Business Administration - Accounting & Financial Planning FIN401 Chapter Notes - Chapter 17: Cumulative Voting

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greenmuskrat329

20 Jan 2018

School

Seneca College

Department

Business Administration - Accounting & Financial Planning

Course

Business Administration - Accounting & Financial Planning FIN401

Professor

Larry Hurst

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Document Summary

Chapte(cid:396) (cid:1005)(cid:1004) &(cid:1005)7 - outline: p(cid:396)efe(cid:396)(cid:396)ed sto(cid:272)k, co(cid:373)(cid:373)o(cid:374) sto(cid:272)k. Lea(cid:396)ning o(cid:271)je(cid:272)ti(cid:448)es: valuatio(cid:374) usi(cid:374)g the p(cid:396)i(cid:272)e-ea(cid:396)(cid:374)i(cid:374)gs ratio, su(cid:373)(cid:373)a(cid:396)(cid:455) a(cid:374)d co(cid:374)(cid:272)lusio(cid:374)s. Cha(cid:396)a(cid:272)te(cid:396)ize p(cid:396)efe(cid:396)(cid:396)ed sha(cid:396)es as a t(cid:455)pe of se(cid:272)u(cid:396)it(cid:455) so(cid:373)e(cid:449)he(cid:396)e (cid:271)et(cid:449)ee(cid:374) de(cid:271)t a(cid:374)d (cid:272)o(cid:373)(cid:373)o(cid:374) sto(cid:272)k. Assess the (cid:272)u(cid:396)(cid:396)e(cid:374)t (cid:448)alue (cid:894)p(cid:396)i(cid:272)e(cid:895) of p(cid:396)efe(cid:396)(cid:396)ed sha(cid:396)es (cid:894)pe(cid:396)petuals(cid:895) (cid:271)ased o(cid:374) the futu(cid:396)e (cid:271)e(cid:374)efits (cid:894)(cid:272)ash flo(cid:449)s(cid:895). Cal(cid:272)ulate the diffe(cid:396)e(cid:374)t ta(cid:454) t(cid:396)eat(cid:373)e(cid:374)t a(cid:374)d (cid:396)esulti(cid:374)g afte(cid:396) ta(cid:454) i(cid:374)(cid:272)o(cid:373)e f(cid:396)o(cid:373) p(cid:396)efe(cid:396)(cid:396)ed di(cid:448)ide(cid:374)ds as (cid:272)o(cid:373)pa(cid:396)ed to (cid:271)o(cid:374)d i(cid:374)te(cid:396)est. Outli(cid:374)e the (cid:396)ights of sha(cid:396)eholde(cid:396)s as o(cid:449)(cid:374)e(cid:396)s of the (cid:272)o(cid:396)po(cid:396)atio(cid:374). B(cid:396)iefl(cid:455) des(cid:272)(cid:396)i(cid:271)e (cid:272)u(cid:373)ulati(cid:448)e (cid:448)oti(cid:374)g as a (cid:373)ethod to pote(cid:374)tiall(cid:455) gi(cid:448)e (cid:373)i(cid:374)o(cid:396)it(cid:455) sha(cid:396)eholde(cid:396)s (cid:396)ep(cid:396)ese(cid:374)tatio(cid:374) o(cid:374) the (cid:271)oa(cid:396)d of di(cid:396)e(cid:272)to(cid:396)s. Cha(cid:396)a(cid:272)te(cid:396)ize a (cid:396)ights offe(cid:396)i(cid:374)g as a (cid:373)ethod used to (cid:396)aise fu(cid:374)ds fo(cid:396) the fi(cid:396)(cid:373) . Assess the (cid:272)u(cid:396)(cid:396)e(cid:374)t (cid:448)alue (cid:894)p(cid:396)i(cid:272)e(cid:895) of (cid:272)o(cid:373)(cid:373)o(cid:374) sha(cid:396)es (cid:271)ased o(cid:374) the futu(cid:396)e (cid:271)e(cid:374)efits (cid:894)(cid:272)ash flo(cid:449)s(cid:895). Des(cid:272)(cid:396)i(cid:271)e the use of a p(cid:396)i(cid:272)e-ea(cid:396)(cid:374)i(cid:374)gs (cid:396)atio to dete(cid:396)(cid:373)i(cid:374)e (cid:448)alue. E(cid:448)aluate the (cid:455)ields o(cid:374) fi(cid:374)a(cid:374)(cid:272)ial (cid:272)lai(cid:373)s (cid:271)ased o(cid:374) the (cid:396)elatio(cid:374)ship (cid:271)et(cid:449)ee(cid:374) (cid:272)u(cid:396)(cid:396)e(cid:374)t p(cid:396)i(cid:272)e a(cid:374)d futu(cid:396)e e(cid:454)pe(cid:272)ted (cid:272)ash flo(cid:449)s.

Related Questions

QUESTION 10

Short-term bond yields are generally ______ than long-term bond yields, whereas long-term bond prices are generally ________ than short-term bond prices.

		more volatile, less volatile
		less volatile, more volatile
		less volatile, less volatile
		more volatile, more volatile

2.5 points

QUESTION 11

Common stockholders have a residual claim to income, in other words they are last in line.

True

False

2.5 points

QUESTION 12

Stock classes are similar to bond ratings in that they are used to rank the performance of different corporations' stock.

True

False

2.5 points

QUESTION 13

The particular type of shareholder voting used has become less important with the influence of takeovers, leveraged buy-outs, and other challenges to management control.

True

False

2.5 points

QUESTION 14

Which of the following is not a true statement?

Common stockholders have a residual claim to income.

Bondholders may force a corporation into bankruptcy for failure to make interest payments.

Common stockholders are legally entitled to some dividend.

A minority interest can still elect members to the Board of Directors under cumulative voting even though someone else owns 51% of the stock.

2.5 points

QUESTION 15

The purpose of cumulative voting is

to maintain majority control of the board of directors.

to allow minority stockholders the possibility of a voice on the board of directors.

to obstruct unfriendly mergers and takeover efforts.

to prevent the dilution of common stock through preemptive rights offerings.

2.5 points

QUESTION 16

A rights offer made to existing shareholders with the sole purpose of making it more difficult for another firm to acquire the company is called

a preemptive right.

a poison pill.

ex-rights.

rights-on.

2.5 points

QUESTION 17

A possible advantage to a rights offering is that

current shareholders are protected against dilution.

the firm has a built-in market of knowledgeable investors.

distribution costs are lower than a public offering.

All of these options

2.5 points

QUESTION 18

Which of the following actions will provide the shareholders with the most total wealth when a company conducts a rights offering?

Exercise the rights for new shares.

Sell the rights themselves and hold existing shares and cash.

Exercise the rights and sell the shares.

None of these options

2.5 points

QUESTION 19

The subscription rate of a new offering is generally _______ than the rights-on price and _______ than the ex-rights price.

higher; higher

higher; lower

lower; higher

lower; lower

crimsonbeaver701

9. Which of the following statements is NOT CORRECT?

a	a. Owners of preferred stock have greater voting rights than common shareholders.
	b. From an individual investor's perspective, preferred stock is riskier than bonds.
	c. Companies are more likely to issue preferred stock if they have a low tax bracket since preferred stock dividends are not tax deductible.
	d. If a preferred issue is cumulative this means that any unpaid dividends are held in arrears.

10. As a general rule, the optimal capital structure

Maximizes expected EPS also maximizes the price per share of common stock.
Minimizes the interest rate on debt also maximizes the expected EPS.
Minimizes the required rate on equity also maximizes the stock price.
Maximizes the price per share of common stock and minimizes the WACC.

11. Which of the following statements about warrants and convertibles is NOT CORRECT?

a. The value of both warrants and convertibles depends on the stock price.

b. One primary difference between warrants and convertibles is that warrants bring in additional funds to the firm when exercised while convertibles reduce debt when exercised.

c. The coupon rate on convertible debt is higher than the coupon rate on similar straight debt because convertibles are riskier.

d. Warrants and Convertibles are used by corporations in order to get a lower rate on their debt.

12. In the lease versus buy decision, leasing is often preferable

a. if the firm is unable to borrow funds at a low rate.

b. if the firm needs a specific piece of equipment that only has value to that firm.

c. Because lease obligations do not affect the riskiness of the firm.

d. if the lessee has a higher tax rate than the lessor

13. Which statement is False?

The WACC is the required return on the firm

cerisejackal589

1. Which of the following statements is true about apartnership?

a. One capital and one drawings account is used for eachpartnership.

b. The capital account is used to record each partner'sinvestment and that partner's designated share of the earnings.

c. Partnerships are subject to separate income taxes.

d. The drawings account is closed to retained earnings at theend of the period.

2. Which of the followingstatements does not correctly describe preferred stock?

a. Preferred shareholders have a preference with respect todividend payments.

b. Preferred shareholders have a preference with respect toassets in the event of dissolution.

c. Preferred shareholders have voting rights on a per sharebasis.

d. Preferred stock typically has a fixed dividend rate.

3. Which of the followingstatements is false?

a. Common stockholders have a residual claim on assets in theevent of liquidation.

b. Shares of stock held in the treasury are subtracted from thenumber of issued shares in the determination of the number ofoutstanding shares.

c. Common stockholders have voting rights at annual stockholdermeetings.

d. Corporations are governed by their stockholders.

4. Which of the following would not be reportedas a financing activities cash flow?

a. Issuing common stock for cash.

b. Cash dividend payments.

c. Purchasing treasury stock.

d. Purchase of a building by signing a note payable.

5. Which of the following is not reported as acash flow from investing activities?

a. Sale of a depreciable asset for cash.

b. Purchasing land in exchange for common stock.

c. Selling a long-term investment at a loss for cash.

d. Purchase of a patent in exchange for cash.

6. Which of the following transactions would be reported withinthe investing section of the cash flow statement?

a. The cash sale of land at a loss.

b. The purchase of a building in exchange for common stock.

c. The receipt of a stock dividend from a stock investment.

d. The cash receipt of a dividend from a stock investment.

7. Which of the following would be subtracted from net incomewhen determining cash flows from operating activities under theindirect method?

a. A decrease in utilities payable.

b. Patent amortization expense.

c. A decrease in prepaid rent.

d. A loss on the sale of a depreciable asset.

7. Which of the following would be added to net income whendetermining cash flows from operating activities under the indirectmethod?

a. A decrease in accounts payable.

b. Patent amortization expense.

c. An increase in prepaid insurance.

d. A gain on the sale of a depreciable asset.

8. Which of the following would not be a cashflow from financing activities?

a. Issuance of common stock for cash.

b. Borrowing cash on a long-term note payable.

c. Collection of a cash dividend.

d. Repayment of principal on a long-term note payable.

9. The cash payment of a previously declared dividend increaseswhich of the following ratios?

a. Debt-to-equity.

b. Earnings per share.

c. Price/earnings ratio.

d. Asset turnover.

10. The debt-to-equity ratio measures which of thefollowing?

a. Liquidity.

b. Solvency.

c. Profitability.

d. Market strength.

11. Negative financial leverage occurs when the:

a. Average net (after tax) interest rate on borrowed funds isless than the company's earnings rate on its assets.

b. Return on assets is more than return on equity.

c. Return on equity is more than return on assets.

d. Operating expenses exceed gross profit.

12. Which of the following ratios is notconsidered to be a test of profitability?

a. Current ratio.

b. Profit margin.

c. Return on assets.

d. Earnings per share.

13. Home Depot's operating strategy is to offer a broadassortment of high-quality merchandise and services at competitiveprices using highly knowledgeable service-oriented personnel andaggressive advertising. Which of the following isnot as critical to achieving Home Depot'sstrategy?

a. Cost control

b. Product differentiation

c. High level of customer service

d. High sales volume

13. Which of the following ratios is not partof the DuPont model?

a. Asset turnover.

b. Debt-to-equity.

c. Net profit margin.

d. Return on equity.

Which of the following statements is notcorrect?

Purchasing fixed assets through debt financing decreases thefinancial leverage ratio.

Accruing an expense will affect the net profit margin ratio.

Return on equity may increase even when the financial leverageratio decreases.

Purchasing treasury stock results in a decrease in assetturnover.

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Business Administration - Accounting & Financial Planning FIN401 Chapter Notes - Chapter 17: Cumulative Voting

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