1) When a company first goes public, a registration statement must be filed with the
New York Stock Exchange.
2) Selection of portfolio combinations from the efficient frontier will depend upon our
willingness to assume risk.
3) Bonds provide stable pricing because they offer a fixed coupon rate and maturity
date unlike stocks.
4) LIFO inventory valuation is responsible for much of the inventory profits caused by
inflation.
5) When selecting marketable securities, the company should always select securities
with longer maturities if they offer higher yields.
6) The desire to expand management and marketing capabilities is a direct financial
motive for an acquisition.
7) According to the expectations hypothesis, when long-term interest rates are higher
than short-term interest rates, long-term rates are expected to decline.
8) Heavy use of long-term financing generally leads to lower financing costs.
9) If a firm averages $2,000 in daily credit sales and offers 60-day terms, the average
accounts receivable balance will be $120,000.
10) The “two-step buyout” procedure allows the acquiring firm to pay a lower total
price than if a single offer is made.
11) In recent years, fully owned foreign subsidiaries are experiencing increased political
pressure from foreign governments.
12) By using cash instead of stock, a company may diminish the perceived dilutive
effects of a merger.
13) The face value of a convertible bond divided by the conversion price equals the
number of shares a bondholder will receive upon conversion.
14) The Glass-Steagall Act of the 1930s required U.S. banks to separate their
commercial banking operations and their investment banking operations into two
different entities.
15) Cash, accounts receivables, and inventory all move monthly in the same direction
under level production.
16) Capital rationing is generally a positive action for a firm because it prevents rapid
growth, which can drive up the cost of capital.
17) The term “underpricing” describes the process of setting the spread between the
participants of the investment banking syndicate.