Chapter 15 - Raising Capital
Chapter 15
Raising Capital
Multiple Choice Questions
1. Jones & Co. is funded by a group of individual investors for the sole purpose of providing
funding for individuals who are trying to convert their new ideas into viable products. What is
this type of funding called?
A. green shoe funding
B. tombstone underwriting
C. venture capital
D. red herring funding
E. life cycle capital
2. What is the form called that is filed with the SEC and discloses the material information on
a securities issuer when that issuer offers new securities to the general public?
A. prospectus
B. red herring
C. indenture
D. public disclosure statement
E. registration statement
3. Miller & Chase is offering $4 million of new securities to the general public. Which SEC
regulation governs this offering?
A. Regulation A
B. Regulation C
C. Regulation G
D. Regulation Q
E. Regulation R
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,Chapter 15 - Raising Capital
4. What is a prospectus?
A. a letter issued by the SEC authorizing a new issue of securities
B. a report stating that the SEC recommends a new security to investors
C. a letter issued by the SEC that outlines the changes required for a registration statement to
be approved
D. a document that describes the details of a proposed security offering along with relevant
information about the issuer
E. an advertisement in a financial newspaper that describes a security offering
5. Which one of the following is a preliminary prospectus?
A. tombstone
B. green shoe
C. registration statement
D. rights offer
E. red herring
6. Advertisements in a financial newspaper announcing a public offering of securities, along
with a list of the investment banks handling the offering, are called:
A. red herrings.
B. tombstones.
C. Green Shoes.
D. registration statements.
E. cash offers.
7. What is an issue of securities that is offered for sale to the general public on a direct cash
basis called?
A. best efforts underwriting
B. firm commitment underwriting
C. general cash offer
D. rights offer
E. herring offer
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,Chapter 15 - Raising Capital
8. Tony currently owns 12,000 shares of GL Tools. He has just been notified that the firm is
issuing additional shares of stock and that he is being given a chance to purchase some of
these shares prior to the shares being offered to the general public. What is this type of an
offer called?
A. best efforts offer
B. firm commitment offer
C. general cash offer
D. rights offer
E. priority offer
9. Soup Galore is a partnership that was formed three years ago for the purpose of creating,
producing, and distributing healthy soups in a dried form. The firm has been extremely
successful thus far and has decided to incorporate and offer shares of stock to the general
public. What is this type of an equity offering called?
A. venture capital offering
B. shelf offering
C. private placement
D. seasoned equity offering
E. initial public offering
10. What is a seasoned equity offering?
A. an offering of shares by shareholders for repurchase by the issuer
B. shares of stock that have been recommended for purchase by the SEC
C. equity securities held by a firm's founder that are being offered for sale to the general
public
D. sale of newly issued equity shares by a firm that is currently publicly owned
E. a set number of equity shares that are issued and offered to the public annually
11. Executive Tours has decided to take its firm public and has hired an investment firm to
handle this offering. The investment firm is serving as a(n):
A. aftermarket specialist.
B. venture capitalist.
C. underwriter.
D. seasoned writer.
E. primary investor.
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, Chapter 15 - Raising Capital
12. What is the definition of a syndicate?
A. a venture capitalist
B. a group of attorneys providing services for an IPO
C. block of investors who control a firm
D. a bank that loans funds to finance the start-up of a new firm
E. a group of underwriters sharing the risk of selling a new issue of securities
13. The difference between the underwriters' cost of buying shares in a firm commitment and
the offering price of those securities to the public is called the:
A. gross spread.
B. under price amount
C. filing fee.
D. new issue premium.
E. offer price.
14. D.L. Jones & Co. recently went public. The firm received $20.80 a share on the entire
offer of 25,000 shares. Keeser & Co. served as the underwriter and sold 23,700 shares to the
public at an offer price of $22 a share. What type of underwriting was this?
A. best efforts
B. shelf
C. over subscribed
D. private placement
E. firm commitment
15. Blue Stone Builders recently offered to sell 45,000 newly issued shares of stock to the
public. The underwriters charged a fee of 8 percent and paid Blue Stone Builders $16.40 a
share on 40,000 shares. Which one of the following terms best describes this underwriting?
A. best efforts
B. shelf
C. direct rights
D. private placement
E. firm commitment
15-4
Chapter 15
Raising Capital
Multiple Choice Questions
1. Jones & Co. is funded by a group of individual investors for the sole purpose of providing
funding for individuals who are trying to convert their new ideas into viable products. What is
this type of funding called?
A. green shoe funding
B. tombstone underwriting
C. venture capital
D. red herring funding
E. life cycle capital
2. What is the form called that is filed with the SEC and discloses the material information on
a securities issuer when that issuer offers new securities to the general public?
A. prospectus
B. red herring
C. indenture
D. public disclosure statement
E. registration statement
3. Miller & Chase is offering $4 million of new securities to the general public. Which SEC
regulation governs this offering?
A. Regulation A
B. Regulation C
C. Regulation G
D. Regulation Q
E. Regulation R
15-1
,Chapter 15 - Raising Capital
4. What is a prospectus?
A. a letter issued by the SEC authorizing a new issue of securities
B. a report stating that the SEC recommends a new security to investors
C. a letter issued by the SEC that outlines the changes required for a registration statement to
be approved
D. a document that describes the details of a proposed security offering along with relevant
information about the issuer
E. an advertisement in a financial newspaper that describes a security offering
5. Which one of the following is a preliminary prospectus?
A. tombstone
B. green shoe
C. registration statement
D. rights offer
E. red herring
6. Advertisements in a financial newspaper announcing a public offering of securities, along
with a list of the investment banks handling the offering, are called:
A. red herrings.
B. tombstones.
C. Green Shoes.
D. registration statements.
E. cash offers.
7. What is an issue of securities that is offered for sale to the general public on a direct cash
basis called?
A. best efforts underwriting
B. firm commitment underwriting
C. general cash offer
D. rights offer
E. herring offer
15-2
,Chapter 15 - Raising Capital
8. Tony currently owns 12,000 shares of GL Tools. He has just been notified that the firm is
issuing additional shares of stock and that he is being given a chance to purchase some of
these shares prior to the shares being offered to the general public. What is this type of an
offer called?
A. best efforts offer
B. firm commitment offer
C. general cash offer
D. rights offer
E. priority offer
9. Soup Galore is a partnership that was formed three years ago for the purpose of creating,
producing, and distributing healthy soups in a dried form. The firm has been extremely
successful thus far and has decided to incorporate and offer shares of stock to the general
public. What is this type of an equity offering called?
A. venture capital offering
B. shelf offering
C. private placement
D. seasoned equity offering
E. initial public offering
10. What is a seasoned equity offering?
A. an offering of shares by shareholders for repurchase by the issuer
B. shares of stock that have been recommended for purchase by the SEC
C. equity securities held by a firm's founder that are being offered for sale to the general
public
D. sale of newly issued equity shares by a firm that is currently publicly owned
E. a set number of equity shares that are issued and offered to the public annually
11. Executive Tours has decided to take its firm public and has hired an investment firm to
handle this offering. The investment firm is serving as a(n):
A. aftermarket specialist.
B. venture capitalist.
C. underwriter.
D. seasoned writer.
E. primary investor.
15-3
, Chapter 15 - Raising Capital
12. What is the definition of a syndicate?
A. a venture capitalist
B. a group of attorneys providing services for an IPO
C. block of investors who control a firm
D. a bank that loans funds to finance the start-up of a new firm
E. a group of underwriters sharing the risk of selling a new issue of securities
13. The difference between the underwriters' cost of buying shares in a firm commitment and
the offering price of those securities to the public is called the:
A. gross spread.
B. under price amount
C. filing fee.
D. new issue premium.
E. offer price.
14. D.L. Jones & Co. recently went public. The firm received $20.80 a share on the entire
offer of 25,000 shares. Keeser & Co. served as the underwriter and sold 23,700 shares to the
public at an offer price of $22 a share. What type of underwriting was this?
A. best efforts
B. shelf
C. over subscribed
D. private placement
E. firm commitment
15. Blue Stone Builders recently offered to sell 45,000 newly issued shares of stock to the
public. The underwriters charged a fee of 8 percent and paid Blue Stone Builders $16.40 a
share on 40,000 shares. Which one of the following terms best describes this underwriting?
A. best efforts
B. shelf
C. direct rights
D. private placement
E. firm commitment
15-4
