Question

21.   Which of the following is false about equity (stock) financing?

1. The shares may trade on a public exchange if they meet government requirements
2. The company is not obligated to pay dividends
3. The shares are secured by the assets of the company thus reducing risk
4. The company has no obligation to repay the investors for their investments

22. We use the term IPO to mean:

1. International private offering
2. Institutional private offering
3. Initial private offering
4. Initial public offering

23. True or False? Warren Buffet, Chairman of the Federal Reserve in 2008, bailed out the banks during the financial collapse

1. True
2. False

24. Which of the following characteristics does a bond not have?

1. Voting rights
2. Coupons/Interest payment date
3. Maturity date
4. Principal amount

25. During the2008-2009 global financial crisis, the stock market lost approximately:

1. 10 percent of its value
2. 30 percent of its value
3. 50 percent of its value
4. 95 percent of its value

Answer 1

Q1) False statement about equity financing -

C. The shares are secured by the assets of the company thus reducing risk

Shares need not be secured by the assets of the firm. They are dependent on how the firm is performing financially. The more the gains, the higher the share value.

Q2) IPO refers to - Initial Public Offering

It is the process of offering shares of the private company to the public investors. It involves issuance of shares depending on the investment of the individual, share value and the number of shares.

Q3) Warren Buffet, Chairman of the Federal Reserve in 2008, bailed out the banks during the financial collapse

Answer is True

Q4) Answer is A. Voting rights

Equity shares do have voting rights but bonds don't. Voting rights provide the equity shareholder the right to vote on critical corporate actions.

Q5) During the2008-2009 global financial crisis, the stock market lost approximately -

C. 50 percent of its value