50. Help me selecting the right answer. Thank you Regarding the issuance of stock, which of the following statements is incorrect?Large corporations need huge quantities of money.The issue price is the amount the corporation receives from issuing its stock.A company can sell its stock directly to stockholders, or it can use the services of the Securities and Exchange Commission.Large corporations cannot finance all their operations through borrowing, so they raise capital by issuing stock.

Regarding the issuance of stocks, the following statements are an analysed: (1) Large corporations…

Answered: Regarding the issuance of stock, which…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 12QTD

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Similar questions

Companies, and governments can all borrow money using bonds. But only corporations have stockholders. Why is that?
One of the three sources of capitol a firm has is offering new equity (stock) to the public. Unlike debt, companies do not have to repay the money raise. So why would a company borrow money instead issuing new stock?
Which of the following is a disadvantage of a company going public? Going public mandates compliance with ongoing SEC disclosure requirements. The amount of equity capital that can be raised in the public equity markets is typically less than the amount that can be raised through private sources. A company can raise equity capital only once by going public. There are millions of investors in public stock markets, and it is not easier for firms to reach these investors through public markets.
1. What do you think the consequences might be in financial markets if individuals consumed more of their incomes and thereby reduced the supply of funds available to financial institutions? 2. Stem Corporation received confirmation that all its PSE listing requirements were in order, and that it may proceed to issue its stock. The company plans to raise P500 million on the stock issue. On what market do you expect this stock to be traded? Would this transaction take place on the money market or the capital market? 3. Over the past 100 years, the level of government regulation of financial institutions and markets has ebbed and flowed or, as some economists might argue, has ebbed and flooded. Although the laws and regulatory agencies created by the government have various defined and not-so-well defined goals, what might you argue is the single biggest benefit of government regulation?
Firms raise capital from investors by issuing shares in the primary markets. Does this imply that corporate financial managers can ignore trading of previously issued shares in the secondary market?
Why might a large corporation want to raise long-term capital through a borrowing money from financial institutions rather than a public offering?
when attempting to raise cash, a company may find it more advantageous to issue bonds rather than common stock shares because of tax advantage
Corporations have come to dominate the business world through their ability to raise large amounts of capital by sale of ownership shares to anonymous outside investors. Is this true or false?
The company cost of capital depends on current profits and cashflows, which measures what investors require from the company: A) True B) False Corporate debt can be dependable or risky, which depends on the value and the risk of the firm's assets. Bondholders can take steps to eliminate default risk: A) true B) False
Which of the following statements is true? a. High liquidity means a company is short on cash and may be unable to pay its debts.b. When a company decides to go public through an IPO, it is typically targeting to sell its shares to only a handful of shareholders. c. If the company has a higher than expected extremely high profit this year, equity holders will benefit more than debt holders as debtholders are the residual claimers for the cash flows of the company.d. In the extreme case, the debt holders take legal ownership of the firm's assets through a process called bankruptcy.e. Equity holders expect to receive dividends and the firm is always legally obligated to pay them.
Stocks are proof of ownership in the company. Imagine a warehouse of goods to be sold where different people own the "stock" or inventory of the company. When their portion of the inventory is sold, they get a profit on that portion. If the stock does not sell, is destroyed, or stolen, the stock loses value. This is the risk. Bonds are proof of debt a company must pay back. Imagine the same company, but instead the owner keeps the stock to himself but requires a loan to buy it all. This is debt, and that debt is sold as a bond where the owner promises to pay the investor back MORE than he borrowed. However, this has to be paid back regardless if the inventory (stock) is sold or loses value. You have $50,000 to invest. Which one do you buy? Why?
* Your answer is incorrect. A company may repurchase its own shares for all of the following reasons, except O to reduce the number of shares issued and thereby increase earnings per share and return on equity. to have additional shares available for use in the acquisition of other companies. O to attempt to influence the market price of the shares. O to reduce the number of shares issued in order to meet debt to equity bank covenant requirements.

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