S-79 Key Exam Questions Flashcards
What does it mean in narrative form for a company to have 41% Gross Profit?
41 cents of profit for every $1 in sales
In an inflationary environment, which accounting method reflects the more aggressive accounting?
FIFO
How is PIK interest income to an investor treated for tax purposes?
Ordinary income when approved.
If at the beginning of 2009, the company issued 1 million shares of stock to redeem all outstanding debt, what would be the adjusted EPS?
$2.13
An IB rep is doing due diligence on an asset purchase. the bankers’s initial assumption is that the asset is worth $1.2mm. It’s actually worth $2.0mm. What happens to goodwill and expenses?
Goodwill falls
Expenses go up
What liability is the top left quadrant of the Accelerated Revenue and Accounting Purposes box?
DTL
How do you increase the value of a firm if EBITDA identified as a multiple driver?
Increase EBITDA
Foreign Co and US Co are competing companies. Foreign Co trades at a higher EV/EBIT multiple but the P/Es of the two companies is the same. What might account for this difference?
What if Foreign CO didn’t pay taxes.
For profitability ratios should you use the average or ending balance?
Average
Is a decrease in NWC a source or use of cash?
Source of cash
What is the formula for Equity Value?
Enterprise Value - Debt + Cash
What should you do if you need to use the median of a range?
Rank in order and use the middle
If two companies have substantial differences in Working Capital and cash flow, what is the best way to account for the difference?
Use a DCF
What is systemic risk measured by?
Beta
What is the PV of annual cash flow in perpetuity of $200m with a WACC of 10%
$2 billion
How much stock can an issuer repurchase?
no more than 25% of ADTV over the prior four weks
IRS Code 338(h)10 describes what type of transaction?
An equity transaction / Asset sale for tax purposes
When must an arbitration award be paid?
30 days after the decision
Are arbitration decisions public?
Yes
Is depreciation included in operating expenses?
Yes!
Section 4(6) of the Securities Act of 1933 governs what?
Exempt transactions - Transactions involving offers or sales by an issuer solely to one or more accredited investors
How long can information in a prospectus remain before it is considered old?
16 months
What two criteria must be met for a company to meet ongoing reporting requirements of Securities Act of 1934?
- ) Have securities that trade in interstate commerce
2. ) exceed a size requirement
What is an analyst not allowed to do during a blackout period?
Not make public appearances or issue research on behalf of issuer’s securities.
What is a firm who approves private securities transactions required to do?
- ) supervise them
2. ) Keep books and records of the transaction and compensation received.
If an SIPC firm were to go bankrupt, the trustee appointed would NOT supervise what type of accounts?
Commodity accounts
What will happen to the price of a discount bond when it reaches maturity?
It will increase towards par
Would a change in interest rates cause an issuer to amend a registration statement?
No
Which classification of shareholder bases does a company typically disclose?
insider and institutions
Would a government subsidy to a company generally improve the company’s ability to cover interest expense?
Yes
What happens to outstanding shares when a company purchases stock for cash in the open market?
- ) outstanding shares decrease
2. ) interest income decreases
Will an investment that has greater total cash flow than another investment mean that it will have a greater IRR?
Not necessarily
Who should a banker notify if any information in a registration statement is misleading or incorrect?
Legal counsel
An investment bank advising a company on launching a tender offer for a target company could do what type of work for the target?
Underwriting work
What is the order of claims paid in a bankruptcy?
Secured, Administrative, Unsecured, PS, Common Stock and Warrants
If a public company is acquiring a private company by issuing stock, the public company would have to file “what” to register the shares?
An S-4
If two companies have similar balance sheets and income statements but one company has working capital that is projected to decline, what analysis would likely capture this in a valuation?
DCF
If a broker dealer is underwriting debt for an issuer in an industry where there is significant consolidation occurring (i.e. mergers), the underwriter and investors might be concerned about what?
change of control provisions in the offering documents.
If an investor buys a bond greater than its coupon, did the investor purchase it at par, discount, premium?
bought it at a discount
It would be a manipulative or deceptive act for a broker dealer to claim that there is a market for a security in which there is not a market or if the market is controlled by that broker dealer.
It would be a manipulative or deceptive act for a broker dealer to claim that there is a market for a security in which there is not a market or if the market is controlled by that broker dealer.
Broker Dealers are required to conduct an annual compliance meeting for both registered reps and registered principals. The meeting can be held at a branch office and can include a discussion of non-compliance matters. Also, it can be recorded and delivered on-demand, but only if the participants have an opportunity to discuss the issues raised with compliance personnel.
Broker Dealers are required to conduct an annual compliance meeting for both registered reps and registered principals. The meeting can be held at a branch office and can include a discussion of non-compliance matters. Also, it can be recorded and delivered on-demand, but only if the participants have an opportunity to discuss the issues raised with compliance personnel.
What is Regulation M-A?
Provides for rules regarding public M&A transactions.
What is the most liquid U.S. Treasury security?
T-bills
A foreign company could issue securities in the U.S. and avoid registration if they were offered as a private placement but it can NOT issue securities under what type of exemption?
Regulation S
What two pieces of information do you need to calculate a company’s public float?
- ) # of shares outstanding
2. ) total # of shares held by insiders
What type of liabilities are a mortgage payable and a convertible bond?
Long-term
What is a sell-side adviser evaluating all cash bids NOT concerned about?
strength of the buyer’s management team.
Regulation FD is designed to protect individual investors and NOT
institutions
What type of sale is an election 338(h)10 for GAAP purposes? Tax purposes?
This is an equity sale for GAAP purposes and an asset sale for tax purposes.
Who prepares an issues a FWP?
The issuer NOT the underwriter
What type of shares do you ignore when calculating market cap?
treasury stock
An acquirer could sweeten its offer for a target company without increasing its price by offering other beneficial terms such as….
shorter time to close.
If a rep lends money to client as part of an outside business relationship, this would need to be pre-approved by the firm. Pre-approval would NOT be required if the rep is lending money to a client who happens to be a….
Family member
Government agency and government sponsored enterprise securities are not issued in what form?
Physical
When is a board going to most likely use a fairness opinion?
When it is recommending the deal
Is an independent investment bank required to prepare a fairness opinion?
No, a sell-side adviser can
What is an inter-creditor agreement?
An agreement between creditors in a bankruptcy whereby they agree to a specific treatment of their debt and the order in which they will be paid.
If warrant holders are given upcoming notice of an IPO and are given the opportunity to sell their shares, the warrants offer what type of rights?
Piggy-back rights
Under Regulation FD, a company can make public disclosure via an SEC filing (e.g. 8k) or a combination of methods, including…
a press release, news conference, webcast and/or social media
If an FINRA member owns 10% of CS, PS or sub-debt of a company it is considered a conflict and an issuer needs needs to hire what?
A Qualified Independent Broker
In order to stabilize, notice must be provided where?
In the prospectus
When must a red-herring be distributed?
Whenever financials are out of date
In a bankruptcy, who does the US Trustee appoint and oversee?
Appoints the creditor committee and oversees bankruptcy trustees handling of the debtor and the case
If one company has a lower gross margin than another company but the EPS is similar, this could be a result of one company having….
a lower tax rate.
An S-4 registration statement must be signed by the CEO, CFO, controller and majority of the board. If it is a foreign corporation, the signature of its ______ in the U.S. is also required.
authorized representative
What type of communication is NOT considered graphic communication?
live or real-time communication
What type of issuers are prohibited from issuing a shelf registration?
non-reporting and ineligible
What are two types of syndicate expense?
Marketing expense and underwriter’s counsel
When are issuers required to file notice to FINRA of stock split or dividend?
At least 10 days prior to the record date
