Which description is true with regard to a 424(b) document?
A) The 424(b) is a mandated report that focuses on internal control certifications under the Sarbanes Oxley Act.
B) The 424(b) is the final prospectus.
C) A 424(b) is an amended S-1.
D) The receipt of a 424(b) must be confirmed in...
Series 79 Exam || with A+ Guaranteed Solutions.
Which description is true with regard to a 424(b) document?
A) The 424(b) is a mandated report that focuses on internal control certifications under the
Sarbanes Oxley Act.
B) The 424(b) is the final prospectus.
C) A 424(b) is an amended S-1.
D) The receipt of a 424(b) must be confirmed in writing by an investor. correct answers B
424(b) is the final prospectus for a new issue. it must be received by investors NO LATER than
TRADE SETTLEMENT. it can also be delivered ELECTRONICALLY.
The Sarbanes Oxley report on Internal Controls is called the Section 404 report.
Which two of the following typically accompany the buyer to the management presentation?
I. M&A adviser
II. Legal counsel
III. Accountants
IV. Financing sources correct answers 1 & 4
buyer typically brings its M&A adviser and financing sources to the management presentation.
the buyer's legal counsel and accountants do not typically attend the mgmt presentation.
All of the following are key advantages to a targeted auction versus a broad auction EXCEPT
A) Higher likelihood of preserving confidentiality
B) Provides full comfort that all likely bidders are approached
C) Reduces business disruption
D) Reduces the potential of a failed auction by signaling desire to select a "partner" correct
answers B
by limiting the universe of bidders that are approached, a targeted auction has the potential to
leave "money on the table" if certain buyers are excluded.
Which balance sheet accounts would be impacted when a corporation issues new stock to the
public.
I. Par Value
II. Additional paid in capital
III. Retained Earnings.
IV. Foreign currency translation adjustment correct answers 1 & 2
when stock is issued, cash increases in the asset of the B.S.. additional paid-in capital offsets new
stock issues.
,In a fixed price IPO, FINRA Rule 5130 requires the book-running underwriter to file with
FINRA a final list of distribution participants and their commitments, by what deadline?
A) By the offering date
B) Three days after the offering date
C) 15 days after the offering date
D) 30 days after the offering date correct answers B
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 correct answers C
best calc is EBIT - taxes - capex
In an M&A transaction, in which scenario would a break-up fee be most likely paid?
A) A target company has signed a definitive agreement with a goshop clause. A new buyer
makes a better offer, resulting in the termination of the definitive agreement with the original
buyer.
B) A target company has signed a definitive agreement with a noshop clause. The seller adheres
to the agreement and does not shop the deal around.
C) Months after a definitive agreement is signed, bring-down due diligence discovered that the
target company's facilities were destroyed that morning in an earthquake. The buyer chooses to
walk away from the signed definitive agreement.
D) A definitive agreement is signed, but the closing of the deal requires anti-trust approvals by
the Justice Department. The government rules that this deal will lead to competitive imbalances
within the industry. The buyer walks away because the deal cannot close. correct answers A
go-shop -> better offer
no-shop -> final offer
if a buyer signed a definitive agreement subject to a go-shop, the target will often agree to pay a
break-up fee if it terminates the first DA and accepts a higher and better offer.
A Section 404 approval means
A) an issuer is SEC registered
B) the company's internal controls have been certified
C) the company is in compliance with SEC filing requirements
D) the company is being sold in a bankruptcy transaction. correct answers B
Sarbanes-Oxley Section 404 requires that on an annual basis, the company's CEO certifies the
firm's internal controls for financial reporting.
,In an underwriting with a conflict of interest as defined by FINRA Rule 5121, what is true about
a Qualified Independent Underwriter
A) Although it must be disclosed that a QIU has been hired, the QIU's identity can be kept
confidential.
B) To qualify as a QIU, the firm that is hired must have been involved in at least one
underwriting of equal size within the last twelve months.
C) The QIU that is hired must provide prominent written disclosure of its name, role, and
responsibilities in the prospectus or similar disclosure document.
D) Although the QIU must perform proper due diligence, it is indemnified from law suits should
misleading information be included in the registration statement correct answers C
QIU's must perform proper due diligence, just like the syndicate members. Failure to do so could
leave them legally responsible. QIUs should have participated in at least 3 underwritings of at
least half the size, in the last 3 years. The identity of the QIU is prominently disclosed in the
prospectus.
According to the rules of FINRA's Corporate Financing Department, which of the following
items paid by an issuer would not be judged to be part of the total compensation for an
underwriting?
A) Reimbursing the investment banking syndicate for the cost of the tombstone ad.
B) Any finder's fees paid by the issuer to the underwriter for bringing in any advisors, investors
or other parties to the transaction.
C) The underwriters spread that was agreed upon in the underwriting agreement.
D) Reimbursing the investment banking syndicate for state registration fees. correct answers D
below included in compensation to underwriter:
- underwriting spread
- reimbursement for underwriting expenses
- finder's fees
- securities credited to the underwriter's investment account
- right of first refusal or exclusivity agreement for future underwriting transactions
All of the following are true about a merger proxy EXCEPT
A) It contains the price offered for the acquisition of the selling company and the form of the
consideration being paid (Cash, Stock, Other)
B) When a company files a merger proxy with regard to closing a transaction, it is also defined
as a prospectus by the SEC.
C) If the management team will receive additional compensation as a result of the change of
control this should be disclosed.
D) A forward looking consolidated balance sheet and income statement must be presented, so
shareholders can comprehend what the combined entity will look like. correct answers D
a forward looking consolidated F/S are NOT a requirement of a merger proxy.
At what point in the M&A process is the engagement letter typically signed?
A) At the start of the M&A process
, B) Upon signing of the definitive agreement
C) At the start of management presentations
D) Upon receipt of first round bids correct answers A
In regard to the notice to customers required when a research department plans to terminate
coverage on a subject company, which statement is true?
A) Notice must be provided for termination of both equity and debt research.
B) Notice must be provided for termination of debt research, but not equity research.
C) Notice must be provided for termination of equity research, but not debt research.
D) Notice is not required for either equity or debt research. correct answers C
notice of termination of coverage only applies to EQUITY RESEARCH, NOT DEBT
RESEARCH.
For purposes of conducting a DCF valuation on a private company, what information on a
company's financial statements is most important to an analyst?
A) Information that helps to project several years of future cash flows
B) Information that projects future debt service costs and capacity
C) Historic trends in quarterly earnings
D) Information that establishes book value correct answers A
DCF -> forecasting future cash flows.
Which of the following statements related to valuations is true?
A) In performing the calculation of the WACC, the weighting of the debt element causes the
levered beta to be overstated.
B) A DCF analysis is the preferred methodology to use in an LBO model
C) In an IRR analysis, the timing of the cash flows thrown off from a deal are more important
than the total amount of those cash flows.
D) In calculating the IRR from a potential acquisition the WACC of the acquirer should be used
correct answers C
IRR calc does not use a discount rate like WACC. Instead it solves for a discount rate.
IRR calc is very sensitive to the timing of C/F. the longer the investor has to wait for the future
cash flows to materialize, the lower the IRR.
LBO's use an IRR methodology, not a DCF.
Which of the following factors can influence the length of the blackout period, during which an
analyst employed by a participant in an underwriting may not issue research reports or engage in
public appearances?
I. Whether the analyst's opinion if favorable or unfavorable
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