Screen Shot 2024-02-08 at 11.18.41 PM

Financial institutions, even though they often own large proportions of a firm's securities, play no role in monitoring publicly traded firms.   Question 7 options:   True   False

Which of the following statements is CORRECT?     One of the ways in which firms can mitigate or reduce potential conflicts between bondholders and stockholders is by increasing the amount of debt in the capital structure.     The threat of takeover generally increases potential conflicts between stockholders and managers.     Managerial compensation plans cannot be used to reduce potential conflicts between stockholders and managers.     The threat of takeovers tends to reduce potential conflicts between stockholders and managers.     The creation of the Securities and Exchange Commission (SEC) eliminated conflicts between managers and stockholders.

1)How does a profitable capital market help reduce the prices of goods and services? 2) The SEC attempts to protect investors who purchase newly issued securities by requiring issuers to provide relevant financial information to potential investors. The SEC does not provide an opinion on the actual value of the securities.Therefore, a reckless investor could pay too much for some shares and consequently lose a lot. Do you think the SEC should, as part of every new offering of stocks or bonds, give investors an opinion on the appropriate value of the securities being offered? Explain.

Which of the following is most consistent with using debt to reduce agency costs or conflicts?   Question 11 options:   Increasing debt reduces a firm’s business risk   The interest paid on debt reduces taxable income and income taxes   The interest paid on debt reduces cash that management of a firm might otherwise waste or use poorly   The issuance of debt helps firms increase their credit rating

The market for corporate control refers to:   Question 26 options:   how much you have to pay to be appointed CEO.   the market price of all a company's outstanding bonds.   the market price of all a company's outstanding convertible bonds.   the market for blocks of stock large enough to affect or replace management, or to wholly acquire a company.

1- FinTech firms are facing increased regulatory oversight. A risk event at a FinTech firm can result in losses that are substantially more damaging than at traditional financial institutions.   True   False   2- Credit risk and interest rate risk cannot affect insolvency risk.   True   False

Why would management want to increase the riskiness of the firm?Why would this make bondholders unhappy?

Ch. 14. Which one of the following is NOT an implication of market efficiency for corporate finance? Group of answer choices Managers can reap many benefits by paying attention to market prices Firms cannot successfully time issues of debt and equity Managers cannot profitably speculate in foreign currencies and other instruments Firms can successfully time issues of debt and equity Managers cannot fool the market through creative accounting