Source of Business Finance and Cost of Capital 2

What means rights issues?

• New shares are offered to the public

• New shares are offered first to existing shareholders

• New shares are offered at a premium

• New shares are offered to institutional investors

Can shareholders sell rights if they wish?

• Yes

• No

Do preference shares carry less risk than ordinary shares? True or False.

• True

• False

What is the preferential right associated with preference shares?

• Right to vote

• Right to receive dividend

• Right to manage the company

• Right to sell shares

Do preference shares normally carry voting rights?

• Yes

• No

In the event of liquidation, when will preference shareholders be paid off?

• Before debt holders

• After debt holders

• At the same time as debt holders

• They will not be paid off

What is an allowable deduction from profit chargeable to tax in long-term debt finance?

• Dividends

• Interest

• Equity

• Capital Gains

In the event of liquidation, who is paid off before shareholders?

• Equity holders

• Debt holders

• Directors

• Employees

The interest rate (or coupon) is based on the _______ value and is usually paid once or twice each year.

• nominal

• market

• par

• discount

If the bond is redeemable, the principal (the nominal value) will need to be repaid on the _______ date.

• redemption

• maturity

• issue

• settlement