MHA 706 MOD 5 - EQUITY FINANCING AND SECURITIES MARKET
EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS
GRADED A++
How is Equity supplied in a For-Profit Organization?
By Owners / Shareholders
How is Equity supplied in a not-for profit organization?
By the community
What are the rights and privileges of Stockholders?
- Claim on residual earnings (net income)
- Control of the firm
- Preemptive right
In for profit, what can net income of a business be used for?
- Paid out as dividends
- Stock repurchase
- Company reinvestment
What is Preemptive right?
Right for current stockholders to purchase new shares of the same company
Allows for current stockholders to protect their interest in an organization.
Is there a correlation between Per Share Earnings and Average Annual Stock
Price?
No - external factors can affect stock price independently of earnings
, Can dividends exceed earnings?
Yes - Cash flow is more important than earnings in setting dividend payments
What are methods used by corporations to sell ne shares of common stock?
- Rights offering
- Public offering
- Private placement
- Employee stock purchase plan
- Dividend reinvestment plan (DRIP)
- Direct purchase plan
What is Private placement in regards to corporations selling new stocks?
Stocks usually sold to a group of individuals or financial/investment institutions
What is purchase plan in regards to corporations selling new stocks?
Small capital individuals or corporations buying fractions of a stock.
Where could not-for-profits obtain start-up equity from?
- Religious organizations
- Governmental entities
- Contributions
Where could not-for-profits obtain ongoing equity from?
- Profits
- Contributions
- Grants
How are start-up business stock valued ?
Roughly though option pricing models
EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS
GRADED A++
How is Equity supplied in a For-Profit Organization?
By Owners / Shareholders
How is Equity supplied in a not-for profit organization?
By the community
What are the rights and privileges of Stockholders?
- Claim on residual earnings (net income)
- Control of the firm
- Preemptive right
In for profit, what can net income of a business be used for?
- Paid out as dividends
- Stock repurchase
- Company reinvestment
What is Preemptive right?
Right for current stockholders to purchase new shares of the same company
Allows for current stockholders to protect their interest in an organization.
Is there a correlation between Per Share Earnings and Average Annual Stock
Price?
No - external factors can affect stock price independently of earnings
, Can dividends exceed earnings?
Yes - Cash flow is more important than earnings in setting dividend payments
What are methods used by corporations to sell ne shares of common stock?
- Rights offering
- Public offering
- Private placement
- Employee stock purchase plan
- Dividend reinvestment plan (DRIP)
- Direct purchase plan
What is Private placement in regards to corporations selling new stocks?
Stocks usually sold to a group of individuals or financial/investment institutions
What is purchase plan in regards to corporations selling new stocks?
Small capital individuals or corporations buying fractions of a stock.
Where could not-for-profits obtain start-up equity from?
- Religious organizations
- Governmental entities
- Contributions
Where could not-for-profits obtain ongoing equity from?
- Profits
- Contributions
- Grants
How are start-up business stock valued ?
Roughly though option pricing models
