raising of equity through an IPO is generally:

Accepted Answer

A)   cheaper.
B)   dearer.
C)   roughly the same.
D)   much cheaper.

Question 7

A right that can only be exercised by the shareholder and not sold is called a:

Accepted Answer

A)   non-saleable right.
B)   renounceable right.
C)   non-renounceable right.
D)   pro-rata right. C

Question 8

If a company raises equity funds by issuing shares to a selected number of institutional investors,this is known as:

Accepted Answer

A)   a share appointment.
B)   a placement.
C)   a share rights issue.
D)   share transfer.

Question 9

A company may seek to raise further funds by issuing additional ordinary shares.The terms and conditions of the new share issue are determined by the board of directors in consultation with its financial advisers and others,and having regard to the preferences of existing shareholders and the needs of the company.Which of the following is LEAST likely to be a determinant of the price that is eventually struck?

Accepted Answer

A)   The discount to current market price that can be offered to shareholders.
B)   The company's cash requirements.
C)   The projected earnings flow from the new investments.
D)   The cost of alternative funding sources.

Question 10

Ordinary shares in limited liability companies are the major source of external equity funding for Australian companies.Which of the following statements regarding the issuance of ordinary shares by a newly listed limited liability company is incorrect?

Accepted Answer

A)   Shares may be issued on a fully paid or partly paid basis.
B)   A holder of instalment receipts only has to pay the remaining amount when due or called.
C)   Share price is determined with reference to a range of variable factors.
D)   No liability company can issue shares only on a fully paid basis because of the risk. D

Question 11

Which of the following is NOT a role of an underwriter in a public offering of shares?

Accepted Answer

A)   To provide pricing of the issue
B)   To provide advice on the structure of the issue
C)   To invest the funds raised in the offering
D)   To provide guidance on the timing of the issue

Question 12

Which of the following requirements does NOT apply to a company seeking a public listing on the Australian Securities Exchange (ASX) ?

Accepted Answer

A)   The entity must adhere to minimum standards of quality.
B)   The entity must adhere to minimum standards of disclosure.
C)   The company must issue a prospectus that is to be lodged with the ASX.
D)   The company must have a structure and operation appropriate for a listed entity.

Question 13

Which of the following is NOT a feature of preference shares?

Accepted Answer

A)   Convertible
B)   Redeemable
C)   Cumulative
D)   An important source of company funding

Question 14

Dividend reinvestment schemes are a significant source of equity for many Australian companies.Which of the following advantages of dividend reinvestment schemes may,at times,also be regarded as a disadvantage?

Accepted Answer

A)   The shareholder avoids transaction costs on the share issue.
B)   The share issue price is usually at a discount to the average market price.
C)   Such schemes allow dividends to be paid while retaining cash for future growth.
D)   The company is able to pass on franking credit to its shareholders.

Question 15

Financial risk refers to the:

Accepted Answer

A)   risk of owning financial assets.
B)   overall risk of a financial services firm.
C)   risk faced by the shareholders when debt is used.
D)   risk of not finding finance for a firm's investment.

Question 16

Generally,an initial public offering is:

Accepted Answer

A)   an offer to potential investors of ordinary shares to newly list a company on a stock exchange.
B)   an offer to potential investors of preference shares to newly list a company on a stock exchange.
C)   an offer to potential investors of company debentures to newly list a company on a stock exchange.
D)   an offer to potential investors of unsecured notes to newly list a company on a stock exchange.

Question 17

Increasing the financial leverage of a company will _______ shareholders' expected returns and ______ their risk.

Accepted Answer

A)   increase; not affect
B)   increase; decrease
C)   increase; increase
D)   decrease; increase

Question 18

Compared with a pro-rata issue of shares,placements usually:

Accepted Answer

A)   take a longer time to organise.
B)   can be carried out much more quickly.
C)   involve a far greater discount to the current market price.
D)   involve no more than 50 participants.

Question 19

The subscription price in a rights offering is generally:

Accepted Answer

A)   below the current share price.
B)   equal to the current share price.
C)   above the current share price.
D)   not related to the share price.

Question 20

A financial institution involved in underwriting the sale of new securities by buying them from the issuing firms and then reselling them to the public in the primary capital market is an:

Accepted Answer

A)   investment agent.
B)   investment broker.
C)   investment dealer.
D)   investment banker.

Exam 5: Corporations Issuing Equity in the Share Market

What is capital budgeting and explain its importance for a company.

Correct Answer
verified
Capital budgeting is the process of eval...
View Answer

Some of the main principles that form the basis of a stock exchange's listing rules are:

Correct Answer
verified
D

Which of the following requirements does NOT apply to a company seeking a public listing on the ASX?

Correct Answer
verified

Potential investors learn of the information concerning the company and its new issue by being sent a _____ by the broker.

Correct Answer
verified

Discuss the attractions of a private placement for a company.

Correct Answer
verified
There are a number of advantages-a place...
View Answer

Compared with raising debt through a bank,the raising of equity through an IPO is generally:

Correct Answer
verified

A right that can only be exercised by the shareholder and not sold is called a:

Correct Answer
verified
C

If a company raises equity funds by issuing shares to a selected number of institutional investors,this is known as:

Correct Answer
verified

Correct Answer
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Ordinary shares in limited liability companies are the major source of external equity funding for Australian companies.Which of the following statements regarding the issuance of ordinary shares by a newly listed limited liability company is incorrect?

Correct Answer
verified
D

Which of the following is NOT a role of an underwriter in a public offering of shares?

Correct Answer
verified

Which of the following requirements does NOT apply to a company seeking a public listing on the Australian Securities Exchange (ASX) ?

Correct Answer
verified

Which of the following is NOT a feature of preference shares?

Correct Answer
verified

Dividend reinvestment schemes are a significant source of equity for many Australian companies.Which of the following advantages of dividend reinvestment schemes may,at times,also be regarded as a disadvantage?

Correct Answer
verified

Financial risk refers to the:

Correct Answer
verified

Generally,an initial public offering is:

Correct Answer
verified

Increasing the financial leverage of a company will _ shareholders' expected returns and their risk.

Correct Answer
verified

Compared with a pro-rata issue of shares,placements usually:

Correct Answer
verified

The subscription price in a rights offering is generally:

Correct Answer
verified

A financial institution involved in underwriting the sale of new securities by buying them from the issuing firms and then reselling them to the public in the primary capital market is an:

Correct Answer
verified

Exam 5: Corporations Issuing Equity in the Share Market

What is capital budgeting and explain its importance for a company.

Correct AnswerverifiedCapital budgeting is the process of eval...View AnswerShow Answer

Some of the main principles that form the basis of a stock exchange's listing rules are:

Correct AnswerverifiedD

Which of the following requirements does NOT apply to a company seeking a public listing on the ASX?

Correct AnswerverifiedShow Answer

Potential investors learn of the information concerning the company and its new issue by being sent a _____ by the broker.

Correct AnswerverifiedShow Answer

Discuss the attractions of a private placement for a company.

Correct AnswerverifiedThere are a number of advantages-a place...View AnswerShow Answer

Compared with raising debt through a bank,the raising of equity through an IPO is generally:

Correct AnswerverifiedShow Answer

A right that can only be exercised by the shareholder and not sold is called a:

Correct AnswerverifiedC

If a company raises equity funds by issuing shares to a selected number of institutional investors,this is known as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Ordinary shares in limited liability companies are the major source of external equity funding for Australian companies.Which of the following statements regarding the issuance of ordinary shares by a newly listed limited liability company is incorrect?

Correct AnswerverifiedD

Which of the following is NOT a role of an underwriter in a public offering of shares?

Correct AnswerverifiedShow Answer

Which of the following requirements does NOT apply to a company seeking a public listing on the Australian Securities Exchange (ASX) ?

Correct AnswerverifiedShow Answer

Which of the following is NOT a feature of preference shares?

Correct AnswerverifiedShow Answer

Dividend reinvestment schemes are a significant source of equity for many Australian companies.Which of the following advantages of dividend reinvestment schemes may,at times,also be regarded as a disadvantage?

Correct AnswerverifiedShow Answer

Financial risk refers to the:

Correct AnswerverifiedShow Answer

Generally,an initial public offering is:

Correct AnswerverifiedShow Answer

Increasing the financial leverage of a company will _______ shareholders' expected returns and ______ their risk.

Correct AnswerverifiedShow Answer

Compared with a pro-rata issue of shares,placements usually:

Correct AnswerverifiedShow Answer

The subscription price in a rights offering is generally:

Correct AnswerverifiedShow Answer

A financial institution involved in underwriting the sale of new securities by buying them from the issuing firms and then reselling them to the public in the primary capital market is an:

Correct AnswerverifiedShow Answer

Correct Answer
verified
Capital budgeting is the process of eval...
View Answer

Correct Answer
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D

Correct Answer
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Correct Answer
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Correct Answer
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There are a number of advantages-a place...
View Answer

Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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D

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Increasing the financial leverage of a company will _ shareholders' expected returns and their risk.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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