Strayer FIN540 Week 5 Midterm Exam (already graded

Strayer FIN540 Week 5 Midterm Exam




TRUE/FALSE

1. If its managers make a tender offer and buy all shares that were not held by the management

team, this is called a private placement.

a. True

b. False

2. Going public establishes a market value for the firm's stock, and it also ensures that a liquid

market will continue to exist for the firm's shares. This is especially true for small firms that are

not widely followed by security analysts.

a. True

b. False

3. The cost of meeting SEC and possibly additional state reporting requirements regarding

disclosure of financial information, the danger of losing control, and the possibility of an inactive

market and an attendant low stock price are potential disadvantages of going public.

a. True

b. False

4. The term "leaving money on the table" refers to the situation where an investment banking

house makes a very low bid for the right to underwrite a firm's new stock offering. The banker is,

in effect, "buying the job" with the low bid and thus not getting all the money his firm would

normally earn on the job.

a. True