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4. ] Boundless.com/finance?campaign_content=book_192_ch apter_14&campaign_term=Finance&utm_campaign=powe rpoint&utm_medium=direct&utm_source=boundless Obtaining Capital: Methods of Long- Term Financing Types of Financing Venture Capital Leasing The Role of Investment Banks in Financing Free to share, print, make copies and changes. Get yours at www.boundless.com Distributing Stock

5. ] Boundless.com/finance?campaign_content=book_192_ch apter_14&campaign_term=Finance&utm_campaign=powe rpoint&utm_medium=direct&utm_source=boundless Obtaining Capital: Methods of Long- Term Financing (continued) Comparing Public and Private Financing Free to share, print, make copies and changes. Get yours at www.boundless.com

6. Financing Life Cycle of the Firm Venture Capital Long-Term Debt Common and Preferred Stock Types of Financing Obtaining Capital: Methods of Long-Term Financing > Types of Financing Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dir ect&utm_source=boundless

7. In the first stage, a new company's external financing needs (EFN) are high, since it needs money to develop its idea but lacks retained earnings. They are usually financed through debt, but may find investors who are willing to take on risk if projected growth is high. In the growth stage, a firm's initial EFN is high relative to its current value; it needs significant funds for growth. It can be financed through venture capital or issuing equity. Growth eventually slows and the firm enters the mature stage. These firms can be financed by equity or debt. If they have no new projects, EFN is relatively low. The firm may go into decline as their product becomes obsolete or a competitor outperforms them. In this case, they have very low external financing needs. Financing Life Cycle of the Firm Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/types-of-financing- 107/financing-life-cycle-of-the-firm-455- 3807?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Firm Life Cycle View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Types of Financing

8. Young companies with high growth potential turn to venture capitalists for funding because they cannot issue debt or raise capital in public markets. Venture capitalists assume high risk by investing in small, unproven companies, rationalizing that successful investments will have so much growth that their returns will far exceed any failed investments. By agreeing to fund a start-up company, the VC firm gets the potentials of high future returns, significant control over company decisions, and a portion of the company's ownership. Because a VC firm's returns are contingent on the company's performance, it is in their interest to take an active role in company decision-making. A company receiving venture capital goes through several rounds of funding, roughly corresponding to stages of company development. Venture Capital Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/types-of-financing- 107/venture-capital-456- 3808?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Structure of a Venture Capital Firm View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Types of Financing

9. Debt financing takes the form of loans that must be repaid by the borrower over a specified period of time, usually with interest. Generally, debt financing is most appropriate for firms who are in the start-up phase or have progressed to the maturity phase. For young companies, debt financing usually takes the form of bank loans, while mature companies may issue bonds. When investors buy a corporate bond or the bank loans to a small business, they must have faith that the company will have the means to repay them. Riskier investments will require compensation for the lender in the form of higher interest rates. Bonds may be an attractive alternative to getting bank loans or issuing stock because it can have less restrictive loan terms and better interest rates than loans, and it doesn't dilute equity or ownership as stock does. It also has considerable corporate tax advantages. Costs of debt financing include: bankruptcy costs (in the event of inability to cover payments to lenders) and increased uncertainty about future financing needs. Long-Term Debt Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/types-of-financing- 107/long-term-debt-457- 3810?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Bank loans as a means of financing View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Types of Financing

10. Firms using equity financing gain financial capital from investors, in exchange for ownership stakes in the firm in the form of common and preferred stocks. The main advantage of equity financing is the lack of an obligation to pay back all investors in the event of poor company performance, while the main disadvantage is diminished control and business autonomy. In the event of liquidation and dividend payments, preferred stock has priority claims to assets. Common stockholders must wait until all preferred stockholders have been paid in full. In the event of bankruptcy, common stock investors receive any remaining funds after bondholders, creditors (including employees), and preferred stock holders are paid. Common stockholders often have voting rights, exercising some measure of control over company board elections and corporate policy, while preferred stockholders usually lack these rights. Preferred stock is divided into a number of sub-categories including: cumulative preferred stock, non-cumulative preferred stock, participating preferred stock, and convertible preferred stock. Common and Preferred Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/types-of-financing- 107/common-and-preferred-stock-458- 3809?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Participating Preferred vs. Non-Participating Preferred View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Types of Financing

11. Defining Venture Capital Advantages and Disadvantages of VC Financing IPOs Venture Capital Obtaining Capital: Methods of Long-Term Financing > Venture Capital Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dir ect&utm_source=boundless

12. Venture capital is the financial capital provided to early-stage high-potential start- ups unable to acquire the necessary funding through conventional means. For venture capitalists, the high risk of investing is offset by the potential of high returns. Venture capitalists typically spread out their fund over a number of investments so that returns from successful investments will outweigh the losses from failed ventures. Venture capitalists take an active role in a company's performance; guidance, expertise, and industry connections can be just as valuable as financial capital. Defining Venture Capital Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/venture-capital- 108/defining-venture-capital-459- 7541?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Venture capital funds revolutionary social networking services View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Venture Capital

13. With VC financing, companies can acquire large sums of capital that would not be possible through bank loans or other conventional methods. Venture capitalists provide expertise and industry connections that can be extremely valuable. Accounting and legal costs make securing a VC deal a difficult process. If a deal is secured, VC investors will be highly involved in deciding on the company's strategic direction. Advantages and Disadvantages of VC Financing Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/venture-capital- 108/advantages-and-disadvantages-of-vc-financing-460- 5151?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Weighing advantages and disadvantages View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Venture Capital

14. An initial public offering is the first time a company's stock is sold to the general public on a securities exchange, transforming the company from private to public. Though unpredictable and potentially costly, IPOs give benefits like increased access to financial markets and more capital. Venture capitalists gain both financial returns and professional reputation from successful IPOs. For venture-backed companies, their VC investors often expect the company to go public within a certain time frame so that they can sell or distribute their holdings of the company and exit the investment. Venture capitalists protect their ability to sell shares by contracting for registration rights prior to agreeing on funding the company. Demand rights allow the investors to initiate an IPO, while piggyback rights allow investors to sell when the company initiates an IPO. If the IPO market is weak, this threatens the venture capitalists' chances of a successful exit. The VC investors may instead select a different method of exit, or they can wait and hope for the market to improve. IPOs Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/venture-capital-108/ipos- 461- 8365?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Apple Computers IPO Prospectus View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Venture Capital

15. Capital Leases vs. Operating Leases Impact of Leasing on the Income Statement Advantages of Leasing Leasing Obtaining Capital: Methods of Long-Term Financing > Leasing Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dir ect&utm_source=boundless

16. The finance company is the legal owner of the asset during duration of the lease. However the lessee has control over the asset providing them the benefits and risks of (economic) ownership. An operating lease is a lease whose term is short compared to the useful life of the asset or piece of equipment (an airliner, a ship, etc. ) being leased. Unlike a Financial Lease or Finance lease, at the end of the operating lease the title to the asset does not pass to the lessee, but remains with the lessor. Capital Leases vs. Operating Leases Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/leasing-109/capital- leases-vs-operating-leases-462- 3804?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Lease View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Leasing

17. Lessees can often benefit from comprehensive maintenance programs offered by lessors while still paying a discounted premium due to the fact that the asset is being leased, not purchased. The costs of leases on the income statement depend on the duration and type of lease. EBITDA coverage ratio will improve if using operating leases. Leasing will influence depreciation expenses, maintenance expenses, other costs and ratios on income statement. Impact of Leasing on the Income Statement Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/leasing-109/impact-of- leasing-on-the-income-statement-463- 3805?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Leasing impact View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Leasing

18. Leasing is a process by which a firm can obtain the use of a certain fixed asset for which it must pay a series of contractual, periodic, tax deductible payments. Capital assets may fluctuate in value. Leasing shifts risks to the lessor, but if the property market has shown steady growth over time, a business that depends on leased property is sacrificing capital gains. Depreciation of capital assets has different tax and financial reporting treatment from ordinary business expenses. Leasing may provide more flexibility to a business which expects to grow or move in the relatively short term, because a lessee is not usually obliged to renew a lease at the end of its term. Advantages of Leasing Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/leasing-109/advantages- of-leasing-464- 3806?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Leasing

19. Underwriter Market Maker The Role of an Advisor Agency The Role of Investment Banks in Financing Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dir ect&utm_source=boundless

20. Security issuers want to mitigate the risk of having an unsuccessful issue. Underwriters will buy the securities from the issuer and then sell it on the market. The underwriter aims to buy the securities below market price, and then sell them for a profit. Underwriters deal with both companies and government. The issuer could issue stocks, bonds, or any other type of security. Underwriter Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/the-role-of-investment- banks-in-financing-110/underwriter-465- 7544?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less NYSE View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing

21. Without sufficient liquidity, markets would become more inefficient because there may not be a buyer/seller to transact with, even at what should be the market price. Market-designated market makers provide liquidity by submitting both bids and asks on certain securities. This helps ensure transactions can occur at the market price. By submitting bids below ask prices, the market maker can make money. The difference between the highest bid and the lowest ask price is called the bid- ask spread. Market Maker Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/the-role-of-investment- banks-in-financing-110/market-maker-466- 3811?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less New York Spot Prices View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing

22. Mergers and acquisitions (M&A) require an investment bank to bring the buyer and seller together and to help negotiate the deal. The advisor is hired by the client company to find a buyer/seller. The advisor pitches the deal to potential buyers/sellers using a pitch book, which contains all relevant financial information. The advisor also helps facilitate the deal which is incredible context because it must account for everything from financial projections to assets to brand names. The Role of an Advisor Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/the-role-of-investment- banks-in-financing-110/the-role-of-an-advisor-467- 3812?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Pricewaterhouse Cooper View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing

23. Many small and private companies cannot access traditional financial markets for capital, so they need to either take on debt or find other sources of financing. Investment banks help them find those other sources of capital. Common sources of financing are equity financing, mezzanine financing, and specialist financing (e.g., government loans). The investment banks match their clients to investors and then charge a fee for the service. Agency Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/the-role-of-investment- banks-in-financing-110/agency-468- 3813?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing

24. Defining Spread Pricing a Security Shelf Registration Distributing Stock Obtaining Capital: Methods of Long-Term Financing > Distributing Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dir ect&utm_source=boundless

25. The party that initiates the trade is the liquidity demander who pays the spread. The counterparty is the liquidity supplier who earns the spread. Liquidity suppliers use limit orders. A limit order is when the buyer waits until the stock reaches a designated price. The spread is one component of transaction cost, which along with brokerage fees, reflects the cost of making an instantaneous trade. Defining Spread Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/distributing-stock- 111/defining-spread-469- 3791?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Signals from dividend policy may give clues about stocks. View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Distributing Stock

26. Several methods are used to determine the value of a company including Present Value, Comparable Company Analysis, and Net Asset Value. The goal of each of these methods is to determine the worth of a potential investment in the company. Financial analysis of this sort determines what investors are willing to pay for a given security because it is what they think the security is worth. If most investors think a stock is worth a lot, or will be in the future, they buy it and this demand drives price up. The opposite occurs if investors are not confident about the stock. Therefore, stock price reflects investor expectations. Pricing a Security Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/distributing-stock- 111/pricing-a-security-470- 3790?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Price View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Distributing Stock

27. A company can file a shelf registration statement with a prospectus that offers different classes of securities. It can then sell all, none, or some of the classes at any time. Regulators generally grant shelf registration to companies that are reliable. They also require a statement of material changes in business since the prospectus was filed before each security is actually sold. Shelf registration can be used by a company as a strategy to quickly sell securities for funds when market conditions become favorable. Shelf Registration Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/distributing-stock- 111/shelf-registration-471- 5149?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Shelf Registration View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Distributing Stock

28. Advantages of Public Financing Advantages of Private Financing Types of Private Financing Deals: Going Private and Leveraged Buyouts Comparing Public and Private Financing Obtaining Capital: Methods of Long-Term Financing > Comparing Public and Private Financing Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dir ect&utm_source=boundless

29. The magnitude of funding available from public financing is its chief advantage. An initial public offering is when a private company converts to a public company by selling shares of its stock publicly. A company can sell further shares of stock in secondary offerings. A company can also sell debt, in the form of bonds, in public exchanges. Advantages of Public Financing Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/comparing-public-and- private-financing-112/advantages-of-public-financing-472- 3454?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Public Financing View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Comparing Public and Private Financing

30. One advantage of private financing is that private investors may infuse the company with more capital than was available to it from public financing. Private financing also saves on administrative costs of being a publicly traded company. Private financing can improve incentives for management, and increase investor involvement. Advantages of Private Financing Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/comparing-public-and- private-financing-112/advantages-of-private-financing-473- 5679?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Private financing View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Comparing Public and Private Financing

31. The acquiring party borrows money in addition to using its own funds to meet the purchase price of the target. LBOs can also occur to public companies, such as in public to private (PtP) transactions. The term typically applies to a deal in which a financial sponsor acquires a company. In this instance, the sponsor uses debt to increase its return on equity. LBOs are appealing to the acquiring company because debt typically carries a lower cost of capital than equity, which means that by employing more debt, the acquiring party magnifies returns. Types of Private Financing Deals: Going Private and Leveraged Buyouts Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/comparing-public-and- private-financing-112/types-of-private-financing-deals-going-private-and-leveraged-buyouts-474- 4236?campaign_content=book_192_chapter_14&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=bound less Financing deal View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > Comparing Public and Private Financing

32. Free to share, print, make copies and changes. Get yours at www.boundless.com Appendix

33. Key terms ask The submitted price at which the trader is willing to sell. bid The submitted price at which the trader is willing to buy. bid price the amount offered by a buyer bid-ask spread the difference between the prices quoted for an immediate sale and an immediate purchase bond A documentary obligation to pay a sum or to perform a contract; a debenture. capital-intensive Capital intensity is the term for the amount of fixed or real capital present in relation to other factors of production, especially labor. Common stock Shares of an ownership interest in the equity of a corporation or other entity with limited liability. Holders of this type of stock are entitled to dividends. Importantly, the financial rights for holders of this type of stock are junior to preferred stock and liabilities. debt Money that the borrowing entity owes or is required to pay to a lender. EBITDA Coverage Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability to honor its debt payments. It may be calculated as either EBIT or EBITDA divided by the total interest payable. external financing needs Additional funds needed from sources outside the firm, in order to support firm operations. incentive Something that motivates, rouses, or encourages. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing

34. Initial public offering An initial public offering (IPO) or stock market launch is a type of public offering where shares of stock in a company are sold to the general public. insolvency The condition of being insolvent; the state or condition of a person who is insolvent; the condition of one who is unable to pay his debts as they fall due, or in the usual course of trade and business; as, a merchant's insolvency. investor A person who invests money in order to make a profit. IPO An initial public offering (IPO) or stock market launch is a type of public offering where shares of stock in a company are sold to the general public for the first time. Through this process, a private company transforms into a public company. issuer The firm or government selling the security. leverage The use of borrowed funds with a contractually determined return to increase the ability of a business to invest and earn an expected higher return (usually at high risk). liquidity Availability of cash over short term: ability to service short-term debt. M&A Mergers and acquisitions (M&A) are aspects of corporate strategy, corporate finance, and management dealing with the buying, selling, dividing, and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. overleveraged Subject to excessive leverage Preferred Stock Stock with a dividend, usually fixed, that is paid out of profits before any dividend can be paid on common stock. It also has priority to common stock in liquidation. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing

35. present value Present value, also known as present discounted value, is the value on a given date of a payment or series of payments made at other times. private A company that is not publicly traded. prospectus A document that describes a proposed endeavor (venture, undertaking) such as a literary work (which one proposes to write). Registration rights A contractual agreement specifying conditions for registering shares of stock with the SEC prior to selling them on a security exchange. security proof of ownership of stocks, bonds, or other investment instruments.W Stock The capital raised by a company through the issue of shares. The total of shares held by an individual shareholder. tender offer an invitation to shareholders of a corporation to exchange their shares in return for a monetary buy-out venture capital Money invested in an innovative enterprise in which both the potential for profit and the risk of loss are considerable. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing

36. venture capital Money invested in an innovative enterprise in which both the potential for profit and the risk of loss are considerable. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing

37. Financing deal An LBO is a type of financing deal. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "All sizes | Handshake | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/aidan_jones/3575000735/sizes/m/in/photostream/ View on Boundless.comCC BYhttp://www.flickr.com/photos/aidan_jones/3575000735/sizes/m/in/photostream/View on Boundless.com Obtaining Capital: Methods of Long-Term Financing

38. Venture capital funds revolutionary social networking services Facebook is one example of a entrepreneurial idea that benefited from venture capital financing. The Menlo Park-based firm has seen immense success since their launch in 2004. Unfortunately for Facebook's venture capitalist investors (Accel Partners, Greylock Partners and Meritech Capital), the IPO has not performed as well as expected. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Wikimedia." CC BY-SA http://wikimedia.org View on Boundless.comCC BY-SAhttp://wikimedia.orgView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

39. Firm Life Cycle Firms progress through stages of development, indicated by their changing profits over time. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Product life cycle." CC BY-SA http://commons.wikimedia.org/wiki/File:Product_life_cycle.png View on Boundless.comCC BY-SAhttp://commons.wikimedia.org/wiki/File:Product_life_cycle.pngView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

40. Weighing advantages and disadvantages Pursuing venture capital financing may not be appropriate for most start-up companies. It is important to weigh the benefits of receiving abundant resources against the costs of losing autonomy and ownership. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Wikimedia Commons." CC BY-SA http://commons.wikimedia.org View on Boundless.comCC BY-SAhttp://commons.wikimedia.orgView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

41. New York Spot Prices The highest price someone is willing to pay (bid) for gold is $742.30 and the lowest someone is willing to accept (ask) is $743.30. There is a bid-ask spread of $1.10. Free to share, print, make copies and changes. Get yours at www.boundless.com http://www.xdr.com/dash/blog/index.php?m=10&y=08. "Dave's Blog." CC BY http://www.xdr.com/dash/blog/index.php?m=10&y=08 View on Boundless.comCC BYhttp://www.xdr.com/dash/blog/index.php?m=10&y=08View on Boundless.com Obtaining Capital: Methods of Long-Term Financing

42. Participating Preferred vs. Non-Participating Preferred This graph shows an example of a liquidation event, illustrating how assets will be divided up between common, participating preferred, and non- participating preferred stock holders. All preferred stockholders are paid first, before common stock holders. Participating preferred stockholders can "double dip", and are entitled to both their money back, as well as the leftovers for common stock, proportionate to the amount of common stock for which their preferred stock can be converted into. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Participating preferred stock." GNU FDL http://en.wikipedia.org/wiki/Participating_preferred_stock View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/Participating_preferred_stockView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

43. Pricewaterhouse Cooper Pricewaterhouse Cooper got it's name after the 1998 merger of Price Waterhouse and Coopers & Lybrand. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "PricewaterhouseCoopers." GNU FDL http://en.wikipedia.org/wiki/PricewaterhouseCoopers View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/PricewaterhouseCoopersView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

44. Structure of a Venture Capital Firm The venture capital firm pools capital from investors and allocates it to venture efforts deemed worthy of investment. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Wikimedia." CC BY-SA http://wikimedia.org View on Boundless.comCC BY-SAhttp://wikimedia.orgView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

45. Bank loans as a means of financing A promissory note dating to 1926 from the Imperial Bank of India, Rangoon, Burma for 20,000 Rupees, plus interest. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Promissory note." GNU FDL http://en.wikipedia.org/wiki/Promissory_note View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/Promissory_noteView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

46. Leasing impact Leasing will improve the ratios of the income statement. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "All sizes | Operational Performance Improvement Delhi | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/castoncorporateadvisory/5038323659/sizes/m/in/photostream/ View on Boundless.comCC BY http://www.flickr.com/photos/castoncorporateadvisory/5038323659/sizes/m/in/photostream/View on Boundless.com Obtaining Capital: Methods of Long-Term Financing

47. Signals from dividend policy may give clues about stocks. The spread measures the cost of executing an instant trade. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Wikimedia." CC BY-SA http://wikimedia.org View on Boundless.comCC BY-SAhttp://wikimedia.orgView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

48. Shelf Registration Some of the securities in the prospectus can be "shelved," and sold later. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Book Shelf." Public domain http://commons.wikimedia.org/wiki/File:Book_Shelf.JPG View on Boundless.comPublic domainhttp://commons.wikimedia.org/wiki/File:Book_Shelf.JPGView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

49. Lease Leasing is a good way to lower the costs of a company. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "All sizes | Leased - 090520081773 | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/roland/2478229521/sizes/m/in/photostream/ View on Boundless.comCC BYhttp://www.flickr.com/photos/roland/2478229521/sizes/m/in/photostream/View on Boundless.com Obtaining Capital: Methods of Long-Term Financing

50. Apple Computers IPO Prospectus The Initial Public Offering (IPO) Prospectus for Apple Computer Inc. in December 1980. A total of 5 million shares were offered to the public for $22 each. The total outstanding shares after the offering were 54,215,332. The company's officers, directors and major shareholders held 32 million shares and the rest were held by the company for stock options plans and other needs. Apple's valuation after the IPO was over $1 billion. (54 million shares at $22. ) Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Wikimedia Commons." Public domain http://commons.wikimedia.org View on Boundless.comPublic domainhttp://commons.wikimedia.orgView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

51. 1903 stock certificate of the Baltimore and Ohio Railroad Normally stocks are traded publicly, except in the instance of private stocks, which are only offered and traded by internal stakeholders such as founders, employees, etc. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "B&O RR common stock." Public domain http://en.wikipedia.org/wiki/File:B%2526O_RR_common_stock.jpg View on Boundless.comPublic domainhttp://en.wikipedia.org/wiki/File:B%2526O_RR_common_stock.jpgView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

52. NYSE Firms may issue an IPO on an exchange such as the New York Stock Exchange (NYSE). They sell their stock in exchange for cash. Free to share, print, make copies and changes. Get yours at www.boundless.com Fotopedia. "New York Stock Exchange by in Stock market on Fotopedia - Images for Humanity." CC BY http://www.fotopedia.com/items/flickr-422215562 View on Boundless.comCC BYhttp://www.fotopedia.com/items/flickr-422215562View on Boundless.com Obtaining Capital: Methods of Long-Term Financing

53. Price Price fluctuates depending on how the market values the security. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Silver price." Public domain http://commons.wikimedia.org/wiki/File:Silver_price.png View on Boundless.comPublic domainhttp://commons.wikimedia.org/wiki/File:Silver_price.pngView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

54. Private financing Private financing can offer advantages over public. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "All sizes | Private | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/holster/195031415/sizes/m/in/photostream/ View on Boundless.comCC BYhttp://www.flickr.com/photos/holster/195031415/sizes/m/in/photostream/View on Boundless.com Obtaining Capital: Methods of Long-Term Financing

55. Public Financing Public financing offers immediate access to large amounts of funding. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "All sizes | Stock Market | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/76657755@N04/7027607705/sizes/m/in/photostream/ View on Boundless.comCC BYhttp://www.flickr.com/photos/76657755@N04/7027607705/sizes/m/in/photostream/View on Boundless.com Obtaining Capital: Methods of Long-Term Financing

56. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing A company has developed a successful strategy and its sales are steadily increasing despite an increase in competition. Which of the following types of financing should the company consider? A) Obtain funds from a Venture Capitalist. B) All of these answers. C) Pursue equity financing. D) Offer its stock to the general public on a security exchange.

57. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing A company has developed a successful strategy and its sales are steadily increasing despite an increase in competition. Which of the following types of financing should the company consider? A) Obtain funds from a Venture Capitalist. B) All of these answers. C) Pursue equity financing. D) Offer its stock to the general public on a security exchange.

58. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing A company is looking for funding through a venture capitalist. The company is selling its product but it is not profitable yet and needs the additional investment as working capital. The company is in which funding stage? A) Start-up. B) Second-round. C) Seed money round. D) Expansion financing.

59. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing A company is looking for funding through a venture capitalist. The company is selling its product but it is not profitable yet and needs the additional investment as working capital. The company is in which funding stage? A) Start-up. B) Second-round. C) Seed money round. D) Expansion financing.

60. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following statements regarding how companies use long-term debt is correct? A) From a tax perspective, debt financing have some advantages over equity financing. B) Riskier businesses are required to pay higher interest rates. C) All of these answers. D) Most corporate bonds are fixed-rate bonds.

61. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following statements regarding how companies use long-term debt is correct? A) From a tax perspective, debt financing have some advantages over equity financing. B) Riskier businesses are required to pay higher interest rates. C) All of these answers. D) Most corporate bonds are fixed-rate bonds.

62. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing A company issues preferred stock that gives the shareholders rights to dividends. If the company does not pay any dividends in a given year, the preferred shareholders cannot claim those unpaid dividends in the future. What type of stock is this? A) Cumulative preferred stock. B) Participating preferred stock. C) Non-cumulative preferred stock. D) Convertible preferred stock.

63. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing A company issues preferred stock that gives the shareholders rights to dividends. If the company does not pay any dividends in a given year, the preferred shareholders cannot claim those unpaid dividends in the future. What type of stock is this? A) Cumulative preferred stock. B) Participating preferred stock. C) Non-cumulative preferred stock. D) Convertible preferred stock.

64. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following statements regarding venture capital is correct? A) Venture capitalists are selective in their investments because each investment must turn a profit. B) When a VC firm invests, they generally take a hands off approach regarding the firm's management. C) All of these answers. D) Most venture capital investments are done with pooled investment vehicles.

65. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following statements regarding venture capital is correct? A) Venture capitalists are selective in their investments because each investment must turn a profit. B) When a VC firm invests, they generally take a hands off approach regarding the firm's management. C) All of these answers. D) Most venture capital investments are done with pooled investment vehicles.

66. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following is an advantage for a firm seeking VC financing? A) The company retains autonomy. B) VC funding offers companies an opportunity to expand that is not possible with other methods. C) The accounting and legal fees associated with the funding are not shouldered by the firm. D) All of these answers.

67. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following is an advantage for a firm seeking VC financing? A) The company retains autonomy. B) VC funding offers companies an opportunity to expand that is not possible with other methods. C) The accounting and legal fees associated with the funding are not shouldered by the firm. D) All of these answers.

68. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following is NOT a benefit associated with a company initiating an Initial Public Offering (IPO)? A) The company will be able to increase its exposure, prestige, and public image. B) The company is guaranteed to raise additional capital necessary to expand its business. C) The company will be able to attract and retain better management and employees. D) The company will have cheaper access to capital.

69. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following is NOT a benefit associated with a company initiating an Initial Public Offering (IPO)? A) The company will be able to increase its exposure, prestige, and public image. B) The company is guaranteed to raise additional capital necessary to expand its business. C) The company will be able to attract and retain better management and employees. D) The company will have cheaper access to capital.

70. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following is a characteristic of an operating lease? A) At the end of the lease, the lessee obtains ownership of the asset. B) The term of the lease is at least 75% of the asset's estimated useful life. C) The present value off the lease payments equals or exceeds 90% of the original cost of the asset. D) At the end of the lease, the company has the opportunity to purchase the asset at its market value.

71. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following is a characteristic of an operating lease? A) At the end of the lease, the lessee obtains ownership of the asset. B) The term of the lease is at least 75% of the asset's estimated useful life. C) The present value off the lease payments equals or exceeds 90% of the original cost of the asset. D) At the end of the lease, the company has the opportunity to purchase the asset at its market value.

72. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following is NOT an expense that can be decreased by a company through leasing? A) Interest expense. B) Depreciation expense. C) Maintenance expense. D) Acquisition costs.

73. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following is NOT an expense that can be decreased by a company through leasing? A) Interest expense. B) Depreciation expense. C) Maintenance expense. D) Acquisition costs.

74. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following is an advantage a company can obtain by leasing its equipment? A) A business can grow more rapidly by leasing property instead of purchasing it. B) Leasing shifts the risk of capital asset value fluctuations from the lessee to the lessor. C) All of these answers. D) Leasing provides flexibility to companies that expect to grow or move in the short term.

75. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following is an advantage a company can obtain by leasing its equipment? A) A business can grow more rapidly by leasing property instead of purchasing it. B) Leasing shifts the risk of capital asset value fluctuations from the lessee to the lessor. C) All of these answers. D) Leasing provides flexibility to companies that expect to grow or move in the short term.

76. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following statements describe the role of underwriters? A) The underwriter minimizes the risk to company that is issuing stock. B) The underwriter sells a company's IPO shares to the market at large. C) All of these answers. D) The underwriter determines at what price a company's IPO shares will sell.

77. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following statements describe the role of underwriters? A) The underwriter minimizes the risk to company that is issuing stock. B) The underwriter sells a company's IPO shares to the market at large. C) All of these answers. D) The underwriter determines at what price a company's IPO shares will sell.

78. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following defines the role of a market maker? A) Market makers purchase securities where the bid-ask spread is too great. B) Market makers are exchanges, like the New York Stock Exchange. C) Market makers quote both ask and bid prices for certain securities. D) All of these answers.

79. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following defines the role of a market maker? A) Market makers purchase securities where the bid-ask spread is too great. B) Market makers are exchanges, like the New York Stock Exchange. C) Market makers quote both ask and bid prices for certain securities. D) All of these answers.

80. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing What are some of the tasks investment banks undertake when they advise companies? A) Prepare the company's pitch book. B) Find companies that might be interested in acquiring the business. C) All of these answers. D) Negotiate the terms of the acquisition between the acquiring and acquired business.

81. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing What are some of the tasks investment banks undertake when they advise companies? A) Prepare the company's pitch book. B) Find companies that might be interested in acquiring the business. C) All of these answers. D) Negotiate the terms of the acquisition between the acquiring and acquired business.

82. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following statements correctly defines a source of capital? A) Equity financing occurs when a company sells some of its stock to investors. B) Mezzanine capital are government loans or special grants that the company qualifies for. C) Specialist financing is subordinated debt or preferred equity instrument that represents a claim on company assets. D) All of these answers.

83. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following statements correctly defines a source of capital? A) Equity financing occurs when a company sells some of its stock to investors. B) Mezzanine capital are government loans or special grants that the company qualifies for. C) Specialist financing is subordinated debt or preferred equity instrument that represents a claim on company assets. D) All of these answers.

84. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following statement regarding stock "spread" is correct? A) A trader initiating a transaction is said to supply liquidity; the counterparty demands liquidity B) A stock's bid-offer spread is the sole component of a transaction cost. C) All of these answers. D) The bid-offer spread is the difference between the prices quoted for sale and for purchase.

85. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following statement regarding stock "spread" is correct? A) A trader initiating a transaction is said to supply liquidity; the counterparty demands liquidity B) A stock's bid-offer spread is the sole component of a transaction cost. C) All of these answers. D) The bid-offer spread is the difference between the prices quoted for sale and for purchase.

86. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following correctly defines a method used to value a company's securities? A) A company's net asset value equals the market value of a company's assets minus its liabilities. B) All of these answers. C) Comparable company analysis determines a firm's value by observing the prices of similar companies. D) Present value determines a company's stock price using the firm's projected cash flows.

87. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following correctly defines a method used to value a company's securities? A) A company's net asset value equals the market value of a company's assets minus its liabilities. B) All of these answers. C) Comparable company analysis determines a firm's value by observing the prices of similar companies. D) Present value determines a company's stock price using the firm's projected cash flows.

88. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following statements regarding shelf registration is true? A) Shelf registration is available to any business, but are examined rigorously. B) Shelf registration allows a company to sell securities without a separate prospectus for each offering. C) Shelf registration is for new issues, must be prepared up to five years in advance. D) Once the application is filed, a business does not make any additional filings prior to the sale.

89. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following statements regarding shelf registration is true? A) Shelf registration is available to any business, but are examined rigorously. B) Shelf registration allows a company to sell securities without a separate prospectus for each offering. C) Shelf registration is for new issues, must be prepared up to five years in advance. D) Once the application is filed, a business does not make any additional filings prior to the sale.

90. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following is the main advantage for a company to go public? A) By being publicly traded, the company has greater access to capital. B) The company can diversify its equity base. C) The company can attract and retain better managers and employees. D) The company has more opportunities for acquiring other businesses.

91. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following is the main advantage for a company to go public? A) By being publicly traded, the company has greater access to capital. B) The company can diversify its equity base. C) The company can attract and retain better managers and employees. D) The company has more opportunities for acquiring other businesses.

92. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following is a reason a public company might decide to go private? A) Private investors can offer expert knowledge and oversight, where public investors generally cannot. B) Privately financed companies generally have lower administrative costs. C) Generally private companies are owned by the managers, which incentivizes them to improve performance. D) All of these answers.

93. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following is a reason a public company might decide to go private? A) Private investors can offer expert knowledge and oversight, where public investors generally cannot. B) Privately financed companies generally have lower administrative costs. C) Generally private companies are owned by the managers, which incentivizes them to improve performance. D) All of these answers.

94. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following statements regarding leveraged buyouts (LBOs) is correct? A) LBOs mostly occur in public companies. B) In an LBO, the junior debt is secured with the assets of the target company. C) All of these answers. D) An LBO is an acquisition that is financed by debt secured by the cash flows of the target company.

95. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following statements regarding leveraged buyouts (LBOs) is correct? A) LBOs mostly occur in public companies. B) In an LBO, the junior debt is secured with the assets of the target company. C) All of these answers. D) An LBO is an acquisition that is financed by debt secured by the cash flows of the target company.

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