When a New Issue Goes Wrong and the Stock Price

question 85

Multiple Choice

When a new issue goes wrong and the stock price immediately crashes once trading commences, the IPO investors are most apt to:

• A) only blame their bad luck.
• B) convert their shares into bonds.
• C) sue the company executives who are still shareholders.
• D)sue the underwriters for overhyping the issue.

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Definitions:

P/E Ratio

Price to Earnings Ratio, a valuation metric comparing a company's market share price to its per-share earnings.

Stock Price

The cost of purchasing a share of a company's stock, representing the market's value of a share of the company's equity.

Days Sales Outstanding

A measure of how long it takes a company to collect payment after a sale has been made, indicating the efficiency of the company's credit and collection policies.

Sales

The activities involved in selling products or services, or the total amount of goods or services sold.