Intermediate Financial Management 12th Edition by Eugene F. Brigham – Test Bank

Intermediate Financial Management 12th Edition by Eugene F. Brigham – Exam Database

ISBN-13: 978-1305718258, ISBN-10: 1305718259

1. A substitute is a document granting one party the authorization to act on behalf of another party, including the power to vote shares of common stock. Substitutes can be crucial instruments concerning the governance of corporations.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Challenge: Simple
LEARNING OBJECTIVES: INTE.GENE.16.53 – LO: 8-1
NATIONAL STANDARDS: United States – BUSPROG: Reflective Thinking
STATE STANDARDS: United States – AK – DISC: Stocks and Bonds
LOCAL STANDARDS: United States – OH – Default City – TBA
TOPICS: Substitutes
KEYWORDS: Bloom’s: Knowledge

2. The preemptive privilege provides existing stockholders the entitlement to purchase, on a pro rata basis, any new shares issued by the corporation. This entitlement helps safeguard existing stockholders against both dilution of control and dilution of value.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Challenge: Simple
LEARNING OBJECTIVES: INTE.GENE.16.53 – LO: 8-1
NATIONAL STANDARDS: United States – BUSPROG: Reflective Thinking
STATE STANDARDS: United States – AK – DISC: Stocks and Bonds
LOCAL STANDARDS: United States – OH – Default City – TBA
TOPICS: Preemptive privilege
KEYWORDS: Bloom’s: Knowledge

3. When a corporation’s stockholders are granted the preemptive privilege, this means stockholders have the option to demand a meeting to vote for a change in management. Without the preemptive privilege, dissenting stockholders must pursue a change in management through a proxy battle.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Challenge: Simple
LEARNING OBJECTIVES: INTE.GENE.16.53 – LO: 8-1
NATIONAL STANDARDS: United States – BUSPROG: Reflective Thinking
STATE STANDARDS: United States – AK – DISC: Stocks and Bonds
LOCAL STANDARDS: United States – OH – Default City – TBA
TOPICS: Preemptive privilege
KEYWORDS: Bloom’s: Knowledge

4. Classified stock distinguishes various categories of common stock, and its use is a strategy companies can employ to fulfill specific requirements such as when owners of a startup firm require additional equity capital but are hesitant to surrender voting control.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Challenge: Simple
LEARNING OBJECTIVES: INTE.GENE.16.54 – LO: 8-2
NATIONAL STANDARDS: United States – BUSPROG: Reflective Thinking
STATE STANDARDS: United States – AK – DISC: Stocks and Bonds
LOCAL STANDARDS: United States – OH – Default City – TBA
TOPICS: Classified stock
KEYWORDS: Bloom’s: Knowledge

5. Founders’ shares represent a form of classified stock where the shares are possessed by the company’s founders, typically carrying more votes per share compared to other classes of common stock.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Challenge: Simple
LEARNING OBJECTIVES: INTE.GENE.16.54 – LO: 8-2
NATIONAL STANDARDS: United States – BUSPROG: Reflective Thinking
STATE STANDARDS: United States – AK – DISC: Stocks and Bonds
LOCAL STANDARDS: United States – OH – Default City – TBA
TOPICS: Founders’ shares
KEYWORDS: Bloom’s: Knowledge

6. The anticipated total return on a stock denotes the dividend yield minus any commissions paid when the stock is bought and sold.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Challenge: Simple
LEARNING OBJECTIVES: INTE.GENE.16.55 – LO: 8-11
NATIONAL STANDARDS: United States – BUSPROG: Reflective Thinking
STATE STANDARDS: United States – AK – DISC: Stocks and Bonds
LOCAL STANDARDS: United States – OH – Default City – TBA
TOPICS: Expected overall stock returns
KEYWORDS: Bloom’s: Knowledge

7. The cash flows associated with common stock are more challenging to predict than those related to bonds due to stock having a residual claim against the company as opposed to a contractual commitment like a bond.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Challenge: Simple
LEARNING OBJECTIVES: INTE.GENE.16.56 – LO: 8-4
NATIONAL STANDARDS: United States – BUSPROG: Reflective Thinking
STATE STANDARDS: United States – AK – DISC: Stocks and Bonds
LOCAL STANDARDS: United States – OH – Default City – TBA
TOPICS: Common stock cash flows
KEYWORDS: Bloom’s: Knowledge

8. According to the fundamental FCF stock valuation model, the value an investor should ascribe to a share of stock depends on the duration of time he or she intends to hold the stock.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Challenge: Simple
LEARNING OBJECTIVES: INTE.GENE.16.56 – LO: 8-4
NATIONAL STANDARDS: United States – BUSPROG: Reflective Thinking
STATE STANDARDS: United States – AK – DISC: Stocks and Bonds
LOCAL STANDARDS: United States – OH – Default City – TBA
TOPICS: Value: investment horizon
KEYWORDS: Bloom’s: Knowledge

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