How Does the Size of an Issue Affect the Fees

question 73

Multiple Choice

How does the size of an issue affect the fees charged by underwriters?

• A)Large issues generally have a similar spread to small issues and thus attract much greater fees.
• B)Large issues have substantially larger direct costs and, thus, must charge a larger spread in order to be profitable for the underwriter.
• C)Large issues have a reduced spread, which means that the total fees are generally the same as for smaller issues.
• D)Although large issues generally have a smaller spread, the large number of shares released means that the total fees are somewhat larger than for smaller issues.

---

Definitions:

Owner's Equity Statement

A financial document detailing the changes in the equity of an owner in a company over a specific period.

Time Period Assumption

An accounting principle that suggests a business's activities can be divided into specific time periods for reporting purposes.

Fiscal Year

The one-year period an organization uses for accounting purposes and preparing financial statements, which may or may not align with the calendar year.

Revenue Recognition Principle

A fundamental accounting principle that dictates when revenue should be recognized in the financial statements, typically when it is earned and realizable.