Which of the statements below is FALSE? Question 14 options: 1) Common stock’s o

Question

Which of the statements below is FALSE?

Question 14 options:

1) Common stock’s ownership claim on the assets and cash flow of a company is often referred to as a residual claim. 2) Shareholders elect the board of directors, which ultimately selects the management team that runs the day-to-day operations of the company. 3) The investment banker is required to work with the issuing company on preparing the prospectus. 4) In a firm-commitment approach, an investment banker pledges to do his or her best to sell the shares and take a percentage of the sale.

Explanation / Answer

The following statement is false.

In a firm-commitment approach, an investment banker pledges to do his or her best to sell the shares and take a percentage of the sale.

The correct statement is a Best effort approach, is a compensation package approach is where the investment banker pledges to give his or her best in trying to sell the shares and will take a small percentage of the sale of each stock. And, a Firm commitment is a compensation package approach where the investment banker essentially buys the entire stock issue from the company at one price and then sells the issue for a higher price.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.