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All of the following are true of poison pills except for:
a.
Poison Pills are issued as a dividend to existing stockholders in the form of a warrant.
b.
Enable target shareholders to buy additional shares in the new company if an unwanted shareholder’s ownership exceeds a specific percentage of the target’s stock.
c.
Poison pill has gained popularity in the past 2 decades.
d.
Stock market sometimes responds positively to the removal of poison pills.
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- Which of the following statements is CORRECT? Select one: a. Stock splits create more administrative problems for investors than stock dividends, especially determining the tax basis of their shares when they decide to sell them, so today stock dividends are used far more often than stock splits. b. Back before the SEC was created in the 1930s, companies would declare reverse splits in order to boost their stock prices. However, this was determined to be a deceptive practice, and reverse splits are illegal today. c. When firms are deciding on the size of stock splits--say whether to declare a 2-for-1 split or a 3-for-1 split, it is best to declare the smaller one, in this case the 2-for-1 split, because then the after-split price will be higher than if the 3-for-1 split had been used. d. When a company declares a stock split, the price of the stock typically declines--for example, by about 50% after a 2-for-1 split--and this necessarily reduces the total market value of…1) "Information asymmetry lies at the heart of the ethical dilemma that managers, stockholders, and bondholders confront when companies initiate management buyouts or swap debt for equity." Comment on this statement. What steps might a board of directors take to ensure that the company's actions are ethical with regard to all parties? 2) Assume that you are the CFO of a company contemplating a stock repurchase next quarter. You know that there are several methods of reducing the current quarterly earnings, which may cause the stock price to fall prior to the announcement of the proposed stock repurchase. What course of action would you recommend to your CEO? If your CEO came to you first and recommended reducing the current quarter's earnings, what would be your response?A company might purchase treasury stock for all of the following reasons excepta. it wants to increase its net assets by buying its stock low and reselling it at a higher price.b. management wants to decrease the earnings per share of common stock.c. management wants to avoid a takeover by an outside party.d. the company needs the stock to distribute to employees as part of its employee stockpurchase plans.
- Dual class stock is generally designed to Provide bigger dividends to majority owners. Help minority owners obtain board representation. Protect the voting rights of managing owners. Improve marketability of the shares. A shareholder in a troubled corporation is not likely to lose his/her: Money invested in the stock. Personal assets. Dividends declared. Par value. 3. An order to the New York Stock Exchange to buy or sell at the best price available is called: - A limit order - A stop order - a market order - a GTC orderAn investment bank’s clients wanted to manipulate its stock price in order tofacilitate a better selling price in private placement deal with a pension fund.To assist the client, the investment bank solicits other advisory clients to buythe company stock; at the same time solicits other clients to sell the samecompany stock to effect a matched. These trades represent a large percentage of the company’s stock volume, which leads to a drastic increase in price. Comment the action of the investment bank.Stock repurchases occur when a company buys its outstanding stock which is often referred to as treasury stock and is reported as a negative value on the company’s balance sheet. In a share repurchase, firms use excess cash to buy shares back from investors. These shares are to be held in the corporate treasury and resold if the company needs money. There are several approaches to conducting share repurchases. Consider the following situation: The firm announces its intention to buy shares of its own stock, like an ordinary investor, and proceeds to do so. What method is described in the preceding situation? Auction Tender offer Open-market transaction Direct negotiation In a taxless world with no brokerage costs, repurchases and dividends have the same effect on shareholder wealth. In the real world, however, repurchases provide more preferable tax treatment than dividends to ordinary investors. Does this mean that firms should always use…
- Nizwa investment company is willing to buy the equity shares directly from various companies as they think that buying the shares at the first moment will always give benefits for long timeThe market from where this transaction will be carried out is termed as a.Primary Market b.Regular Market c.Secondary Market d.None of the options A financial statement which shows the status of the worth of a company on a certain date is known as a.Cash flow statement b.Balance Sheet c.All of the options12. Why might a company repurchase its own stock? A) It believes that the market undervalues its shares B) To offset dilutive effects of employee stock options granted C) To recognize an economic gain when the treasury shares are later sold for a profit D) To improve earnings per share by reducing the denominator E) All of the aboveA company would repurchase its own stock for all of the following reasons except:a. it wishes to prevent unwanted takeover attempts.b. it wishes to increase the earnings per share.c. it believes the stock is overvalued.d. it needs the stock for employee bonuses.
- Give typing answer with explanation and conclusion Which of the following represent undiversifiable risks? I. The Federal Reserve raises interest rates. II. A product is recalled because of safety problems. III. The economy slips into a recession. IV. The CEO 's divorce settlement forces him to sell off half of his stock holdings.Which of the following statements concerning common stock and the investment banking process is NOT CORRECT? a. The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue. b. 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. c. If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the primary market. d. 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. e. 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…Companies often are under pressure to meet or beat Wall Street earnings projections in order to increase stock prices and also to increase the value of stock options. Such pressure may cause some managers to alter their estimates for depreciation to artificially create desired results.Required: 1. Understand the reporting effect: Do estimates by management affect the amount of depreciation in its company’s financial statements? 2. Specify the options: To increase earnings in the initial years following the purchase of a depreciable asset, would management (a) choose straight-line or double-declining balance, (b) estimate a longer or shorter service life, and (c) estimate a higher or lower residual value? 3. Identify the impact: Are decisions of investors and creditors affected by accounting estimates? 4. Make a decision: Should a company alter depreciation estimates for the sole purpose of meeting expectations of Wall Street analysts?