1) Only a small amount of security issues are sold on a “best-efforts” basis.
2) A $125,000 credit sale could be a part of a firm’s cash flow from operations if paid
off within the firm’s fiscal year.
3) “Extended disbursement float” has to do with the length of time a corporation takes
to collect bills.
4) An increase in sales and/or profits means there is also an increase in cash on the
balance sheet.
5) An underwriting syndicate is a group of investment bankers who help to distribute a
new issue for a company.
6) Stock purchased through a rights offering may carry lower margin requirements.
7) Leveraged buy-outs usually entail the use of a large proportion of debt to take control
of the firm.
8) Larger firms tend to be net users of trade credit, rather than net providers.
9) Treasury bills are unique in that they trade on a premium basis.
10) As the dividend payout ratio declines, more external funds are required.
11) The out-of-pocket cost of common stock is a good approximation of the cost of
common stock equity.
12) Because socially desirable goals can impede profitability in many instances,
managers should not try to operate under the assumption of wealth maximization.
13) The existing management of a firm is almost always ready to accept an offer for the
purchase of the firm at a price above the market price.
14) Simulation models allow the analyst to test possible changes in the variables used in
the model.
15) Cash flow decisions that ignore the time value of money will probably not be as
accurate as those decisions that do rely on the time value of money.
16) Stockholders always have preemptive rights when new issues of stock are offered.
17) Participating preferred stock may receive an extra dividend in a particularly good
year when earnings are above a stated level.
18) The successful financial manager is very interested in the term structure of interest
rates but is not concerned with the relative volatility or historical level of interest rates.
19) The NASDAQ Market is composed of large nationwide companies that are traded
in the over-the-counter market.