Question 1

Which of the following statements regarding companies is incorrect?

Accepted Answer

A)   A company is a discrete legal entity.
B)   Since shares represent ownership in a company, ownership cannot be readily transferred to new owners.
C)   A company has a potentially unlimited life.
D)   The shareholders' liability is limited.E) All of the above
F) A) and B)

Question 2

The greatest number of issues of equity capital on the ASX over recent years has involved:

Accepted Answer

A)   rights issues.
B)   placements.
C)   dividend reinvestment.
D)   new floats.E) B) and C)
F) A) and D)

Question 3

Which of the following security types is NOT usually listed on the ASX?

Accepted Answer

A)   Ordinary shares
B)   Treasury bonds
C)   Debentures
D)   Commercial paperE) A) and D)
F) C) and D)

Question 4

A futures contract is a:

Accepted Answer

A)   contract that provides a specified commodity or instrument to be bought at a future date at a price determined at the expiry date.
B)   contract that provides a specified commodity or instrument to be bought at a future date at a price decided today.
C)   right to buy a specified commodity or instrument at a price determined today.
D)   right to buy a specified commodity or instrument at a price determined at the expiry date.E) All of the above
F) A) and C)

Question 5

Which of the following statements is incorrect?

Accepted Answer

A)   The Corporations Act 2001 compels continuous disclosure requirements on a listed company.
B)   All corporations, except mining companies, must submit half-yearly and annual audited reports to the ASX.
C)   The main supervisor in the Australian market is the ASX itself.
D)   If a listed company does not fully disclose information to the satisfaction of the ASX, trading in its shares may be suspended.E) B) and D)
F) B) and C)

Question 6

Units sold in a managed investment scheme that follows the performance of a specified share market index are called:

Accepted Answer

A)   contracts for difference.
B)   exchange traded funds.
C)   option funds.
D)   warrant funds.E) A) and B)
F) All of the above

Question 7

Agency problems are reduced by:

Accepted Answer

A)   monitoring management behaviour.
B)   the shareholders' ability to sell their shares.
C)   the threat of takeover by another firm.
D)   all of the given answers.E) C) and D)
F) All of the above

Question 8

In options markets,option premiums are paid by:

Accepted Answer

A)   option writers to buyers.
B)   option buyers to sellers.
C)   both option buyers and sellers.
D)   put option buyers only.E) A) and B)
F) C) and D)

Question 9

The key aspect of the agency relationship for the corporate form of business is that:

Accepted Answer

A)   the firm's owners will always act in the best interests of the managers.
B)   the managers will always act in the best interests of the firm's owners.
C)   with their management contracts, the managers have the incentive to act in the best interests of the shareholders.
D)   the managers have different incentives from the shareholders.E) A) and B)
F) A) and C)

Question 10

An active and well-organised secondary market in existing shares benefits a company because it receives an additional payment from the share market.

Accepted Answer

A) True 
 B)False

Question 11

Consider the following statements:
i.A corporation differs from other forms of business organisation only in that it tends to be larger.
ii.The corporate form of business organisation is destined to fail because 'managers',and not the 'owners',run the business.
iii.The corporate entity ceases on the death or bankruptcy of the individual shareholders.
iv.The stock exchange is important to the corporation only because it provides the institutional framework through which new shares may be sold to the public.
v.Maximisation of shareholder utility is presumed when managers maximise possible profit.
How many of these statements are true and how many are false?

Accepted Answer

A)   1 statement is true and 4 are false
B)   2 statements are true and 3 are false
C)   3 statements are true and 2 are false
D)   4 statements are true and 1 is falseE) B) and C)
F) A) and D)

Question 12

A common measure of market liquidity is the ratio of turnover to market capitalisation.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following forms of business organisation is characterised by limited liability?

Accepted Answer

A)   Sole partnership
B)   Partnership
C)   General partnership
D)   CorporationE) A) and B)
F) B) and C)

Question 14

The corporate entity means that if a major shareholder is declared bankrupt it does not necessarily impact on the firm's operations.

Accepted Answer

A) True 
 B)False

Question 15

ASIC is the regulatory body responsible for the supervision of:

Accepted Answer

A)   insurance companies only.
B)   insurance and investment companies only.
C)   initial public offerings only.
D)   corporations law and markets.E) B) and C)
F) A) and D)

Question 16

The strategy of lowering risk exposure by holding a number of investments in a portfolio is called:

Accepted Answer

A)   augmentation.
B)   diversification.
C)   expansion.
D)   optimisation.E) B) and C)
F) None of the above

Question 17

The document drawn up by a company stating the terms and conditions of a public share issue is called a:

Accepted Answer

A)   share directory.
B)   memorandum.
C)   share plan.
D)   prospectus.E) A) and B)
F) A) and C)

Question 18

A _______ represents a financial claim to the cash flow of a business after all other claims have been deducted.

Accepted Answer

A)   bond
B)   debenture
C)   share
D)   preference shareE) A) and B)
F) A) and C)

Question 19

A characteristic of secondary markets for shares is that:

Accepted Answer

A)   only highly risky shares are traded.
B)   only low-risk shares are traded.
C)   they are where companies borrow funds for the second time.
D)   companies do not get funds from the secondary market in shares.E) None of the above
F) B) and C)

Question 20

Because of their _____ liability,corporate stockholders are more interested in chances of _____.

Accepted Answer

A)   limited; failure than success
B)   limited; success than failure
C)   unlimited; success than failure
D)   unlimited; failure than successE) All of the above
F) A) and C)

Exam 4: The Share Market and the Corporation

ASIC is the regulatory body responsible for the supervision of:

Correct Answer
verified

Because of their _ liability,corporate stockholders are more interested in chances of _.

Correct Answer
verified

The corporate entity means that if a major shareholder is declared bankrupt it does not necessarily impact on the firm's operations.

Correct Answer
verified

The key aspect of the agency relationship for the corporate form of business is that:

Correct Answer
verified

A futures contract is a:

Correct Answer
verified

Agency problems are reduced by:

Correct Answer
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Which of the following security types is NOT usually listed on the ASX?

Correct Answer
verified

Which of the following forms of business organisation is characterised by limited liability?

Correct Answer
verified

The greatest number of issues of equity capital on the ASX over recent years has involved:

Correct Answer
verified

An active and well-organised secondary market in existing shares benefits a company because it receives an additional payment from the share market.

Correct Answer
verified

Which of the following statements is incorrect?

Correct Answer
verified

A common measure of market liquidity is the ratio of turnover to market capitalisation.

Correct Answer
verified

The strategy of lowering risk exposure by holding a number of investments in a portfolio is called:

Correct Answer
verified

A _______ represents a financial claim to the cash flow of a business after all other claims have been deducted.

Correct Answer
verified

Correct Answer
verified

Which of the following statements regarding companies is incorrect?

Correct Answer
verified

A characteristic of secondary markets for shares is that:

Correct Answer
verified

In options markets,option premiums are paid by:

Correct Answer
verified

Units sold in a managed investment scheme that follows the performance of a specified share market index are called:

Correct Answer
verified

The document drawn up by a company stating the terms and conditions of a public share issue is called a:

Correct Answer
verified

Exam 4: The Share Market and the Corporation

ASIC is the regulatory body responsible for the supervision of:

Correct AnswerverifiedShow Answer

Because of their _____ liability,corporate stockholders are more interested in chances of _____.

Correct AnswerverifiedShow Answer

The corporate entity means that if a major shareholder is declared bankrupt it does not necessarily impact on the firm's operations.

Correct AnswerverifiedShow Answer

The key aspect of the agency relationship for the corporate form of business is that:

Correct AnswerverifiedShow Answer

A futures contract is a:

Correct AnswerverifiedShow Answer

Agency problems are reduced by:

Correct AnswerverifiedShow Answer

Which of the following security types is NOT usually listed on the ASX?

Correct AnswerverifiedShow Answer

Which of the following forms of business organisation is characterised by limited liability?

Correct AnswerverifiedShow Answer

The greatest number of issues of equity capital on the ASX over recent years has involved:

Correct AnswerverifiedShow Answer

An active and well-organised secondary market in existing shares benefits a company because it receives an additional payment from the share market.

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect?

Correct AnswerverifiedShow Answer

A common measure of market liquidity is the ratio of turnover to market capitalisation.

Correct AnswerverifiedShow Answer

The strategy of lowering risk exposure by holding a number of investments in a portfolio is called:

Correct AnswerverifiedShow Answer

A _______ represents a financial claim to the cash flow of a business after all other claims have been deducted.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements regarding companies is incorrect?

Correct AnswerverifiedShow Answer

A characteristic of secondary markets for shares is that:

Correct AnswerverifiedShow Answer

In options markets,option premiums are paid by:

Correct AnswerverifiedShow Answer

Units sold in a managed investment scheme that follows the performance of a specified share market index are called:

Correct AnswerverifiedShow Answer

The document drawn up by a company stating the terms and conditions of a public share issue is called a:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Because of their _ liability,corporate stockholders are more interested in chances of _.

Correct Answer
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