a forecast of cash receipts and disbursements for the next planning period
dutch auction underwriting
type of underwriting in which the offer price is set based on competitive bidding by investors
best efforts underwriting
type of underwriting in which the underwriter sells as much of the issue as possible, but can return any unsold shares to the issuer without financial responsibility
firm commitment underwriting
type of underwriting in which the underwriter buys the entire issue, assuming full financial responsibility for any unsold shares
group of underwriters formed to share the risk and to help sell an issue
compensation to the underwriter, determined by the difference between the underwriter's buying price and offering price
investment firms that act as intermidiaries between a company selling securities and the investing public
general cash offer
an issue of securities offered for sale to the general public on a cash basis
advertisement announcing a public offering
financing for new, often high-risk ventures
stock split under which a firm's number of shares outstanding is reduced
indirect bankruptcy costs
costs of avoiding a bankruptcy filing incurred by a financially distressed firm
direct bankruptcy costs
-costs directly associated with bankruptcy
-legal and administrative expenses
-extent to which a firm relies on debt
-the more debt financing a firm uses in it's capital structure, the more financial leverage it employs
4 reasons for IPO underpricing:
1) Young firms tend to be very risky
2) The best IPOS are oversubscribed
3) Underwriters like to avoid lawsuits
4) Underpricing helps counter the winner's curse
The quiet period helps...
ensure that all potential investors have access to the same information.
What is reviewed by the SEC primarily to determine if all the pertinent rules and regulations have been followed?
the registration of securities under SEC 415 which permits a firm to issue securities over a two-year period is called _____ registration.
Direct loans from a limited number of investors for generally a long period of time are what?
The provision that grants the underwriters an option to purchase additional shares at the offer price is called a ____ ____ provision.
an offering of additional equity shares by a publicly owned firm is called a ________ offering.
An initial public offering is:
the first issue of equity shares to the general public
A public issue of securities that initially offers the securities to existing shareholders is best defined as a...
Preliminary prospectus provided to prospective investors is a...
The legal document provided to prospective investors that describes a security offering and provides information on the issuer is called a...
what occurs when a firm is operating at it's optimal point?
shortage costs are equal to carrying costs
The cash cycle is equal to the ________ __________ period minus the _________ ________ period plus the __________ period.
accounts receivable;accounts payable;inventory
The operating cycle is equal to the __________ __________ period plus the __________ period.
accounts receivable; inventory
Purchasing new fixed assets ________ cash.
Increasing the accounts payable balance ________ cash.
An inventory load is best defined as a _____ _____ term loan to purchase inventory.
Accounts receivable financing is the term used to describe which of the following types of loans that involve either the assignment or the factoring of a firm's accounts receivables?
secured short term
The costs incurred because a firm's investment in current assets is low are called ________ costs.
Costs that increase as the level of investment in current assets increases are called _______ costs.
The accounts receivable period is the time that elapses between the _____ and the _______.
sale of an item;receopt of payment for that sale
The time it takes to acquire and sell inventory is referred to as the:
the operating cycle begins when _______ and ends when ______.
inventory is purchase; payment is received for the sale of that inventory
What impact does this have on cash? more finished goods are produced for inventory instead of for order.
What impact does this have on cash? A greated percentage of raw material purchases are paid for with credit.
What impact does this have on cash? fewer raw materials than usual are purchased
What impact does this have on cash? an increased number of customers begin to pay in cash instead of with credit
What impact does this have on cash? The cash discounts offered by suppliers are increased; thus, payments are made earlier.
What impact does this have on cash? the terms of cash discounts offered to customers are made less favorable.
The use of borrowing by an individual to adjust his or her overall exposure to financial leverage is referred to as:
M&M Proposition I is the theory that the:
value of a firm is independent of its capital structure
The theory that a firm's cost of equity capital is a positive linear function of its capital structure is referred to as:
M&M Proposition II
The equity risk that derives from a firm's daily operation is referred to as:
Financial risk is the risk associated with a firm's:
The benefit to a firm derived from the tax treatment of its interest payments is referred to as:
interest tax shield
The direct and indirect costs of bankruptcy are also called _______ costs.
Liquidation is defined as the:
termination of a firm as a going concern.
The financial restructuring of a firm in an attempt to maintain the firm as a going concern is referred to as a/an:
The list that establishes the order of claims in a liquidation is referred to as the:
absolute priority rule.
A taxpaying, levered firm's optimal capital structure is the mixture of ____ and ______ financing that minimizes the weighted average cost of capital.
debt and equity
A regular cash dividend is best described as a:
cash payment by a firm to its owners as part of a firm's normal operations.
the board of directors passes a resolution to pay a dividend
The ex-dividend date is defined as ______ day/days before the date of record.
The argument that stocks attract certain groups of investors based on
the stock's dividend yield and related tax effects is referred to as
the ______ effect.
If a firm maintains its preferred debt-equity ratio and pays dividends
only after meeting its investment needs, the firm is following a
dividend policy which is referred to as a _________ dividend policy.
A firm's long-term desired dividend-to-earnings ratio is called the ______ ratio.
What is the name given to a transaction wherein a firm buys some of its own outstanding shares of stock?
a non-cash payment made by a firm to its shareholders that dilutes the value of each share of stock outstanding
increases the number of shares outstanding without increasing the value of the owners' equity
The prices that fall between the lowest price at which a stock has
traded and the highest price at which it has traded are referred to as
____ creates financial leverage
debt gives you ______ earnings per share.
equity risk that comes from the nature of the firms operating activities
equity risk that comes from the financial policy (capital structure) of the firm
financial distress costs
direct and indirect costs associated with going bankrupt or experiencing financial distress
4 steps in the Bankruptcy Process:
1) Business failure
2) Legal bankruptcy
3) Technical Insolvency
4) Accounting Insolvency
dividend declaration date
date on which the board of directors passes a resolution to pay a dividend
date of record
date by which holders must be on record to receive a dividend
residual dividend approach
policy under which a firm pays divs only after meeting its investment needs while maintaining a desired debt-equity ratio
payment made by a firm to its owners in the form of stock, diluting the value of each share outstanding