The Key Difference Between a Negotiated Offer and a Competitive

question 47

Multiple Choice

The key difference between a negotiated offer and a competitive offer is that:

• A) the underwriters cannot set the spread in a negotiated bid but can in a competitive offer.
• B) the issuing firm can offer its securities to the highest bidder in a competitive bid but in a negotiated bid only one investment banker is used.
• C) the issuing firm works the underwriter for the best spread in a negotiated bid which will be less than that available in a competitive offer.
• D) the underwriter will not do a full investigation in a negotiated bid because the company is at their mercy, while in a competitive bid the underwriter must be extra diligent.
• E) None of these.

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Definitions:

Cash Basis

An accounting method where revenues are recognized when received and expenses when paid.

Sales Adjusted

Adjustments made to sales figures for returns, allowances, or discounts.

Direct Method

A cost allocation method that assigns costs directly to cost objects without using any intermediate cost pools or allocations.

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is received or paid, respectively.