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Free Questions › CFA › Corporate Issuers
Free CFA Corporate Issuers Practice Questions & Answers
900 exam-style Corporate Issuers questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 691
Which of the following is a feature of corporate legal identity?
Select an option first.
Correct answer: B — It is separate from its owners
Explanation: B is correct because corporations are legally separate entities. A is wrong because corporations continue regardless of ownership changes. C is wrong because corporations can enter contracts. D is wrong because corporations can be sued.
Question 692
What is the primary role of an investment bank in an IPO?
Select an option first.
Correct answer: B — To underwrite and help sell new shares to the public
Explanation: B is correct because investment banks underwrite IPOs and help sell new shares. A is wrong because IPOs involve issuing new shares, not buying insiders’ shares. C is wrong because tax obligations are not determined by investment banks. D is wrong because no intermediary guarantees profits.
Question 693
In an IPO, where do the proceeds from the sale of new shares go?
Select an option first.
Correct answer: B — To the issuing corporation
Explanation: B is correct because IPO proceeds go to the issuing company. A is wrong because existing shareholders do not receive IPO proceeds. C is wrong because exchanges only facilitate trading. D is wrong because banks receive underwriting fees, not the proceeds.
Question 694
Which of the following is a defining feature of a direct listing?
Select an option first.
Correct answer: C — No new capital is raised
Explanation: C is correct because direct listings do not issue new shares, so no capital is raised. A is wrong because new shares are not issued. B is wrong because direct listings do not use underwriters. D is wrong because the text does not restrict participation to institutions.
Question 695
Why are direct listings typically used only by large, established companies?
Select an option first.
Correct answer: B — They rely on strong brand recognition to attract buyers
Explanation: B is correct because direct listings depend on existing shareholder sales and brand recognition. A is wrong because government approval is not the reason. C is wrong because direct listings do not issue new shares. D is wrong because valuations are market-determined.
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Question 696
Which method of going public involves listing existing shares without raising capital?
Select an option first.
Correct answer: B — Direct listing
Explanation: B is correct because direct listings list existing shares only. A is wrong because IPOs issue new shares. C is wrong because SPACs raise capital through their own IPO. D is wrong because reverse mergers involve dormant companies.
Question 697
In a SPAC, where are IPO proceeds held until an acquisition occurs?
Select an option first.
Correct answer: B — In a trust account
Explanation: B is correct because SPAC proceeds are held in trust. A is wrong because operating accounts are not used. C is wrong because exchanges do not hold SPAC funds. D is wrong because sponsors cannot hold investor funds.
Question 698
What happens if a SPAC does not complete an acquisition within its time limit?
Select an option first.
Correct answer: C — It returns proceeds to investors
Explanation: C is correct because SPACs must return funds if no acquisition occurs. A is wrong because it does not become a corporation automatically. B is wrong because reverse mergers are a different process. D is wrong because SPACs do not convert to private companies.
Question 699
What is the typical time frame for a SPAC to complete an acquisition?
Select an option first.
Correct answer: C — 18 months
Explanation: C is correct because SPACs often have about 18 months to acquire a company. A and B are wrong because these are shorter than typical SPAC timelines. D is wrong because SPACs do not have multi-year windows.
Question 700
What type of company is a SPAC before it acquires a target?
Select an option first.
Correct answer: C — A shell company with no operations
Explanation: C is correct because SPACs are shell companies created solely to acquire another company. A is wrong because SPACs have no operations. B is wrong because dormant companies are used in reverse mergers, not SPACs. D is wrong because SPACs are not private equity funds.
Question 701
What happens to a private company once a SPAC acquires it?
Select an option first.
Correct answer: A — It becomes public
Explanation: A is correct because SPAC acquisitions result in the private company becoming public. B is wrong because the acquisition makes it public. C is wrong because no IPO is required. D is wrong because the company continues operating.
Question 702
What is a key similarity between SPACs and reverse mergers?
Select an option first.
Correct answer: B — Both allow private companies to go public via acquisition
Explanation: B is correct because both processes take a private company public through acquisition. A is wrong because SPACs are not dormant companies. C is wrong because issuing new shares is not required. D is wrong because neither guarantees returns.
Question 703
In a go-private transaction, what must investors typically pay?
Select an option first.
Correct answer: B — A premium above market price
Explanation: B is correct because go-private deals require paying a premium to buy out shareholders. A is wrong because discounts are not typical. C is wrong because shareholders expect compensation above market value. D is wrong because governments do not set the price.
Question 704
Why do investors often use debt to finance go-private transactions?
Select an option first.
Correct answer: B — Debt reduces the need for equity capital
Explanation: B is correct because debt financing reduces the amount of equity required. A is wrong because debt is not free. C is wrong because debt increases risk. D is wrong because valuation is not guaranteed.
Question 705
Which of the following is a reason investors take companies private?
Select an option first.
Correct answer: B — To implement changes outside public view
Explanation: B is correct because going private allows restructuring without public pressure. A is wrong because scrutiny decreases. C is wrong because investors gain more control. D is wrong because premiums must be paid.
Question 706
Which of the following actions might investors take after going private?
Select an option first.
Correct answer: B — Sell assets or restructure
Explanation: B is correct because restructuring and asset sales are common value-creation strategies. A is wrong because disclosure decreases. C is wrong because management changes are selective, not eliminations. D is wrong because relisting takes years.
Question 707
What trend is common in emerging economies regarding public companies?
Select an option first.
Correct answer: B — Growing number of public companies
Explanation: B is correct because emerging economies experience growth, market liberalization, and foreign inflows. A is wrong because declines occur in developed markets. C is wrong because the trend is not flat. D is wrong because exchanges remain active.
Question 708
Which factor contributes to the decline of public companies in developed markets?
Select an option first.
Correct answer: C — Growth of private capital sources
Explanation: C is correct because private equity and venture capital reduce the need for public listings. A is wrong because mergers reduce public company counts. B is wrong because listings are declining. D is wrong because private equity is abundant.
Question 709
Why do some private companies choose to remain private?
Select an option first.
Correct answer: B — To preserve control by existing owners
Explanation: B is correct because private status preserves control. A is wrong because regulatory burden is lower. C is wrong because disclosure is limited. D is wrong because private companies cannot access public markets.
Question 710
What is a key characteristic of SPAC investors before an acquisition?
Select an option first.
Correct answer: C — They may form expectations based on SPAC leadership
Explanation: C is correct because investors rely on SPAC executives’ reputations and comments. A is wrong because the target is unspecified. B is wrong because executives are known. D is wrong because investor approval is not universal.
Question 711
What happens to SPAC proceeds if no acquisition is completed?
Select an option first.
Correct answer: C — They are returned to investors
Explanation: C is correct because SPAC rules require returning funds. A is wrong because donations are not allowed. B is wrong because sponsors cannot keep the funds. D is wrong because proceeds cannot be repurposed.
Question 712
Which method of going public is the fastest and lowest-cost?
Select an option first.
Correct answer: B — Direct listing
Explanation: B is correct because direct listings avoid underwriting and new share issuance. A is wrong because IPOs are costly and slow. C is wrong because SPACs involve acquisition steps. D is wrong because reverse mergers are less common today.
Question 713
Which of the following is a disadvantage of direct listings?
Select an option first.
Correct answer: B — They do not raise new capital
Explanation: B is correct because direct listings do not raise capital. A is wrong because underwriters are not used. C is wrong because no new shares are issued. D is wrong because they are used by large companies.
Question 714
Which of the following is a reason SPACs became popular?
Select an option first.
Correct answer: B — They provide a faster path to going public
Explanation: B is correct because SPACs offer a quicker alternative to IPOs. A is wrong because returns are not guaranteed. C is wrong because SPACs carry risk. D is wrong because SPACs are regulated.
Question 715
What is a key difference between IPOs and direct listings?
Select an option first.
Correct answer: C — IPOs use underwriters; direct listings do not
Explanation: C is correct because IPOs involve underwriters, while direct listings do not. A is wrong because IPOs do raise capital. B is wrong because direct listings do not issue new shares. D is wrong because both require regulatory compliance.
Question 716
Which of the following is a reason companies may go public?
Select an option first.
Correct answer: B — To increase liquidity for shareholders
Explanation: B is correct because public listing increases liquidity. A is wrong because access to capital increases. C is wrong because reporting increases. D is wrong because going public dilutes ownership.
Question 717
Which of the following is a reason companies may avoid going public?
Select an option first.
Correct answer: B — To avoid regulatory burden
Explanation: B is correct because public companies face heavy reporting requirements. A is wrong because scrutiny decreases when private. C is wrong because liquidity is lower privately. D is wrong because avoiding public markets is the point.
Question 718
Which of the following is a characteristic of government-owned corporations?
Select an option first.
Correct answer: B — They may be fully or partially investor-owned
Explanation: B is correct because government corporations may be partly investor-owned. A is wrong because they issue audited statements. C is wrong because they exist in both developed and emerging economies. D is wrong because many operate profitably.
Question 719
Which of the following industries commonly has government-owned corporations in developed economies?
Select an option first.
Correct answer: B — Postal services and railways
Explanation: B is correct because postal systems and railways are common government-owned sectors. A, C, and D are wrong because these are not typical government-run industries.
Question 720
What is the purpose of creating a legally separate government corporation?
Select an option first.
Correct answer: B — To provide transparency and accountability
Explanation: B is correct because separate corporations improve transparency. A is wrong because transparency increases. C is wrong because oversight remains. D is wrong because audited statements are required.
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