Question

QUESTION 1: True or False

A) Changes in the stock price and the number of shares available will evoke changes in the “market cap.”

True

False

B) After an IPO, the value of a company’s securities is set by the market through the laws of supply and demand

True

False

C) An example of direct financing is when a company raises funds from commercial banks, insurance companies, pension funds, and venture capital firms.

True

False

D) The concept of “currency for acquisition” refers the shares of a company being used to acquire other companies.

True

False

E) Remaining private can reduce the legal and regulatory requirements for a company.

True

False

Answer 1

Question 1 True

Market capitalizarion refers to the total value of the company, It is computed by (Multiplying outstanding share * Share price). So, Any change in Outstanding share or share price will bring the change in the market capitalization.

Qestion 2 True

When the company rings the intial price offer (IPO) the price is set by the company only for the first time at listing after that the price is set by the demand and supply. If the company has good valuation then the price may rise in the share due to the perception of the buyer and vice versa and there are many external factors that may affect the share price.

Question 3 True

direct financing refers to the financing where the borrower borrows money directly from the market like Banks, Insurance companies etc. Indirect financing refers to borrowing money from the third party which involves financial intermediaries.So, the statement is an example of direct financing.

Question 4 True

Currency of acquisition refers to the currency that is used in takeover of a company. For Example : The shares of the company that has to be takeover is an example of currency of acquisition.

Question 5 True

The private company has various advantage over public companies, public companies has to meet guidelines of the regulatory bodies and they have to disclose all the information to the public failing which leads to litigations, While for the private companies they don't have to furnish much information as compared to private oens.