Question

Which of the following statements concerning common stock and the investment banking process is NOT CORRECT?

a.

If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the primary market.

b.

Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm.

c.

Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with management's performance, an outside group may ask the stockholders to vote for it in an effort to take control of the business. This action is called a tender offer.

d.

The announcement of a large issue of new stock could cause the stock price to fall. This loss is called "market pressure," and it is treated as a flotation cost because it is a cost to stockholders that is associated with the new issue.

e.

The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue.

Which of the following statements about listing on a stock exchange is most CORRECT?

a.

Any firm can be listed on the NYSE as long as it pays the listing fee.

b.

Listing provides a company with some "free" advertising, and it may enhance the firm's prestige and help it do more business.

c.

Listing reduces the reporting requirements for firms, because listed firms file reports with the exchange rather than with the SEC.

d.

The OTC is the second largest market for listed stock, and it is exceeded only by the NYSE.

e.

Listing is a decision of more significance to a firm than going public.

According to Michael Porter, there is a tremendous allure to _________. It is the big play, the dramatic gesture. With one stroke of the pen you can add billions to size, get a front-page story, and create excitement in markets.

A.	strategic alliances and joint ventures

B.	internal development

C.	mergers and acquisitions

D.	differentiation strategies

Answer 1

1.
Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with management's performance, an outside group may ask the stockholders to vote for it in an effort to take control of the business. This action is called a tender offer.

2.
Listing provides a company with some "free" advertising, and it may enhance the firm's prestige and help it do more business.

3.
mergers and acquisitions