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Which of the following is not a true statement?

(A) Common stockholders have a residual claim to income.

(B) Bondholders may force a corporation into bankruptcy for failure to
make interest payments.

(C) Common stockholders are legally entitled to some dividend.

(D) A minority interest can still elect members to the Board of Directors under cumulative voting even though someone else owns 51% of the stock.

Question 2

A company's value based on the assumption that its divisions being sold individually is called ________ value.

(A) book
(B) market
(C) break up
(D) real

Question 3
According to the "marginal principle of retained earnings," dividends are:

(A) the active variable.

(B) the passive variable.

(C) not usually paid.

(D)a certain fixed percentage of earnings.

Question 4

Publicly-traded companies generally have:

(A) more pressure for short-term performance.

(B) less pressure for short-term performance.

(C) very strong stock market performance.

(D) low distribution costs in selling securities.

Question 5

The greater use of debt by corporations since the late 1960s is best shown by the:

(A) declining interest coverage ratio.

(B) small amount of common stock sold.

(C) rising cost of interest.

(D) inability of earnings to keep up with the inflation.

Question 6

An increasing proportion of shares in the U.S. are owned by:

(A) individual investors.

(B) corporations (Treasury Stock).

(C) institutions.

(D) governments.

Question 7

The major, overall argument against the "marginal principle of retained earnings" is:

(A) the uncertainty surrounding capital investment projects.

(B) the lack of ability to adequately measure corporate investment returns.

(C) the diversity of stockholders and their potential investment returns.

(D) its failure to consider stockholder preferences.

Question 8

When comparing common stock of the same company it is fair to say that:

(A) all shares, no matter how many classes, are all created with the same equal rights.

(B) companies sometimes have two different classes of shares with unequal rights to dividends and votes.

(C) the Securities and Exchange Commission allows only one class of common stock.

(D) investors are indifferent between class A and class B shares.

Question 9

The risk function of investment banking is categorized mainly under_________ Function.

(A) Underwriting

(B) Market Maker

(C) Advisor

(D) Agent

Question 10

Corporate debt has:

(A) increased rapidly since World War II.

(B) increased slowly since World War II.

(C) held fairly steady over the last forty years.

(D) has resulted in great difficulties for corporations.

Solution Preview

1) (C) Common stockholders are legally entitled to some dividend.
2) (C) break up
3) (B) the passive variable.
4) (A) ...

Solution Summary

Solution explains the concepts of Financial Management by answering multiple choice questions