Which of the Following Statements Is FALSE

question 43

Multiple Choice

Which of the following statements is FALSE?

• A)After deciding to go public,managers of the company work with an underwriter,an investment banking firm that manages the offering and designs its structure.
• B)The shares that are sold in the IPO may either be new shares that raise new capital,known as a secondary offering,or existing shares that are sold by current shareholders (as part of their exit strategy),known as a primary offering.
• C)Many IPOs,especially the larger offerings,are managed by a group of underwriters.
• D)At an IPO,a firm offers a large block of shares for sale to the public for the first time.

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Definitions:

Financial Leverage

Financial leverage refers to the use of debt (borrowed funds) to amplify the potential returns to shareholders. It increases the potential for both gains and losses.

Operating Risk

The risk arising from the day-to-day operations of a company, indicating the variability in operating income due to changes in revenue and expenses.

Financial Risk

The potential for losses due to factors affecting the overall financial market or specific securities within a portfolio.

EPS

Earnings Per Share represents the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of the company's profitability.