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Chapter 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Markets Hypothesis

Multiple Choice

1)

Stockholders’ rights include

(a)

the right to vote.

(b)

the right to manage.

(c)

primary claims on all cash flows.

(d)

ownership of bonds.

(e)

all of the above.

Answer:

Question Status: New

2)

Stockholders’ rights include

(a)

the right to manage.

(b)

the right to change personnel policy.

(c)

the right to veto management’s decisions.

(d)

primary claim on all of a company’s assets.

(e)

residual claim on all cash flows.

Answer:

Question Status: New

3)

Stockholders are residual claimants, meaning that they

(a)

have the first priority claim on all of a company’s assets.

(b)

are liable for all of a company’s debts.

(c)

will never share in a company’s profits.

(d)

receive the remaining cash flow after all other claims are paid.

(e)

have a higher claim on cash flow than bond holders.

Answer:

Question Status: New

4)

A stockholder’s ownership of a company’s stock gives her the right to

(a)

vote and be the primary claimant of all cash flows.

(b)

vote and be the residual claimant of all cash flows.

(c)

manage and assume responsibility for all liabilities.

(d)

vote and assume responsibility for all liabilities.

(e)

manage and be the residual claimant of all cash flows.

Answer:

Question Status: New

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