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IDC Unit 3 MC Review Flashcards | StudBud
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IDC Unit 3 MC Review
IDC Unit 3 MC Review
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IPO, MF and ratio MC
Flashcards
21 cards
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Questions
21
Answers
1
Whichof the following is not anadvantage of investing in mutual funds
allowfor flexibility investing small sums at a time
professional management ensures MF always beat the market
veryliquid
allow the small retail investor toeasily diversify
2
Return on Assets indicates:
earnings per share
money made for each dollar invested in the company
profit made for each dollar the company has in assets
none of the above
3
Return on Equity indicates:
earnings per share
money made for each dollar invested in the company
none of the above
profit made for each dollar the company has in assets
4
Loblaws (L) hada return on equity (ROE) ratio of 15% (0.15); what does this indicate?
Loblawsshareholders had their shares appreciate by 15%
L made 15 cents in sales for each $1 invested by the owners
L generated 15 cents in profi for each dollar in assets
L made 15 cents in profit for each $1 invested by the owners
5
buy a home in 3 years; save as much as possible; limit risk of losing principle. best MF
specialtyfund
equity fund
assetallocation mutual fund
moneymarket fund
6
Whichof the following is trueabout mutual funds
a unit of a MF islike owning a bit of all security in the MF
pre-packaged portfolio of securities
pool the capital of their unit (share)holders
all of the above
7
Forwhat reasons would a company have an IPO or a secondary offering
all of the above
Research and development
expansion
paying down debt
8
Whydo underwriting firms (investment bankers) form syndicates
A.to decrease their risk in underwritingthe new issue
its law no one firm canunderwrite more than 10% of an IPO
all of the above
A.to share their hottips withtheir colleagues at other firms
9
Securitieswithin a mutual fund may include:
all of the above
bonds
cash
real estate
10
Whichpiece of information is not containedin the prospectus
analysts recommendations of the company
the number of shares for sale
Use of the money raised
investment risks
11
priceto earnings ratio (P:E) for Loblaws is 13; P:E for Sobeys was12.2. - choose two answers!
investorsare willing to pay a higher value for L’ shares,
Sobeys is more profitable than L,thus likely a better “deal”
Loblaws share price is higher than that of Sobeys
L sh trading at 13 times their EPS, Sobeys at 12.2 times
12
Anoverallotment… choose all correct answers!
greater profit for the underwriter; more money for issuer
veryuncommon in secondary issues and IPO’s
underwriter sell extra shares than were originally planned
solves the problem of over subscription by investors
13
you are investing $5000 into a MF for college 1.5 years away-best type of commission structure
front-endfee
no-loadfund
A back-end declining fee
a loaded fund
14
What is the purpose of computing the current ratio?
measurementof the returns investors can expect
abilityto meet its current obligations from current assets
to measure the ability to meetemergency demands for cash
measure h ow much a firm is financed through borrowed money
15
Earnings per share (EPS) means
how much money each share "makes"
a dance song from the 80's
the ROI
another term for dividens
16
Whichof the following would
not
bean advantage of going public for the owner of the company?
increase the company’s profile through apublic listing
easilyreward her management team with shares of the company
access to a large pool of capital
increased scrutiny ofmanagement to common S. holders
17
personwith many years of investing ahead will experience the most growth with
balanced fund
money market funds
bondfund
equityfund
18
Howis the "debt to owner's equity" ratio used?
indicatethe percentage of revenue which will be profit
measure if the firm canmeet unexpected demands for cash
measure profit the business earns for each dollar invested
measure how much the co. is financed through borrowed money
19
Comparingan initial public offering and a secondary offering
one could consider them as the same thing
2nd offering is a public co. selling more sh.
only IPO’s require a prospectus
one could consider them as the same thing
20
IfScotia Capital underwrites an IPO with a firm commitment theyare
has confidence in the futuresuccess of the company
guaranteeing thepurchase of all of the newly issued shares
will only sell as many of the shares asthey can
both A and C
21
Whatis underpricingandhow does this effect IPO’s - choose ALL correct answers
Shares jumping up in price upon the first issue
issuers not receiving as much as they could for their shares
shares initially selling at less then they should
results from the company's limited public track record
