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Corporate Finance, 6/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Jeffrey Jaffe, University of Pennsylvania

Long-Term Financing: An Introduction

Multiple Response Quiz


1	The amount of stock that can be sold by a corporation without shareholder approval is limited to the number of:
		A)	preferred shares.
		B)	treasury shares.
		C)	no-par shares.
		D)	undistributed shares.
		E)	none of the above.


2	Flower Buds has had a very successful year and earnings are $72,000. The company has 60,000 shares outstanding and will pay a dividend of $0.50 per share. What is the dividend payout ratio and the retained earnings for the year?
		A)	71.43%; $42,000.
		B)	71.43%; $30,000.
		C)	41.67%; $42,000.
		D)	2.4%; $17,728.
		E)	83.33%; $12,000.


3	Last year, Flower Buds had equity accounts as follows: Common Stock ($1 Par Value) $60,000 Retained Earnings 12,000 Total Shareholder's Equity $72,000 Projected income is $72,000 and a $0.50 dividend per share is to be paid immediately. What will the ending retained earnings account be?
		A)	$ 42,000.
		B)	$ 54,000.
		C)	$114,000.
		D)	$ 84,000.
		E)	$102,000.


4	This year, Flower Buds expects to pay a dividend of $0.60 per share on the 60,000 shares outstanding. Flower Buds expects to have a payout ratio of 40%. How much income does Flower Buds expect to earn?
		A)	$14,400
		B)	$21,600
		C)	$60,000
		D)	$90,000
		E)	Can not be determined with the information given.


5	A corporation has 100 shares outstanding, and 10 directors are up for election. The stock features cumulative voting. About how many shares do you have to own to guarantee yourself a place on the board of directors (ignoring possible ties)?
		A)	50.
		B)	40.
		C)	30.
		D)	20.
		E)	10.


6	Preference in position among creditors when it comes to repayment is called:
		A)	creditor priority.
		B)	security.
		C)	liquidation preference.
		D)	seniority.
		E)	none of the above.


7	The major source of long-term financing for U.S. industrial firms is:
		A)	internal financing.
		B)	long-term debt.
		C)	new common equity.
		D)	seasoned equity issues.
		E)	none of the above.

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