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LOS j: Discuss the use of convertible preferred stock in direct venture capital investment.
Q1. The convertibilty feature in convertible preferred stock is important because it means that preferred stockholders:
A) can block a possible buyout.
B) can convert their claims to equal those of later investors in the company.
C) can benefit from a buyout favorable to common stockholders.
Q2. Compared to common stockholders, investors who use convertible preferred stock to make venture capital investments will receive the promised dividend:
A) before common stockholders receive a dividend but not if there is a liquidation.
B) before common stockholders receive a dividend or a disbursement through liquidation.
C) only if common stockholders receive a dividend or a disbursement through liquidation.
Q3. Frank Campbell, CFA, has a client who wants to make a venture capital investment. Campbell is considering recommending convertible preferred. This would least likely be appropriate if the client wishes to:
A) receive dividends.
B) have a priority of claims over subsequent investors in the company.
C) benefit in the case of a buyout of the company. | 
发表于 2009-3-11 09:38
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