Equity Securities PREPARATION TEST 2026
QUESTIONS AND CORRECT ANSWERS
GRADED A+
● Management is more likely to focus on short-term results instead of
long-term earnings growth if a company raises equity through: Answer:
an IPO
● Common shares that are tradeable on different stock exchanges in
different currencies are best described as: Answer: global registered
shares
● The book value of a company's equity is: Answer: the difference
between its total assets and liabilities
● All else being equal, which of the following preference shares pays
the lowest dividend? Answer: Putable
● Which of the following is least likely to directly affect a company's
book value? Answer: investor estimates of the company's future cash
flows
● A company's ROE most likely decreases if shareholders' equity
increases at: Answer: a higher rate than net income
, ● Global depository receipts are most likely: Answer: issued outside the
US
● If investors believe a company has a large number of positive net
present value investment opportunities, the company's book value will
most likely be: Answer: less than the market value
● Investors' minimum required rate of return on a company's stock is
most directly measured by the: Answer: CAPM
● Which of the following methods of raising capital most likely
provides mezzanine financing to early-stage companies? Answer:
Venture capital
● Which of the following types of preference shares entitles
shareholders to receive an additional dividend if the company's profits
exceed a pre-specified level? Answer: Participating
● Management actions most directly affect a company's: Answer: book
value
● The discounted value of a company's future projected cash flows is
best described as its: Answer: intrinsic value
QUESTIONS AND CORRECT ANSWERS
GRADED A+
● Management is more likely to focus on short-term results instead of
long-term earnings growth if a company raises equity through: Answer:
an IPO
● Common shares that are tradeable on different stock exchanges in
different currencies are best described as: Answer: global registered
shares
● The book value of a company's equity is: Answer: the difference
between its total assets and liabilities
● All else being equal, which of the following preference shares pays
the lowest dividend? Answer: Putable
● Which of the following is least likely to directly affect a company's
book value? Answer: investor estimates of the company's future cash
flows
● A company's ROE most likely decreases if shareholders' equity
increases at: Answer: a higher rate than net income
, ● Global depository receipts are most likely: Answer: issued outside the
US
● If investors believe a company has a large number of positive net
present value investment opportunities, the company's book value will
most likely be: Answer: less than the market value
● Investors' minimum required rate of return on a company's stock is
most directly measured by the: Answer: CAPM
● Which of the following methods of raising capital most likely
provides mezzanine financing to early-stage companies? Answer:
Venture capital
● Which of the following types of preference shares entitles
shareholders to receive an additional dividend if the company's profits
exceed a pre-specified level? Answer: Participating
● Management actions most directly affect a company's: Answer: book
value
● The discounted value of a company's future projected cash flows is
best described as its: Answer: intrinsic value
