Chapter 19 – Using Securities Markets for Financing and Investing Opportunities
220. Trading in newly issued securities takes place in the:
A. primary market.
B. secondary market.
C. initial offerings market.
D. corporate trading market.
221. The trading of previously issued securities from one investor to another takes place
in the:
A. primary market.
B. secondary market.
C. initial offerings market.
D. corporate trading market.
222. When retained earnings are not enough to meet their long-term funding needs,
businesses may be able to raise funds by:
A. selling common stock.
B. petitioning the government for a loan.
C. purchasing additional assets.
D. decreasing their accounts payable.
19–65
231. Molly Manufacturing plans to issue $75 million of common stock. The firm will
likely rely on the advice and assistance of a(n):
A. Federal Reserve bank.
B. commercial bank.
C. mutual fund.
D. investment banker.
Feedback: Investment bankers are specialists who assist in the issue and sale of new
securities.
232. Shareholder Jones sells 100 shares of Very Vegetarian Corporation stock to
Investor Smith. This transaction takes place in the:
A. primary market.
B. secondary market.
C. initial offerings market.
D. security resale market.
Feedback: The secondary market handles the trading of securities between investors.
233.
Chapter 19 – Using Securities Markets for Financing and Investing Opportunities
As the chief financial officer (CFO), you identify that your firm needs to raise
additional funds by selling new shares of stock. Which of the following refers to a
specialist that assists corporations in the issue and sale of new securities?
A. An investment banker
B. A commodities broker
C. An officer of the Securities and Exchanges Commission (SEC)
D. An institutional investor advisor
Feedback: Investment bankers provide assistance to firms issuing new securities.
234. As a new father, Dave plans to accumulate funds over the next eighteen years to
help pay for his son’s college education. Security markets provide Dave with:
A. financing opportunities.
B. investing opportunities.
C. opportunities to reduce his taxes.
D. borrowing opportunities.
Feedback: Investors benefit from the securities market by having a convenient place to
buy and sell stocks, bonds, mutual funds, and commodities.
19–70
239. Peak Performance Sporting Goods, Inc., needs a large amount of funds to expand
its operation and open new stores. Jackson is one of a team of finance professionals
that is working on Peak Performance’s initial public offering. Peak Performance
will partner with an investment banker to assist in pricing and selling several
million original issue shares of company stock. Jackson just received word that the
investment bank is willing to _____________ the issue. This means the investment
bank will purchase the entire issue at a discount, and sell it for full price to
interested investors.
A. capitalize
B. materialize
C. underwrite
D. revitalize
Feedback: Underwrite means the investment banking firm is willing to purchase the
entire issue (all shares) at a discounted price and place it in inventory. It will then sell
the shares to interested investors at a full market price.
240. Which of the following terms best describes the relationship between the New York
Stock Exchange and the NASDAQ?
A. Cooperative
B. Dependent
C. Competitive
D. Disastrous
241.
Chapter 19 – Using Securities Markets for Financing and Investing Opportunities
An organization whose members can buy and sell securities for companies and
investors is known as a:
A. public securities dealer.
B. securities facilitator.
C. transfer medium.
D. stock exchange.
242. A company’s stock does not have to be listed on one of the major stock exchanges
in order to trade. It can be traded on _____________.
A. Over-the-counter market
B. NYSE Euronext
C. NASDAQ
D. AMEX
243. If a publicly traded corporation fails to maintain specific minimum requirements,
the exchange can ________ the firm’s securities.
A. re-list
B. transfer ownership of
C. delist
D. provide preemptive rights to
19–78
259. A ________ certificate provides evidence of ownership in a specific corporation.
A. stock
B. bond
C. debt
D. capital
260. __________ represents the most basic form of company ownership and includes
voting rights and dividends, if and when the firm elects to pay dividends.
A. Capital stock
B. Common stock
C. Preferred stock
D. Carrier stock
261. ___________ are the firm’s after tax profits that are distributed to stockholders.
A. Equity capital
B. Interest payments
C. Dividends
D. Retained earnings
