Chapter 17 Test Bank – Static Key
1. Common stockholders have a residual claim to income; in other words they are last in line during an elimination of the company.
TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Shareholder rights
2. Common stockholders have a legal claim to dividend income. FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Shareholder rights
3. A common stockholder cannot force a company into bankruptcy for eliminating the dividend. TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Shareholder rights
4. Stock classes are similar to bond ratings in that they are used to rank the performance of different corporations' stock.
FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Classes of stock
5. Stock classes may differ in voting rights, dividend rights, and claims to income during company elimination.
TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Classes of stock
6. Occasionally, a company will have several classes of common stock, with each class carrying different rights to dividends and income.
TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Classes of stock
17-1
7. Common stockholders may assign a proxy, or the power to cast their ballot, only when majority voting is in place.
FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Shareholder voting
8. Each common stockholder has the ability to vote, and may assign a proxy if they desire to pass the voting right along.
TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Shareholder voting
9. Under majority voting, it is easier for minority stockholders to elect directors to the board. FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-02 Cumulative voting provides minority stockholders with the potential for some representation on the board of directors.
Topic: Shareholder voting
10. 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.
FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-02 Cumulative voting provides minority stockholders with the potential for some representation on the board of directors.
Learning Objective: 17-04 Poison pills and other similar provisions may make it difficult for outsiders to take over a corporation against management’s wishes.
Topic: Shareholder voting
11. Bondholders never have any control over the actions of a firm. FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Shareholder rights
12. The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Shareholder rights
17-2
13. Under cumulative voting, holding 30% of the shares outstanding will guarantee an investor the ability to elect three of nine directors to the board.
FALSE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: Intermediate
Learning Objective: 17-02 Cumulative voting provides minority stockholders with the potential for some representation on the board of directors.
Topic: Shareholder voting
14. Hewlett-Packard’s capital stock has largely recovered from the loss of confidence brought about by the failure to find a successful CEO and the multimillion-dollar severance packages the ousted executives received.
FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Historical performance
15. Stockholders always have pre emptive rights when new issues of stock are offered. FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Shareholder rights
16. A rights offering may be of limited value to shareholders. TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Rights offerings
17. After a rights offering, the common stock price will sell at the subscription price. FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Rights offerings
18. Pre-emptive rights offerings are an especially popular way in Europe to raise money and fund expansions.
TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Rights offerings
19. When a stock sells ex-rights, the sale of the shares no longer entitles the purchaser to receive a right to purchase future stock.
TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
17-3
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Rights offerings
20. The difference between the rights-on and ex-rights price is equal to the subscription price divided by N, where N is the number of rights needed to purchase a new share of stock.
FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Rights offerings
21. The difference between the rights-on and ex-rights common stock price is equal to the value of a right to purchase future stocks, all other things being equal.
TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Rights offerings
22. The ex-rights date usually takes place after the end of the subscription period. FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Rights offerings
23. If the current market value of Markowitz Corp stock is $61 and 10 rights are required to buy one additional share of Markowitz at the subscription price of $50, then the rights are worth $1.00.
TRUE
Based on Formula 17-3: (61 - 50)/(10 + 1) = $1
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: Challenge
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Rights offerings
24. Stock purchased through a rights offering may carry lower margin requirements. TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-03 A rights offering gives current stockholders a first option to purchase new shares.
Topic: Rights offerings
25. A poison pill will raise the potential for maximizing shareholder value because it deters takeover bids. FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-04 Poison pills and other similar provisions may make it difficult for outsiders to take over a corporation against management’s wishes.
Topic: Defensive tactics
17-4
26. American Depository Receipts (ADRs) are certificates that give foreign stockholders a legal claim on U.S. companies' foreign stock.
FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Equity securities
27. Although American Depository Receipts (ADRs) are traded in the U.S. in dollars, U.S. investors may still incur foreign currency risk.
TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-01 Common stockholders are the owners of the corporation and therefore have a claim to undistributed income, the right to elect the
board of directors, and other privileges.
Topic: Equity securities
28. Preferred stock dividends are a tax-deductible expense for a corporation. FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-05 Preferred stock is an intermediate type of security that falls somewhere between debt and common stock.
Topic: Taxes
29. The after-tax cost of debt is usually cheaper than issuing preferred stock to the corporation, all things being equal.
TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Intermediate
Learning Objective: 17-05 Preferred stock is an intermediate type of security that falls somewhere between debt and common stock.
Topic: Preferred stock features
30. Preferred stock generally carries a higher interest rate than debt. FALSE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: Basic
Learning Objective: 17-05 Preferred stock is an intermediate type of security that falls somewhere between debt and common stock.
Topic: Preferred stock features
31. To the security holder, preferred stock offers the highest risk and the lowest return. FALSE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: Challenge
Learning Objective: 17-05 Preferred stock is an intermediate type of security that falls somewhere between debt and common stock.
Topic: Preferred stock features
32. To the individual recipient, preferred stock dividends offer no advantage over common stock dividends. TRUE
AACSB: Reflective Thinking Accessibility: Keyboard Navigation
Blooms: Remember
17-5
金融管理基础英文版第16版人大版MGH版单选题附答案Chapter 17 Test Bank
