A Study by Lee, Lockhead, Ritter and Zhao in Examining

question 5

Multiple Choice

A study by Lee, Lockhead, Ritter and Zhao in examining the underwriting discount and other direct costs of going public with a debt or equity offering found:

• A)the direct expenses are higher for equity than debt offerings.
• B)substantial economies of scale are prevalent.
• C)underpricing on average is similar in magnitude to total direct expenses.
• D)overpricing on average is similar in magnitude to total direct expenses.
• E)All of the above.

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Definitions:

COGS

The Cost Of Goods Sold; it represents the direct costs attributable to the production of the goods sold by a company.

Net Cash

Describes the amount of cash available after accounting for all cash inflows and outflows.

Statement Of Cash Flows

A financial report that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Financial Ratios

Financial ratios are quantifiable measures used to evaluate a company's financial performance by comparing two line items from financial statements.