The Offering Price Is Set to Make the Issue Attractive

question 32

Multiple Choice

The offering price is set to make the issue attractive to the market and provide a good price to the issuer.Which of the following is/are true?

• A)Empirical studies by Ritter have shown that the average firm commitments have had a 17.8% underpricing on the first day of trading.
• B)Empirical studies have shown that the best efforts sales have underpricing on the first day of trading.
• C)Some issues such as Shiva which rose dramatically on the first day of trading were viewed as successfully priced by the underwriter because it helped build a long-term investment base.
• D)All of the above.
• E)None of the above.

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Definitions:

Quick Ratio

A financial metric that measures a company's ability to meet short-term obligations with its most liquid assets, excluding inventory.

Evaluation Of Liquidity

The process of assessing a company's ability to meet its short-term obligations using its current assets.

Current Obligations

Debts or financial commitments that are due to be settled within one year or within the normal operating cycle of the business.