Which of the Following Statements Is Correct

question 47

Multiple Choice

Which of the following statements is correct?

• A) Flotation costs under a best-efforts arrangement typically are less for a given new equity issue than the costs associated with an underwritten offering,and the corporation is more certain of getting the needed funds under a best-efforts offering.This is why best efforts deals are most common.
• B) If a firm decides to issue securities through a direct (or private)placement,then the underwriting syndicate that is formed to distribute the securities to the public may,at its discretion,decide either to guarantee or not to guarantee the sale of the securities.
• C) If the demand curve for a firm's stock is relatively flat,the firm will have a more difficult time raising a large amount of new equity funds for expansion than would be true if this demand curve were steeper.
• D) It is possible for a firm to go public,and yet not raise any additional capital.
• E) None of the above is a correct statement.

---

Definitions:

Federal Government

The national government of a federal country, which shares sovereignty with the subnational governments (states, provinces, etc.).

Government Purchases

Expenditures by government bodies on goods and services that directly contribute to a nation's aggregate demand.

Social Security Payments

Government transfers paid to eligible individuals, such as the retired, disabled, and survivors, aimed at providing a basic level of financial security.

Private Pensions

Retirement plans offered by private sector employers, unions, or other organizations to provide income to employees after retiring.