PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 14, Problem 2PS
Summary Introduction
To discuss: Whether the give statement is true or false.
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Which of the following statements correctly describes the nature of direct financing as discussed in lectures?
Group of answer choices
A. More than one of the other answers is correct
B. It is the source of financing whenever an investor purchases shares that are listed on the Australian Securities Exchange.
C. None of the other answers is correct
D. May involve an individual investor buying shares in a company when a company goes public via an initial public offering.
E. It relies upon an intermediary to facilitate the flow of funds from surplus to deficit units, unlike indirect financing
I answered D, is it correct?
Which of the following statements correctly describes the nature of indirect financing as discussed in lectures?
Group of answer choices
A) It is the source of financing whenever an investor purchases shares that are listed on the Australian Securities Exchange.
B) May involve an individual investor buying shares in a company when a company goes public via an initial public offering.
C) More than one of the other answers is correct
D) None of the other answers is correct
E) It relies upon an intermediary to facilitate the flow of funds from surplus to deficit units, unlike direct financing
Chapter 14 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 14 - Terminology Fill in the blanks, using the...Ch. 14 - Prob. 2PSCh. 14 - Sources of funds True or false? a. Net stock...Ch. 14 - Prob. 4PSCh. 14 - Company ownership What do we mean when we say that...Ch. 14 - Prob. 6PSCh. 14 - Prob. 7PSCh. 14 - Prob. 8PSCh. 14 - Corporate debt Which of the following features...Ch. 14 - Financial markets and intermediaries. True or...
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- Which of the following statements is false? A. Mutual funds are pool investor funds to purchase financial instruments and thus reduce risks through diversification. B. Initial public offering (IPO) occurs when firm issues stock in the public market for the first time. C. The difference between current assets and non-current assets equals to working capital. D. Owner’s equity is the residual interest in assets that remains after subtracting an entity’s liabilities.arrow_forwardThe financial institution that assists in the initial sale of securities in the primary is the. select one: a . stock exchange b . None of these c. Commercial Bank e. Investment Bankarrow_forwardHow is an investment banker compensated for promoting and facilitating the sale of a company’s shares to the public?arrow_forward
- Finance A corporation can raise money by selling stocks and/or bonds. From an investor's perspective, what is the difference between a bond and stock? O 1. If an investor owns a corporate bond, the investor owns a part of the company. O 2. A corporation guarantees interest payments to a bond investor but does not guarantee dividend payments to stock investor. O 3. A corporation guarantees dividend payments to a stock investor but does not guarantee interest payments to bond investor. O4. Stocks can appreciate in value, bonds do not change value.arrow_forwardA corporation can raise money by selling stocks and/or bonds. From an investor's perspective, what is the difference between a bond and stock? O 1. If an investor owns a corporate bond, the investor owns a part of the company. O 2. A corporation guarantees interest payments to a bond investor but does not guarantee dividend payments to stock investor. O 3. A corporation guarantees dividend payments to a stock investor but does not guarantee interest payments to bond investor. O4. Stocks can appreciate in value, bonds do not change value.arrow_forwardThe secondary market is the market in which: Select one: a. The sale proceeds of a trade flow to the issuer of the security. b. Publicly held firms issue new shares of stock. O c. One shareholder sells securi ties to another shareholder. d. Only bonds or other debt securities are sold.arrow_forward
- Which of the following statements is most correct? Group of answer choices Money market transactions include common stock transactions. Preferred stockholders are paid before bondholders but after common stockholders. One of the problems in corporations is that managers often put their own interests ahead of those of the stockholders. U.S. T-bills are considered risky securities. None of the above statements is correct.arrow_forwardWhich is false about long-term sources of a firm’s capital? a. Preferred shares are securities whose intrinsic value is based on prospective earnings b. Some types of bank loans may require collateral from potential debtors c. Retained earnings are internal sources of funding that can be utilized for expansion d. All types of corporations may issue equity securities to the publicarrow_forward1 Which of the following is least likely to be a financial intermediary? A. Finance companies 8, Mutual funds C. Pension funds D. Investment banks E. Savings banks 2 Which of the following do not have corporate stock ownership? A. Commercial banks B. Savings and loan associations C. Savings banks D. Credit uniong O All of the above 3. A financial institution that raises funds by issuing shares to the public and invests the proceeds in a diversified portfolo for a management fee is: A. Banks B. Pension FundyC)Mutual Funds D. Financn companies E. None of the above - 4. One of the following types of financial instruments derive their value from other instruments (underlying assets) A. Cash instruments B. Equity instruments O Derivative instruments D. Debt instrumentsarrow_forward
- Which of the following characteristics are not an advantage of being a publicly traded company? Group of answer choices A. Allows the firm to play the merger game, using marketable securities for the purchase of other firms. B. Prestige is helpful in bank negotiations, executive recruitment and the marketing of products. C. Tapping into the security markets for a greater amount of funds. D. Compliance costs because of various public disclosure requirements.arrow_forwardWhich of the following can be described as involving direct finance? O A. People buy shares in a mutual fund. B. People buy shares of common stock in the primary markets. OC. A corporation buys a short-term corporate security in a secondary market. O D. A corporation takes out loans from a bank.arrow_forwardTrue or False 1. Only the sole proprietorship and partnership forms of business organization can resort to borrowing as their source of funds. 2. Only a corporation can issue shares of stock to the public as a source of its capital. 3. Corporation has more options on the manner it raises its capitalization, as compared to other forms of business organization. 4. A bond certificate is a contract of debt. 5. Stockholders are investees in a corporation.arrow_forward
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