1. Which of the following statements is TRUE?
a. Privately held corporations are prohibited from issuing stock.
b. In an IPO, early investors in the firm sell their shares of stock to the public.
c. In a best efforts deal, the underwriter buys the entire issue and then tries to sell it to their customers.
d. A group of investment banks that join together to buy all of the stock of a company and then sell it to investors is called a syndicate.
2. What type of firm invests in companies for non-financial reasons?
a. Angel Investors
b. Investment Banks
c. Private Equity
d. Venture Capitalists
3. The “red-herring prospectus” used to advertise an upcoming IPO to potential investors includes all of the following except __________.
a. The company’s financial statements
b. The issue price of the stock being issued
c. Officers and major owners (called blockholders) of the company
d. Company history and future plans
4. Which statement is TRUE?
a) IPOs generally perform poorly at first, but outperform the market as they grow
b) Privately-held firms have to submit their financial statements to the SEC
c) The Sarbanes-Oxley Act (SOX) of 2002 was passed in response to corporate fraud
d) The NYSE is a government organization that regulates the stock market
5. Which statement is TRUE?
a) If you buy stock through a market order, you will have to pay the highest Bid price
b) Limit orders allow an investor to automatically sell a stock if it falls to a specified price
c) The specialist has the responsibility to buy or sell stock from their own account in order to stabilize the market, even if doing so results in a loss to them
d) Small stocks are often said to sell in the “red-herring” market
6. Which statement is TRUE?
a. Capital Expenditures are part of Cash Flow from Operations
b. Cash flow from financing is the amount available for distribution to all investors after the company has made all investments in fixed assets and operating working capital.
c. Under GAAP, different firms must all follow the same rules in accounting for things like inventory and depreciation
d. Depreciation is considered a source of funds and is part of Cash Flow from Operations.