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Series 79 > Review > Flashcards

Review Flashcards

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Series 79 Top-Off Exam flashcards
1
Q

When selling stock on OTC Pink Sheets, what is the limit?

A

1% of outstanding shares

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2
Q

Reg S can only sell to people:

A

Living offshore

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3
Q

How does WACC apply to small firms?

A

It’s a size premium that is added

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4
Q

PV of Cash Flows:

A

T. Value = FCFn x (1+g)/(r-g)

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5
Q

ROIC=

A

EBIAT / Invested Capital or EBIAT / (Avg Debt + Avg Equity)

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6
Q

FINRA Comp Limits for IPO, Options & Warrants, Right of First Refusal, and Tail Fee Arrangement:

A

7%, 5 years with strike price at or above offering, 3 years, 2 years.

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7
Q

Price / Tangible Book Value Ratio

A

=Equity Value / Book Value of Equity or (Stock Price x shares outstanding) / (SH Equity - Goodwill)

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8
Q

Carry Trade

A

Borrow in a currency with low interest and invest in a currency with high interest

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9
Q

Credit Arbitrage

A

Invest in ST and LT bonds of the same currency

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10
Q

Interest Income & Interest Expense are both components of

A

Operating Cash Flow

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11
Q

Shares offered “at the market” must be purchased from:

A

The secondary market

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12
Q

Eq Value

A

Total Shares Outstanding x Stock Price or EV - Net Debt

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13
Q

EV

A

Eq. Value + Net Debt or Eq. Value - Cash + Pref. Stock + NCI

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14
Q

Operating Income or Earnings =

A

EBIT

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15
Q

AP Turnover

A

COGS / Avg AP

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16
Q

144A is for

A

QIBs

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17
Q

Shelf Registration Rule 4 and 5 clock

A

3 years

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18
Q

WKSI $1B non-conv deb over what period?

A

3 years

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19
Q

Price / Tangible Book Ratio

A

EqV / (Shareholder’s Equity - Goodwill)

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20
Q

SA 1933 Section 4(a)(2) & 4(a)(5)?

A

PPs to AIs

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21
Q

What type of communication is a FWP?

A

Written

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22
Q

Role of Asset Purchase Agreement (APA)?

A

Make a pre-emptive bid on favorable terms

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23
Q

Do un-exercisable options contribute to diluted shares outstanding?

A

No

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24
Q

Affiliate’s shares are sold by affiliates of the company in the secondary market, do proceeds go to the company?

A

No, they go to the affiliate who sold them.

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25
Q

Yield to Worst

A

Lower of YTC or YTM

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26
Q

Equity Turnover

A

Sales / Avg. SH Equity

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27
Q

Priority Status of Debt is also called:

A

Contractual Subordination

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28
Q

Merger proxy is in a Schedule

A

A Schedule 14A

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29
Q

Companies in trouble would most likely seek investment from what kind of fund?

A

Distressed

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30
Q

Schedule 13G vs 13D

A

Both hold 5% public co stock. D=Direct want to control. G=Passive for Gerald.

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31
Q

Ineligible issuers must use a what to issue securites?

A

Registration statement

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32
Q

Large accelerated filers have how long at EOY to file their 10K?

A

60 calendar days

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33
Q

During a tender offer, purchaser files a Schedule TO and Schedule 13D. Target responds on a ________ with investor recommendation.

A

Schedule 14d-9

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34
Q

ROE

A

NI / Avg Book Value of SH Equity

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35
Q

Current Ratio

A

CA/CL

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36
Q

Rule 144 provides exemption from registration for:

A

Restricted Stock

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37
Q

Where is a bankruptcy attorney’s asset priority?

A

After secured creditors, before employee wages

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38
Q

Bankruptcy creditor priority:

A

SPUMPC:
Secured - first lien
Priority - Admin: trustee, bankers, attorneys, wages, benefit plans, Govt
Unsecured - General creditors - Senior, Junior, Exec Pay
Mezzanine
Preferred Stock
Common stock, rights, and warrants

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39
Q

Operating Margin

A

EBIT / Sales

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40
Q

Goodwill formula

A

Purchase Price - MV

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41
Q

QIB definition

A

Institution with over $100M discretionary or BD w/ $10M assets

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42
Q

CAPM determines

A

COE

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43
Q

Income taxes on LP are paid by

A

All partners

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44
Q

MLPs do what with gains and losses?

A

Pass through

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45
Q

What is Accretion?

A

EPS before vs EPS after

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46
Q

Control relationships must be disclosed:

A

before transaction completion

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47
Q

AI qualification for companies?

A

$5M

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48
Q

Do preliminary merger proxies always have to be filed with SEC?

A

Yes

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49
Q

When calculating Retained Earnings, when are taxes calculated?

A

Before dividends

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50
Q

Public disclosures are made through an

A

8-k

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51
Q

If a research firm is writing a report on another, with what restrictions can the subject of the report review it?

A

Old: With certain information omitted, like rating and price target. They can only review facts. New rule: Now they can not review it at all.

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52
Q

When can IOIs be collected for a new issue?

A

After registration statement is filed.

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53
Q

In a bankruptcy, deferred comp plans are on par with:

A

Other unsecured creditors

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54
Q

Does new goodwill add to existing goodwill on the acquirer’s books?

A

Yes

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55
Q

Form for public disclosure of sensitive information

A

8-K

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56
Q

What are some useful places to get information on precedent transactions?

A

Merger proxies, target’s M&A history, SDC Platinum, Research report.

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57
Q

What may be granted super priority in a bankruptcy?

A

DIP loans

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58
Q

Diluted EPS assumes all convertible preferred shares are

A

converted to common stock

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59
Q

Fixed Charge Coverage Ratio formula

A

(EBIT + Rent Exp.) / (Int. Exp. + Rent Exp.)

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60
Q

Short swing profits are considered less than

A

6 months

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61
Q

Restricted period before pricing

A

ADTV $100k+ or public float $25M+ = 1 business day.
Under the above numbers = 5 business days.

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62
Q

Institutional customers (50M+ assets) can be exempt from

A

Customer Suitability requirements

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63
Q

Form S-4 must be signed by:

A

CEO, CFO, Controller, Majority of BoD.

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64
Q

Default Reg M restricted period is __ days before pricing

A

5 business days

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65
Q

Committed financing letters come with

A

Final bids

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66
Q

10-Q includes what two pieces?

A

Financial statements and market risk disclosure

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67
Q

Most important limitation on Reg D Rule 504

A

Total capital raised - 10M over 12 months.

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68
Q

When does the pricing of an IPO take place?

A

After SEC clears the issue

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69
Q

Difference between a Dutch auction and a modified Dutch auction?

A

Modified allows purchaser to change the price range

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70
Q

Comparable Company Analysis vs Precedent Transactions Analysis

A

Comparable is current prices of publicly traded peers.
Precedent is looking at prices/multiples in prior M&A transactions

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71
Q

Who ensures the investor doesn’t exceed their CF limit?

A

The Intermediary

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72
Q

Continuous reporting requirements are mandated by what?

A

SA 1934

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73
Q

Do syndicate covering transactions have specific requirements?

A

No

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74
Q

To determine an accelerated filer, when is market cap calculated?

A

Q2 of the fiscal year

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75
Q

Institutional investor requirements

A

$50M

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76
Q

What two situations increase the chances of an SEC review?

A

MBO & buyer issuing shares with the transaction

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77
Q

Who do anti-dilution provisions in IPOs protect?

A

Pre-IPO investors

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78
Q

Goodwill is the amount paid over

A

Book value

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79
Q

Are insider shares outstanding?

A

No

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80
Q

Cram down requirements

A

1/2 claims and 2/3 of dollar amount

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81
Q

Does the management team help prepare the CIM?

A

Yes

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82
Q

Research report requirements - how many people does it need to be distributed to to be a research report?

A

Recommendations to at least 15 people

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83
Q

When does a public company file an 8-K for a PIPE?

A

Total shares increase by 1% or more

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84
Q

What is not required in a Fairness Opinion?

A

Firms previous experience

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85
Q

REITs aren’t subject to corporate tax if they:
% assets invested in RE
% income from RE investments
% gains passed through to investors

A

75
75
90

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86
Q

Two differences between 10-K and 10-Q?

A

Financial statements in 10-Q are unaudited and it does not include a list of major shareholders.

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87
Q

PREF14A must be filed X days before the DEF14A.

A

10

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88
Q

Does SOX require a financial expert on the audit committee?

A

No, it just requires disclosure if there is one.

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89
Q

Form 3 is filed when

A

A person becomes a corporate insider

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90
Q

Form 4 is filed any time

A

A corporate insider trades stock in the open market

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91
Q

Form 5 is filed

A

To report any change in ownership outside the open market

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92
Q

Who files a 13F?

A

Institutional investment managers with $100M or more of discretionary securities.

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93
Q

When is a 13F filed?

A

Quarterly, within 45 calendar days of the end of each quarter

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94
Q

Who files a 13E-3?

A

Public co going private

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95
Q

To avoid multiple private placements being treated as one transaction, at least ___ days must elapse without any offerings to investors

A

30

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96
Q

Under Reg D, a company must file Form ___ with the SEC within ___ days after the first sale of securities

A

D, 15

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97
Q

How to calculate the multiple paid for a transaction?

A

Purchase price = NI x multiple
Purchase price / (NI + after-tax synergies)

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98
Q

A buy-side advisor would want all of the following except:
A) a larger break-up fee for a superior offer
B) a tighter sale contract (Definitive Agreement)
C) greater certainty of closing
D) strong cultural fit

A

D

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99
Q

What is DSO and how does it effect A/R?

A

Days Sales Outstanding, it’s a measure of how well a company is managing its AR.

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100
Q

Fairness opinions are typically rendered in what kind of transactions?

A

M&A

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101
Q

What do you do with one-time charges when recalculating P/E multiple?

A

Add them back to NI after-tax, then recalculate.

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102
Q

What metric is the best proxy for operating cash flow?

A

EBITDA

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103
Q

Why would a company want to acquire 90% of another company’s stock?

A

It permits a short-form merger.

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104
Q

In a fixed price IPO, when must the final list of distribution participants be filed?

A

3 days after the offering date.

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105
Q

Which method of soliciting crowdfunding investments is NOT allowed?

A

Direct offering to investors (social media or otherwise)

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106
Q

When must a prospectus be given to shareholders on a merger?

A

Prior to the vote (no specific day limit)

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107
Q

What kind of stock sale is treated as an asset sale for tax purposes?

A

338, also called 338(h)(10)

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108
Q

When is a research report not considered an offering of securities?

A

It’s regularly published and not overly promotional (it can express opinions.

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109
Q

What are the three components of O&O?

A

Organization and offering expenses are: DD expenses, bona fide issuer expenses, and underwriting compensation.

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110
Q

What conditions must be met for an issuer to exchange its own securities?

A

Limited to existing holders and can not include commission paid to brokers.

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111
Q

If a member of the BoD unexpectedly resigns right before an IPO, how is that information disclosed to the public?

A

Revised term sheet or press release as a FWP.

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112
Q

In a 10-K, registrants must report what about foreign countries?

A

All foreign countries it derives revenues from for the last three fiscal years.

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113
Q

The parties to a selected dealer agreement are

A

the managing underwriter and the selling group members

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114
Q

Rule 147 offering can only sell to investors where?

A

In state.

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115
Q

The lead manager in the syndicate is also called the

A

Book-runner

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116
Q

Conflict amount for using an offering to repay debt from a BD?

A

5%

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117
Q

What is the crowdfunding limit per investor?

A

Greater of $2500 or 5% of annual income or net worth.

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118
Q

Easy way to calculate P/E multiple?

A

Stock Price / EPS

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119
Q

“Capital resources” describes what?

A

Registrant’s material commitments for the capital expenditures as of the end of the latest fiscal period.

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120
Q

Debt to cap ratio

A

Total Debt / (Total Debt + Shareholder’s Equity)

Total debt includes: current installments of long-term debt, long-term debt, notes payable, loans, bonds, debentures, capital leases.

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121
Q

In what capacity does the selling group act in an IPO?

A

Agency capacity - they accept IOIs

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122
Q

An affiliate must file notice with the SEC on Form 144 if they wish to sell (amounts in shares & dollars) in what period?

A

5,000 shares or $50,000 in aggregate in any three month period. Sale must take place within three months of filing the Form

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123
Q

What two components does the total spread consist of?

Where does the underwriting fee come from?

A

The manager’s fee plus the full takedown.

The underwriting fee is part of the full takedown, along with the selling concession.

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124
Q

SOX Section 403 requires disclosures by any stockholder with a beneficial interest in

A

10% or more of any class of any equity

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125
Q

Reps and warranties are required with what type of transaction?

A

Stock-for-stock

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126
Q

Marketing emails sent to prospective investors are categorized as what and must be filed when?

A

FWP and filed on the day of first use

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127
Q

Quick Ratio

A

(CA - Inventory) / CL

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128
Q

What type of trust may not own an S corp?

A

Charitable remainder trust

129
Q

In what two scenarios would a buyer be expected to pay a higher premium for a public target?

A

All-stock deal and target trading at an all-time low (because investors wouldn’t want to sell on the cheap)

130
Q

For what two reasons would a sell-side banker conduct extensive DD on its client?

A

To better anticipate buyer concerns and better understand the company’s investment highlights

131
Q

Is a 363 Sale used to arrange DIP Financing?

A

No

132
Q

When can a corporate BOD minute book stay unsigned?

A

As long as 75% of the directors were present, the minutes may remain unsigned.

133
Q

What disclosure is required with a Rule 134 offering?

A

The securities may not be bought prior to the registration’s effective date.

134
Q

If two public companies agree to merge, who has to announce the merger in an 8-K?

A

Both

135
Q

Can the “public announcement” of a tender offer be written, oral, or both?

A

Both

136
Q

Where are mortgage bonds in the priority of claims?

A

Secured creditors

137
Q

Assets = Liabilities + ________

A

Shareholder’s Equity

138
Q

According to Reg M Rules 101 and 102, FINRA must receive notification from offering participants for listed, unlisted, or all securities and only those with a restricted period, without, or all?

A

All and all

139
Q

In a MLP, who has unlimited liability?

A

General Partners only. LPs only lose their investment and debts.

140
Q

What is a Standstill Agreement and where is it usually located?

A

Precludes buyers from making unsolicited offers or purchases of shares or seek to control/influence. Typically found in the Confidentiality Agreement.

141
Q

What’s the difference between a qualified and unqualified opinion?

A

Qualified is negative: limited or couldn’t verify info. Unqualified is good: financials fairly reflect the co.

142
Q

If Public Co A wants to acquire Private Co B with stock, where are the terms of the deal made public?

A

Public Co S-4 (combo and exchange offers)

143
Q

In what case are money market mutual funds exempt from SEC registration and prospectus delivery requirements?

A

Never

144
Q

Fairness opinions have to disclose whether they evaluated compensation to any insider of the client company. Who are insiders for this requirement?

A

Directors, officers, or employees

145
Q

For publicly traded bonds, cost of debt for the WACC calculation is determined from

A

Current yield

146
Q

Intentional disclosures must be followed by a public disclosure when?

A

Simulaneously

147
Q

If DD is misleading or out of date, what should the banker do?

A

Alert the party who provided the information so it can be corrected

148
Q

How to calculate share price with EV/LTM NI? You have PE Ratio, NI, and basic shares outstanding.

A

PE x NI, then / basic shares outstanding

149
Q

Amount to be a Qualified Purchaser (QP)?

A

5M

150
Q

A public company hires an independent firm to solicit shareholder votes for a proxy contest. What two items must they disclose?

A

Info about the entities making the solicitation and info about the cost of the solicitation.

151
Q

According to SA1934, how much of its own stock can an issuer repurchase each day?

A

25% of average daily trading volume

152
Q

In a one-step merger, what two items must the proxy contain?

A

Description of financial analysis of the fairness opinion and financial advisors, and copy of the definitive purchase/sale agreement

153
Q

Typical lock-up length for an issuer’s executives?

A

180 days, can be 120-365.

154
Q

Can restricted stock of a company pre-IPO be sold after 6 months holding under Rule 144? Why or why not?

A

No, there’s not current information about the issuer since they don’t file financial reports.

155
Q

Under a tender offer, do restricted shares require Rule 144 compliance?

A

No

156
Q

An investment club wants in on an IPO, how do they ensure none of the club members are restricted persons?

A

Obtain a representation from an authorized rep of the club within 12 months prior to the IPO

157
Q

Does a research department need to notify customers when it plans to terminate coverage on a subject company for equity, debt, or both types of research?

A

Equity only

158
Q

Why might a seller prefer a stock sale to an asset sale?

A

Provides a cleaner exit

159
Q

Institutional customer requirements?

A

Insurance co, bank, or individual or institution with at least 50M in assets

160
Q

A company paid a $0.35 dividend for the most recent quarter, reflecting a 3.4% dividend yield
and a 15.0% dividend payout ratio. Also, the company’s book value is $12.00 per share. What is the company’s price-to-book value multiple?

A

Dividend x4 = Annual. Yield/3.4% = $41.18. $41.18/$12.00=3.4x

161
Q

When must accelerated filers file their 10-k?

A

Within 75 calendar days of fiscal year end

162
Q

Research quiet period for the manager of a follow-on offering?

A

3 days, 10 for a non-manager. Syndicate members have none. EGC have none

163
Q

When does a broker have to disclose a conflict?

A

Verbal prior to sale and Written prior to settlement

164
Q

10-Q filing deadline for large accelerated, accelerated, and non-accelerated filers?

A

40, 40, and 45

165
Q

For the M&A sale process, when does the data room get populated?

A

By the start of the second round

166
Q

FINRA Rule 2269 requires BDs to give customers a written notice of interest for:
I. Primary offerings
II. Secondary distributions
III. Securities in accounts advised for a fee

A

All

167
Q

Underwriter participated in three equity deals in the last three years. 200M, 400M, 400M. To serve as a qualified independent underwriter, the new deal must have proceeds of:

A

QIU needs at least three public equity offerings in last three years, all three not less than 50% of anticipated proceeds. Double the size of the smallest deal. -No more than 400M.

168
Q

Price-to-Book Value and Price-to-Tangible-Book Value are most useful in valuing what types of companies?

A

Financial services - most items on balance sheet are shown at FMV

169
Q

Ineligible issuers cannot use what two priviledges?

A

FWP & Shelf Registration

170
Q

Do Reg S investors need to be accredited?

A

No

171
Q

Which document contains the compensation of public co’s execs and directors?

A

Proxy statement

172
Q

When does a broker need to obtain customer information for the Suitability Rule?

A

Before execution

173
Q

Total Debt =

A

ST debt (current maturities) + loans + notes + bonds + debentures + capital leases

174
Q

Treasury Stock calculation formula =

A

(Current price - avg exercise price) / (current price x number of options shares)

175
Q

A DPP raises 50M in gross proceeds. What amount can go to O&O expenses?

A

7.5M; 15%

176
Q

After registration of an IPO, can information be corrected on the red herring with a FWP?

A

No, the information conflicts with the red herring and the registration and red herring must be amended.

177
Q

Would a banker use EV/NI? Why?

A

No, EV includes both debt and equity

178
Q

A company has an inventory turns multiple of 4.0x and COGS of $750M. What is the avg inventory?

A

$187.5M = 750/4

179
Q

A research analyst at a non-deal road show can’t communicate with customers in the presence of

A

IBs or reps of the securities issuer

180
Q

Which filing does a business need for an all-cash transaction with no change of securities?

A

Proxy only

181
Q

What is a Proof of Interest for?

A

Equity holder in CH 11 that wants to be treated as a creditor

182
Q

Assuming no other issues, what is the key gating item for closing a deal in a timely manner?

A

Raising funds through a capital markets transaction

183
Q

In an M&A, what percentage of shares offered as part of the cost consideration requires shareholder approval?

A

20%

184
Q

What are the two requirements for Rule 139 for research reports?

A

Issuer must have filed all periodic reports over the preceding 12 months and the issuer must meet requirements for using Form S-3 or F-3.

185
Q

Bad actor disqualification of an issuer for crowdfunding eligibility, subject to SEC disciplinary action over what period?

A

Past 5 years

186
Q

When can a BD with a conflict selling IPO securities, sell those securities into a discretionary account?

A

With specific written permission

187
Q

EVA calculation?

A

EVA = EBIAT - (WACC x Investment)
[WACC is Discount Rate]

188
Q

When calculating adjustments to EBITDA, how do tax rates factor in?

A

They don’t, EBITDA is pre-tax.

189
Q

DSO formula

A

AR / Sales x 365

190
Q

What term describes a company’s
total borrowings, notes and bonds,
and capitalized leases?

A

Funded debt

191
Q

What does high operating leverage mean for fixed and variable costs?

A

High Op Leverage = High Fixed Costs and Low Variable Costs

192
Q

An IB takes an IOI from his client. When does he have to deliver the preliminary prospectus?

A

At least 48 hours before the order is consummated

193
Q

A loan covenant specifies that a company must maintain a current ratio equal to or greater than 120% and working capital of not less than $12 million. The company has current liabilities of $50 million. What is the minimum amount of current assets it must maintain to meet both requirements?

A

$62M: 120% is 60, but working capital is a higher requirement at 50+12.

194
Q

What are the two contracts setting terms for an underwriting and what do they define?

A

Underwriting Agreement defines terms of the arrangement between the securities issuer and the underwriting group.

Agreement Among Underwriters defines terms among all underwriters, including share allocations and compensation.

195
Q

When examining an acquisition, if not able to physically inspect all locations, what would a firm do to confirm overseas estate holdings?

A

Obtain a copy of legal titles

196
Q

When can an offering be made to non-accredited investors without a PPM?

A

If the offering is less than $10M

197
Q

Under Rule 433, a “bona fide electronic road show” is a presentation using written communication to offer securities by

A

any graphic means

198
Q

Maximum common stock limit for an issuer to file a Form S-3?

A

33.3% of public float over the previous 12 months

199
Q

Would a labor union contract expiring around the time of an acquisition be an opportunity to raise the sale price?

A

No, uncertainty like that would make buyers nervous

200
Q

An investor relies on a prospectus dated October 1 to buy shares in an IPO. The sale takes place on October 10. The October 1 version of the prospectus contains errors, and the investor sues for damages. However, the October 1 prospectus is “stickered” with a replacement prospectus, correcting all errors, dated October 7. What damages may be claimed by the investor?

A

Actual losses based on the change in price from October 7 through October 10

201
Q

Rule 144 applies to the sale of securities that (pick 2)
I. were acquired by investors through unregistered, private transactions
II. are considered control securities because they are held by an affiliate of the issuer
III. were acquired by non-affiliates through an open market transaction
IV. must under all circumstances satisfy a holding period before they can be sold

A

I and II

202
Q

What value method is good for companies in highly cyclical industries?

A

EV to EBITDA ratio

203
Q

How many days prior to filing a registration statement might an announcement like forward-looking projections be considered gun-jumping?

A

30 days

204
Q

When raising capital for crowdfunding, what financial information must be disclosed on Form C?

A

Info for current and prior year

205
Q

If an offering will not terminate until the target amount is reached, what kind of offering is it?

A

Best-efforts

206
Q

For a stabilizing bid after an IPO, what can the broker bid?

A

Higher of the most recent transaction price or best independent bid

207
Q

When does the fee for writing a fairness opinion have to be disclosed?

A

Never

208
Q

Current Ratio= CA/CL, which line items do you use on the balance sheet?

A

Total Current Assets / Total Current Liabilities

209
Q

Which of the following most closely approximates free cash flow?
A) EBIT + Capex
B) Gross Profit - Depreciation & Amortization
C) Net Income + Interest - Capex
D) EBITDA + Capex

A

C) Net Income + Interest - Capex

210
Q

Do you need Target tax rate to calculate accretion/dilution analysis?

A

No, you need the buyer’s tax rate

211
Q

Are prospective underwriters considered distribution participants?

A

No, only those who participate in the offering, including customers

212
Q

Where do stabilizing expenses come from?

A

They are deducted from the underwriting fee, along with all syndicate expenses

213
Q

Does a target company have to communicate to shareholders on a tender offer, even if it’s neutral?

A

Yes

214
Q

What is Net Debt?

A

Debt - Cash

215
Q

If a company accrues an expense on its income statement, but the tax deduction is taken later, what is this called?

A

Deferred tax asset

216
Q

If a company repurchases shares in the open market, what happens to outstanding shares and interest income?

A

They both decrease, interest income because the company no longer earns interest on the cash it used to buy back shares.

217
Q

What types of bonds are most sensitive to fluctuating interest rates?

A

Long-term, low coupon bonds, especially zero coupon bonds

218
Q

Proxy statements include what information about board attendance?

A

The names of any directors who did not attend at least 75% of previous year’s meetings

219
Q

What is an unseasoned issuer?

A

Public float under 75M or filer for less than 1 year

220
Q

When a company files for CH 11, does the board remain intact?

A

Yes

221
Q

Reg A+ is exempt for what type and size of offering?

A

A public offering of up to $75M in any 12-month period.

222
Q

Can a research analyst attend a road show with an IB?

A

No, never

223
Q

If an investor tendering shares receives additional compensation, like a pay package, who approves it?

A

A majority of the company’s compensation committee

224
Q

What is a GARP investor?

A

Growth At Reasonable Price (stocks)

225
Q

In bring-down DD, an advisor usually receives the comfort letter from whom?

A

The accounting team

226
Q

If a lead bookrunner exercises an overallotment option, when is the distribution deemed completed?

A

After the securities have been
distributed and trading restrictions
are terminated

227
Q

During a “blackout period”, an analyst cannot

A

Make public appearances or issue research for the issuer’s securities

228
Q

When recalculating EBITDA add-backs (one-time fees), if something is net, what do you do?

A

Gross it up by adding back the taxes paid, then add it back to EBITDA

229
Q

ROIC measures what?

A

The return generated by all capital provided to a company

230
Q

Is an MLP an appropriate tax-advantaged vehicle for hundreds of investors?

A

Yes, they can go public and have unlimited shareholders

231
Q

Is short tendering stock permitted?

A

No, they can only offer up the amount of their long position.

232
Q

For a company with steadily rising earnings, what will be the relationship between the forward P/E multiple and the LTM P/E multiple?

A

LTM P/E multiple will be higher

233
Q

In a normal market, what buyer would be expected to pay the highest price for a company?

A

Large strategic buyer in the same line of business, due to synergies

234
Q

Are QIBs required to receive an offering circular in a private placement?

A

Never

235
Q

What is the cost of capital with a PIPE compared to a public offering?

A

Investors would a higher cost of capital due to the shares being illiquid

236
Q

What is required in all business combinations that require a shareholder vote?

A

A proxy

237
Q

The “prudent man” burden of proof applies on what date?

A

Effective date of the offering

238
Q

In a business combination, which company prepares the registration statement prospectus?

A

Both

239
Q

Variations in road shows are permissible, as long as all investors receive the same

A

“core presentation”

240
Q

What is “stapled financing”?

A

Committed financing structure for buyers in support of a target being sold

241
Q

Accrued liabilities are what?

A

On the balance sheet, but not yet paid

242
Q

Equity Value calculated with stock price?

A

Stock price x Outstanding Shares

243
Q

What is the PV today of 100M free cash flow at the end of the first year, with a WACC of 10%?

A

100M / (1.10)^1 = 91M

244
Q

An IB can contact a credit ratings agency for what?

A

Obtain comparable debt issuances

245
Q

Are proxy statements required in a two-step merger?

A

No

246
Q

How to calculate unlevered beta?

A

Levered beta / (1+D/E x (1-tax rate))

247
Q

CoE formula (CAPM)

A

Risk-free rate + (Levered Beta x Market Risk Premium)

248
Q

Where would you find information on an impairment charge?

A

Management’s discussion and analysis on 10-K and 10-Q

249
Q

For shelf registration, when is the determination of WKSI made?

A

Most recent filing or amendment (700M market cap or 1B issuance test)

250
Q

Dividend discount calculation (to find stock price) =

A

Stock price = last year’s dividend x (1+growth rate) / (discount rate - growth rate)
Or Next Year’s Div / Disc. Rate - GR)
ex: $0.40 x (1+0.03)/(0.05-0.03)=$20.60

251
Q

Which disclosure document would not contain a full income statement?

A

8-K

252
Q

Under Reg FD, a company can use its website to make broad distribution of information, provided the website is

A

broadly available and a recognized channel of distribution

253
Q

QIB amount?

A

$100M or insurance co, investment co, BD co, IA, or BD with at least 10M in discretionary assets

254
Q

ROA

A

NI / Average Assets

255
Q

When can Reg FD prevent companies from making selective disclosure to employees?

A

Never, they can always disclose information to employees

256
Q

Which is a cheaper option for debt, Convertible Debt or Debentures?

A

Convertible Debt

257
Q

Requirements for a BD in selecting members of its Fairness Committee?

A

Document selection process and qualifications in written procedures

258
Q

When is it prohibited to allocate IPO shares to a previous or potential client?

A

Business in last 12 months or next 3 months

259
Q

What is an underwriter’s best defense against lawsuits?

A

Demonstrate effective DD

260
Q

Gross Profit Margin formula

A

(Rev - Cost of Rev) / Rev

261
Q

If interest rates are high, what’s a good way to get cash while avoiding dilution of SH?

A

Rights offering

262
Q

Best valuation multiple for divisions of public companies?

A

EV/EBIT, it removes D&A. EV/EBITDA is the standard for most sectors

263
Q

Does a direct listing have a stabilization agent?

A

No

264
Q

Current Yield of bond

A

NY/Price

265
Q

Post-tax cost of debt for a bond?

A

CY x (1 - Tax rate)

266
Q

Status of a company’s financial position at a particular point in time is best measured by what financial statement?

A

BS

267
Q

In an IPO, what fee does an underwriter receive for their allocation of shares?

A

Underwriting fee

268
Q

Can IB personnel review an equity research report prior to publication?

A

No, never (recent rule change).

269
Q

Schedule TO is required for an entity expected to own X% of a class of securities?

A

5%

270
Q

Legal document issued with corporate bonds?

A

Trust indenture

271
Q

When is joint due diligence permitted?

A

For underwriting of an EGC (under 1B in sales for the most recent fiscal year)

272
Q

What layer of capital is between traditional debt and equity?

A

Mezzanine debt

273
Q

How long after the effective date of an IPO does the syndicate have to complete final settlement of their accounts?

A

30 days

274
Q

Which of these can qualify as a WKSI?
Registered investment companies
Business development companies
Asset-backed issuers
Foreign issuers

A

Foreign issuers, if they meet the market cap and issuance requirements

275
Q

A foreign issuer wishing to file a “short-form” registration statement for newly issued securities would complete a

A

Form F-3

276
Q

Formula for effective EBIT mulitple?

A

EBIT x multiple, then divide by EBIT + synergies

277
Q

What is the most filed SEC form for large public companies?

A

8-K

278
Q

Where is book value of equity on the BS?

A

“Total stockholder’s equity”

279
Q

When do selling shareholders vote on an M&A deal?

A

Always

280
Q

Who can use a shelf registration?

A

WKSI’s, Seasoned and Unseasoned Issuers. WKSI’s shelf registration can be automatic.

281
Q

When can a research analyst attend a road show?

A

Never

282
Q

ROE

A

NI / Avg SH Eq

283
Q

A crowdfunding issuer wishes to offer its stock to the public in a way that prospective investors will have access to investment advice and recommendations before committing. How can this be done?

A

Use a BD as an intermediary

284
Q

GARP investors like what kind of PE multiple?

A

Low PE

285
Q

Under Reg D, companies must file Form D with the SEC within

A

15 days of the first sale

286
Q

In a direct listing on the Nasdaq, who must a Form 10 be filed with?

A

SEC, FINRA, and Nasdaq

287
Q

When does book-building occur?

A

After filing SEC registration

288
Q

Proxy for Cash Flow (formula)

A

NI + D&A

289
Q

An increase in current assets represents a ____ of cash

A

Use of cash

290
Q

How do you calculate FCF from IS?

A

Cash flow from operations - CapEx

291
Q

EVA=

A

(EBIAT x (1- tax rate)) - (Investment x WACC)
Or
EBIA - (Investment x WACC)

292
Q

EV Calc with Annual Cash flow, WACC, and Growth Rate

A

Annual CF / (WACC - GR)

293
Q

How long must a change in tender offer remain open?

A

Minimum of 10 days

294
Q

ROA

A

NI / Avg Assets

295
Q

Document required by an investment manager, disclosing holdings of long equity positions, filed quarterly?

A

13-F

296
Q

What is required in a summary term sheet?

A

Plain English, bullet-point summary, and essential features of the transaction

297
Q

What restricted trading period do “actively traded securities” have?

A

None, they are not subject to a restricted trading period

298
Q

Under FINRA rules, what bona fide issuer expenses fall into “miscellaneous”?

A

None, they must all be in clearly defined categories

299
Q

Which of these are “fiduciaries”?
Broker-dealers
Transfer agent
Registered Rep
Trustee

A

Transfer agents and Trustees

300
Q

If gross profit increases, does net income increase more, less, or the same?

A

Less, because it’s an after-tax figure

301
Q

Under Reg M, what is the restricted period for securities with ADTV of 1M+ and public float of 150M+?

A

No restricted period - these are “actively traded securities”

302
Q

The primary purpose of Reg FD is to prevent

A

selective disclosure of material information to outsiders

303
Q

Do FINRA members have to disclose fees for fairness opinions?

A

Base: no. Contingent on deal closing: yes.

304
Q

Is Debt/Sales a good credit statistic?

A

No, Debt/EBITDA, Coverage ratios, and Debt/Cap are all good.

305
Q

Who usually leads drafting a DA?

A

Legal counsel

306
Q

What happens on the balance sheet during a share repurchase program?

A

Shareholder’s Equity decreases by the acquisition cost of the repurchased shares

307
Q

When a company buys back shares, what happens to the P/E ratio?

A

It will decrease due to less shares and the same earnings to distribute across fewer shares

308
Q

Each offering sold under a shelf registration would have what document with it?

A

Prospectus supplement

309
Q

When a partnership dissolves, whose account is last to settle?

A

GP -> Secured lenders, General creditors, LPs, GPs

310
Q

Syndicate settlement must occur within how many days of the settlement date?

A

90

311
Q

Complete sequence for an IB during an IPO?

A

1) Pitch for business (bake-off),
2) Win mandate,
3) Sign engagement letter,
4) File registration statement,
5) Book building/marketing,
6) Go effective (shares are registered under ‘33 Act),
7) Confirm allocations and distribute securities to investors

312
Q

When are tender offers most advisable?

A

For a fast closing and with cash ready

313
Q

Price/Tangible Book Value=

A

EqV / (SE - Goodwill)

314
Q

ROIC can be calculated with which two metrics, depending on information available?

A

Adjusted EBIT/ Invested Capital or
EBIAT / Invested Capital
*IC = Debt + Equity - Cash

315
Q

Accelerated filers fall within what market cap range?

A

$75M-700M

316
Q

Safe harbor Rule 10b-18 apply to an issuer purchasing its own:

A

Common stock

317
Q

Reg M prohibition on short sales applies to whom?

A

All investors

318
Q

Cost of Debt calculation for a bond?

A

CY x After-tax
*Coupon/Price finds CY

Series 79 (1 decks)

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