Question

QUESTION 1

1. The Global Financial Crisis (GFC) occurred during the years:

   		2007 - 2008.
   		1999 - 2000.
   		1792 - 1854.
   		1914 - 1916.

2. A dividend reinvestment scheme is:

   		the amount that must be paid per share to buy a new issue.
   		an offering of new issues of shares or bonds.
   		a scheme in which shareholders are allowed to reinvest dividends into shares.
   		the date on which a company ceases to effect transfers of its shares.

3. Venture capital is useful to entrepreneurs because:

   		New businesses can easily get funding from banks.
   		Venture capitalists are bored and have lots of money to play with.
   		Venture capitalists don't want shares in return for their investment.
   		New businesses have limited access to funding.

4. Which of the following statements is not correct? An ordinary shareholder in a troubled corporation:

   		receives the proceeds from the sale of the assets after the creditors and the preference shareholders are paid, if the company goes bankrupt.
   		records a decrease in the value of his/her assets.
   		may lose his/her house.
   		does not receive dividends.

5. Which of the following characteristics is not associated with ordinary shares?

   		cumulative dividends.
   		vote by proxy.
   		limited liability.
   		residual claim on income and assets.

6. Ordinary shares represent basic ownership in a company. Ordinary shareholders enjoy:

   		unlimited liability.
   		guaranteed annual dividends.
   		a place on the company's board of directors.
   		limited liability.

7. Mortgages are long-term loans secured by:

   		real estate.
   		your pet.
   		your car.
   		they are unsecured.

8. Venture capitalists are another name for shareholders.

   True

   False

9. As a shareholder of a company, I am guaranteed an annual dividend payment.

   True

   False

10. The Global Financial Crisis (GFC) is another name for the Great Depression.

    True

    False

Answer 1

Hello. As per our Honor Code, we will provide the answer to the first 4 parts of this question.

(a)The Global Financial Crisis occurred in the year 2007-2008 when the financial markets all over the world were facing huge stress and many banks across the globe faced losses. The catalyst was US housing market.

(b) A dividend reinvestment scheme is a scheme in which shareholders are allowed to reinvest dividends into shares. Under this scheme, the shareholders get an option that they can reinvest the declared dividend amount into additional shares of that company.

(c)Venture capital is useful to entrepreneurs because New businesses have limited access to funding. Usually when there is a start-up company or a new venture, the investors hesitate to invest in these firms because the performance of the firm cannot be judged. This is when Venture Capitalists become useful in providing the required funding.

(d) An ordinary shareholder in a troubled corporation :

Receives the proceeds from the sale of assets after the creditors and preference shareholders are paid, if the company goes bankrupt. This statement is correct.

The ordinary shareholders are the last in the line to receive from the proceeds. First, the secured creditors are paid, then the unsecured creditors, then preference shareholders and lastly the ordinary shareholders. Though, sometimes there is no amount left to be paid to the shareholders but yes they are entitled to receive at the last, if any.

Records a decrease in the value of his/her assets. This statement is correct.

When a corporation faces trouble, for example bankruptcy or insolvency, there is a fall in the value of shares. Since shares are the investment of shareholders, they record a decrease in the value of their assets side.

May lose his/her house. This statement is incorrect.

Shareholders are the owners of the company and are subject to voting rights but their liability is limited.

Does not receive dividends. This statement is Correct.

Usually during the times of financial trouble, A company remains in no position to generate profits. It rathers gerenates loses. Since the company has an obligation to pay interests to the creditors and dividends to preference shareholders. There is minimal or no amount left to be paid as common dividends and thus the company in usual cases suspends the dividends for that time.