DEAL IT

A nswer B ooklet

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CFAS Project Blink-O Questions
NTA stands for ___?
a) Net Tangible Assets
b) Net Taxable Assets
c) Net Transferred Assets
It is also known as net asset value or book value. To calculate, take total assets of a
company, minus intangible assets and all liabilities. An example of intangible asset is
goodwill.

Share placement is the issuing of new shares to existing shareholders.

a) True
b) False
Share placement refers to the issuing of new shares to non-existing shareholders. Rights
issue refers to the issuing of new share to existing shareholders.

Which of the following is not considered equity?

a) Share capital
b) Insurance
c) Retained earnings
Equity refers to the amount of funds contributed by the owners of the company or any other
security representing an ownership interest. Insurance is a contract between an individual
who receives financial protection and an insurance company which reimburse against
customer’s losses Therefore, insurance is not equity.

When market interest rate goes ___, the bond price goes___.
a) Up, Down
b) Up, Up
c) Up, Unchanged

The relationship between the market interest rate and the bond price are inversed.

According to Singapore law, a Singapore company cannot hold its own shares.
a) True
b) False
Although a listed company can buy their own shares from the stock market during a Share-
Buyback, it cannot hold its own shares. They would have to cancel the shares bought.

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In the event of company liquidation, _________ are being paid first, followed by ________,
and lastly _______.
a) Creditors, preference shareholders, ordinary shareholders
b) Ordinary shareholders, creditors, preference shareholders
c) Preference shareholders, ordinary shareholders, creditors

In terms of return of money invested, creditors are rank ahead of shareholders and
preference shareholder rank ahead of ordinary shareholders. Therefore, ordinary
shareholders carry the highest risk.

The dividend paid on preference shareholders and ordinary shareholders are _______
&________ respectively.
a) Fixed, Uncertain
b) Uncertain, Fixed
c) Uncertain, Do not have dividend

Preference dividend must be fully paid before ordinary dividend can be declared. The
payment of ordinary dividend is at discretion of company’s directors. If preference dividend
not paid, investors may take legal action to recover money invested.

Which are the 2 types of takeover offer?

a) Voluntary offer and Public offer
b) Mandatory offer and Public offer
c) Voluntary offer and Mandatory offer

Mandatory offer refers to the takeover offer made by offeror who has purchased shares in
the target company. Takeover offer that is not mandatory is voluntary.

Bonds are usually listed to widen the pool of potential investors.

a) True
b) False
Bonds are usually listed to widen the pool of potential investors. However, it does not mean
it is actively traded.

Which is a mode of payment for a takeover?

a) Cash
b) Offeror Company’s shares
c) Both are possible
It can be Company’s shares if it is listed, or cash, or a combination of cash and shares.

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Investors are interested in Loan Stocks as itgives______ _______.
a) Monthly Dividend
b) Regular Income
c) Voting Rights
Loan stocks are when Common or Preferred stock shares are being used as collateral to
secure a loan from another party. The loan will earn fixed interest rate therefore, it has
regular income.

Which of the following rank first to claim principal in case of liquidation?

a) Bank
b) Ordinary Shareholders
c) Creditors
In terms of return of money invested, creditors are rank ahead of shareholders and bank
will rank ahead of ordinary shareholders.

Which of the following is issued with no consideration of cancelling?

a) Redeemable Preference Shares
b) Ordinary Shares
c) Loan Stocks
Issued share capital (ordinary shares) is basic capitalization of a company. Once issued,
they remain on the company’s balance sheet permanently. Companies do not issue
Ordinary Shares with intention to cancel them.

Under which market will a listed company intensify the issuing of ordinary shares?
a) Bullish
b) No Movement
c) Bear
Bullish markets are characterized by investor confidence, optimism and expectations that
strong results will continue. Therefore, more investors would be willing to participate in the
stock market.

Why does company choose to go public?

a) Get Recognition
b) Promote Products & Services
c) Raise Funds

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When a company "goes public," it is the first time the general public has the ability to buy
their shares. As there is no limit to the maximum number of shareholders in a company, a
large amount of funds can be raised to expand the business.

Wealthy Individual investors in venture capital are known as __________.

a) Business Angels
b) Rich People
c) Agents
Business angels are wealthy individuals who provide funding to a Venture capital. Private
equity funds provided by them may be used in Venture Capital financing.

Which of the following does a venture capitalist looks for in an investment?

a) Probability of gain/loss
b) Unique selling point of a product
c) All of the above
Each venture capital fund has its own criteria for assessing the risks & rewards of an
investment. It depends on Venture Capitalists management team’s assessment of possible
gain/loss. They often prefer a product with some unique selling point and development
potential. However, the most important factor is the integrity of the entrepreneur.

How many types of listing quantitative criteria are there on SGX Main Board used to assess
a company?
a) 2
b) 5
c) 3
Qualitative Criteria 1 for SGX Main Board requires the company applying to be listed to
have a consolidated (group) pre-tax profit of at least 7.5 million for the last 3 years
consecutively with at least 1 million in each of those 3 years.
Qualitative Criteria 2 for SGX Main Board requires the company applying to be listed to
have a cumulative consolidated pre-tax profit of at least 10 million for the last 1 or 2 years.
Qualitative Criteria 3 for SGX Main Board requires the company applying to be listed to
have a market capitalization of at least 80 million (issue price * post-invitation issued share
capital) and a 3 year record in research and development (R&D).

What is the objective of foreign company seeking overseas listing?

a) IPO(Initial Public Offering) pricing more attractive
b) Large part of business is located in the local country
c) Form of marketing to promote company’s shares

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IPO pricing will be higher because of the higher demand by strong investors who
appreciates the business better. In addition, there will be strong financial institutions to
manage IPO. If a large part of business is located in the foreign country, company can raise
foreign currency funds to meet its operational needs while minimizing its forex exposure.

What will happen if a bond certificate is lost?

a) The bond will still belong to the original owner.
b) Finders’ keepers- the bond will belong to whoever picks it up.
c) The bond will immediately be invalid.
Unlike loan stocks certificate which is registered in the name if the loan stock holder, the
bond certificate is in bearer form. Whoever who holds the bond certificate, is deemed to be
the owner.

What does IPO stands for?

a) Irredeemable Preference Ownership
b) Initial Private Offering
c) Initial Public Offering
Initial Public Offering (IPO) is a process by which a company first obtains a listing of its
shares on a recognized stock exchange such as Singapore Exchange (SGX). Both local
and foreign companies can seek a listing provided that they meet the Singapore Exchange
listing requirements as set out in its listing Manual.

Which of the following is not a method of raising capital?

a) Public Offer
b) Share Placement
c) Bonus Issue
Bonus Issue is the issues of new shares by the company to the shareholders in proportion
to their existing shareholdings. They are considered free as existing shareholders do not
have to pay for the new shares.

The __________ undertakes to underwrite issue of shares; in other words; in the event of
an under subscription, they will buy the remaining shares.
a) Underwriter
b) Issue Manager
c) Placement Agent
Underwriters will receive underwriting fees from their issuing clients. They usually also earn
profits when selling the underwritten shares to investors. By underwriting the shares, they
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hold responsibility.

Qualitative Criteria 1 for SGX Main Board requires the company applying to be listed to
have a consolidated (group) pre-tax profit of at least ________ million for the last 3 years
consecutively with at least ________ million in each of those 3 years.
a) SGD 7.5 million; SGD 1 million
b) SGD 6 million; SGD 0.8 million
c) SGD 10 million; SGD 1.5 million
In additional to this, the operating track record should be achieved by substantially same
management, with company in substantially same business.

Qualitative Criteria 2 for SGX Main Board requires the company applying to be listed to
have a cumulative consolidated pre-tax profit of at least ______ for the last 1 or 2 years.
a) SGD 10 million
b) SGD 12 million
c) SGD 7 million
In additional to this, the operating track record should be achieved by substantially same
management, with company in substantially same business. This applies to listing company
which is a highly profitable business but with a short operating history.

Qualitative Criteria 3 for SGX Main Board requires the company applying to be listed to
have a market capitalization of at least ______ (issue price * post-invitation issued share
capital) and a 3 year record in research and development (R&D).
a) SGD 80 million
b) SGD 90 million
c) SGD 100 million
This caters for listing of businesses that have committed a lot of money in projects that take
a long time to turn a profit. E.g. Life Sciences. Profit record is not a requirement. Same
business and management are also not required.

Rights Issue is being offered to ________.

a) New Shareholders
b) Existing Shareholders
c) None of the above
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Rights issue refers to offering of common stock to existing shareholders who hold
subscription rights that entitle them to buy new issued shares at a discount from the market
price.

When new ordinary shares are issued, the shareholdings of existing shareholders will be
diluted.
a) True
b) False
For example, Joe initially owns 25% of the company shares by owning 25,000 shares out of
the company 100,000 shares. If the company decides to issue 50,000 new shares, Joe’s
would now only hold 16 % (25,000 shares out of 150,000 shares) of the company shares
provided that he did not subscribe for the new shares.
What is a bond rating?
a) Rating Agency’s opinion on the Issuer’s market position.
b) Rating Agency’s opinion on the price of bond.
c) Rating Agency’s opinion of Issuer’s ability to repay.

A grade is given to bonds to indicate their credit quality. Examples of rating agencies are
Standard & Poor's and Moody's. They provide these evaluations of a bond issuer's financial
strength, or its the ability to pay a bond's principal and interest on time.

What is true about a Share-Buy Back?

a) It occurs when a listed company has surplus funds and difficulty earning adequate
return on its equity.
b) It is costly and time-consuming.
c) It affects a large portion of a company’s ordinary share capital.
Share-Buyback simply means a listed company buys own shares from the stock market. It
is simple and quick and only affects a small portion of a company’s ordinary share capital.
After using their surplus funds of the company to buys own shares from the market, those
shares have to be cancelled because, by law, a Singapore company cannot hold its own
shares. The Return on Equity would increase (ROE) due to the smaller number of ordinary
shares.

Venture capitalist faces high risks due to the expectation of gaining high returns above their
investment.
a) True
b) False

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Generally, the higher the risk, the higher the expected return.

What does TEP stands for?

a) Theoretical ex-rights price
b) Tentative ex-rights price
c) Taxed ex-rights price
Theoretical ex-rights price (TEP) is a calculated price for a company's shares price after
issuing new rights-shares with the assumption that all new-issued shares are taken up by
the existing shareholders. The result would be that the price will be lower than the old
shares were but higher than the new issued shares.

What is the main disadvantage of shares cancellation?

a) Affects key ordinary shareholders
b) Time-consuming and costly
c) Increases capital
Capital reduction exercise is not an usual occurrence during a company’s lifetime. It is
mostly proposed in connection with debt restructuring scheme, when company faces
serious financial trouble. It affects all ordinary shareholders & issued capital .In addition, it is
costly & time-consuming.

What is a feature of a redeemable convertible preference share?

a) Capital gain
b) Permanent capital of the company
c) Converting preference shares into ordinary shares

Such preference shares will not be redeemed by the issuer. During the life of the issue,
investors can convert the preference shares into ordinary shares of the issuer corporation.
It is reflected as equity on issuer’s balance sheet.

Redeemable preference shares are treated as ____ on the balance sheet when issued.
a) Asset
b) Debt
c) Equity

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Redeemable preference shares are redeemed by the issuer (the Company) at the end of
the life of the issue. When redeemed, issuer pays investors for amount invested &
preference shares are cancelled. It is similar to debt issue in nature. Therefore is treated
like debt on balance sheet.

Rights issue of 1: 4 means ___________.

a) 4 new shares for every 1 ordinary share held
b) 1 new share for every 4 ordinary shares held
c) 1 preference share for 4 ordinary shares
Rights issue refers to offering of common stock to existing shareholders who hold
subscription rights that entitle them to buy new issued shares at a discount from the market
price.

What is the minimum shareholding spread criteria for SGX-SESDAQ?

a) 25% of post-invitation share capital in the hands of 200 shareholders
b) 500,000 shares in the hands of 500 shareholders
c) 500,000 shares in the hands of 200 shareholders
The minimum shareholding spread criteria for SGX-SESDAQ is 15% of post-invitation
share capital or 500,000 shares in the hands of 500 shareholders, whichever is greater
500, 000 shares in the hands of 200 shareholders is for Catalist.

Face value of a bond is also known as par value.

a) True
b) False
Bond face value refers to the amount paid to the bond holder at maturity .Bonds generally
has a par value of $1,000

When most shares in the stock market is moving in an upward trend, it is deemed that the
stock market is ______.
a) Bearish
b) Bullish
Bullish markets are characterized by investor confidence, optimism and expectations that
strong results will continue. In bearish market condition, prices of securities are falling and

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there is a widespread pessimism by investors.

SGX stands for____.

a) Securities Government Exchange
b) Singapore Exchange
c) Singapore Good Exchange
Singapore Exchange Limited is the stock exchange in Singapore which was formed on
December 1, 1990 from the merger of two financial institutions- the Stock Exchange of
Singapore (SES) and Singapore International Monetary Exchange (SIMEX).

Ordinary share would give investors ______.

a) Interest
b) Capital Gain
c) None of the above

Ordinary share do not receive interest. They receive dividends instead. Capital gain refers
to an increase in the value of a capital asset (shares) that gives a higher value than the
purchased price. Capital gain may be either short tern (a year or less) or long tern (more
than a year).

Company share price is affected by_________.

a) Government Regulations
b) Economy
c) Company’s Management Team
d) All of the above
A share price is the price of a single share of a number of saleable stocks of the company
price is calculated by dividing the market capitalization by the total number of shares. The
share price is directly related to the earnings and dividends of the company in the long
term.

An investor would need to hold at least ____% of shares of the company in order to gain
majority control over the business.
a) 50
b) 51
c) 70
A person who owns more than 50% of the outstanding shares of a company has majority
control.

At which stage of a company would Venture Capitalists be willing to invest in?

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 a) Starting up of business
b) Growing of business
c) No more expansions but is earning profit
In the stage of growing of business, business may have breakeven or is already profitable.
Additional funds are needed to allow company to achieve full potential. For example, to
increase production capacity or expand geographically.

Some investors prefer to hold preference shares over ordinary shares as it has/have
_________.
a) Lower risk of losing invested funds
b) Regular income from Periodic Fixed Dividends Payout regardless whether the
company is profiting
c) All of the above
Preference dividend must be fully paid before ordinary dividend can be declared. If
preference dividend not paid, investors may take legal action to recover money invested.

The higher the risk, the lower the expected return.

a) True
b) False
The higher the risk, the higher the expected return. This is to compensate the investor.

Lifespan of a bond is also known as tenor.

a) True
b) False
Tenor is the amount of time left for the repayment of a loan or contract. It is sometimes
used interchangeably with "maturity".

Who is the supervisor for Post-IPO for Catalist?

a) Sponsors
b) Singapore Exchange (SGX)
c) Board of Directors
Singapore Exchange is the supervisor for Main Board. Sponsors give advice to listed
companies on rule compliance, reviewing their public documents and report to SGX when

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necessary.

The general mandate, given by the shareholders, entitled the directors to issue shares at
the ______.
a) Directors’ agreement
b) Directors’ discretion
c) Directors’ free-will
This process is usually done in company’s Annual General Meeting. (AGM)

SGX is concerned that with a company’s change in management and shareholding control
will affect _____.
a) Reception of issue
b) Public perception
c) All of the above
SGX vision is “Building an enduring marketplace”. Their mission is to “offer highly trusted
securities and derivatives marketplace for capital raising, risk transfer, trading, clearing and
settlement and to serve our stakeholder”.

Bonus Questions
A company’s financial situation is considered healthy when _____.
a) Current Assets > Current Liabilities
b) Current Liabilities > Current Assets
c) Shareholders’ equity < Current Liabilities
Current Asset = What you own
Current Liabilities = What you owe
Therefore is healthy when you own more than what you owe.

Which of the following is a feature of Moratorium on Disposal of Shares?

a) Free transfer of shares between shareholders
b) 1st right of refusal to buy shares
c) None of the above
It is to prevent shareholders from selling out overnight as such must offer the remaining
shareholders to buy the shares first.

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A company’s profitability and growth potential is reflected in its _____.
a) Dividend Payout
b) Profit and Loss Statement
c) Share price
A company’s profit or loss amount within the year is recorded down in the profit and loss
statement. If the company is profitable, means it has growth potential.

Which of the following reserves can be utilized for bonus issue?

a) Revenue Reserves
b) Capital Reserves
c) All of the above
Revenue Reserves is the retained earnings or unappropriated profit. Capital Reserves is
the surplus on revaluation of fixed assets. Reserves not equal to shares. Therefore it can
be utilized.
When will a company prefers share placements to rights issue?
a) Fund requirements are small
b) Controlling shareholders not willing to dilute shareholding
c) Bear market
By issuing rights issue, if shareholders unwilling or incapable to purchase the shares, their
shareholding will be diluted as percentage shareholding in the company will decrease.
However by doing shares placement, the shareholders can cap on the aggregate number
of shares that can be issued which helps them to not dilute their shareholding.

If there is a change in a company’s management recently, the company should _____ to

ascertain management’s ability.
a) Increase share price
b) Provide evidence of management’s ability
c) Increase dividends
It is important as it helps to assure the investors that the company will continue to be well
managed.

Which of the following is Venture Capitalist Company?

a) Dubai International Capital
b) Navis Capital Partners
c) Walden International
Walden International invests in companies that have lack of capital but with good potential
growth and hope to reap above average return on their investment.

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SESDAQ is established in ___.
a) 1987
b) 1971
c) 1969

It was initially introduced for small & medium enterprises (SMEs) which conduct high risk
businesses to grow the business.

Which of the following way(s) are used to reduce absolute share price?
a) IPO
b) Bonus Issue
c) All of the above
By issuing bonus issue, the number of shares shareholders hold will increase
whereas the net shareholders’ funds will remain the same as issuing of bonus shares is
utilizing the reserves of the company. Thus, the absolute share price will decrease. (NTA
per share = Net shareholders’ funds / Number of shares)

What are Dragon Bonds?

a) Any currency listed on at least 2 “Dragon” exchanges. (HK, Singapore or Taiwan.
b) RMB and HKD listed on at least 2 “Dragon” exchanges. (HK, Singapore or Taiwan)
c) RMB listed on at least 2 “Dragon” exchanges. (HK, Singapore or Taiwan)

These bonds are traded during Asian time zone.

Zero-Coupon Bonds’ characteristics are

a) Annual coupon repayments, issued at a deep discount and redeemed at par.
b) No coupon during life issued, at deep discount from face value and redeemed at par.
c) No coupon during the 1st year of issue, issued at discount from face value and
redeemed at premium.
Attract investors that are interested in having the discount at the start for buying the bond
and realized earnings at the end of maturity.

Who are the players in the bond market?

a) Issuer, Intermediaries and Investors
b) Underwriters, Intermediaries and Investors
c) Lenders and Borrowers
Issuer is the borrowing corporation which requires funds and wants to borrow money from
the investors who are cash-rich individuals or corporations by issuing bonds. Intermediaries
are the financial institutions which help the issuer to find suitable investors and provide the
buy-sell quote to the issuer and investors. Issuer will repay principal on maturity; pays

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interest periodically to the investors through the intermediaries.

Arrange the Bond Rating from the highest quality to the lowest quality.
a) Aa
b) Aaa
c) Bbb
d) A Ans: b, a, d, c
A has the highest quality by a by B and then b. Thus the one with the most A and a has the
highest quality followed by the B and b.

When Required Rate of Return ( R ) is greater than Coupon Rate ( C ), the bond price will
be _____ 100%, this means that the bonds are selling at a _____ from face value.
a) Smaller than; Discount
b) Greater than; Premium
c) Equal to; Par
When R is greater than C; it means that the investors did not expect the coupon payment to
be lower and thus are not willing to pay the risk value. When demand drops, the price will
drop and will sell at a cheaper price.
Interest rates on the loan stock and convertible unsecured loan stocks are _____ straight
loan stocks because of “sweetener” (reflecting value of conversion rights).
a) Higher than
b) Equal to
c) Lower than
“Sweetener” refers to the warrant in the package as this equity feature provides speculative
interest in the issuer’s shares.

Forms of consideration for a takeover are,

a) Cash, Offeror company’s shares and combination of cash and shares
b) Cash, Offeror company’s shares, Bonds and combination of cash and shares.
c) Cash, Offer company’s shares, Bonds and combination of cash, shares and bonds

Concert-Party refers to
a) Immediate family, siblings children and parents’ siblings
b) Immediate family, siblings children, parents’ siblings and friends
c) Immediate family and their close friends, siblings’ children and parents’ siblings

Concert Party refers to parties who cooperate to obtain or consolidate effective control of
target company.

Which of the following is not the main type of takeover documents?

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 a) Offer Document
b) Offeree Circular
c) Prospectus

Offer Document emphasise attraction or merit of Takeover Offer. Offeree Circular states
terms, merit &/or demerit of Takeover Offer analysed for the benefit of shareholders.
Whereas Prospectus states nothing about the merit or demerit about Takeover Offer, thus
Prospectus is not a main type of takeover document.

Which of the following are NOT tactics to defend unwanted takeover offer?
a) Obtaining a Court Order
b) Release positive new information such as strategic business plans
c) Be critical of the terms of offer
By obtaining a Court Order, it does not help as the court cannot stop the offeree from not
accepting the takeover offer.

Which of the following are not tactics to defend unwanted takeover bids?

a) Cultivate good market image

b) Keep share price low
c) Monitor shareholder’s registers

If the share price is low, it means the company has undervalued shares and
is vulnerable to a takeover as offeror can purchase shares at cheaper price.

A wide spread of shareholders mean each shareholder has _____ shareholding.

a) Relatively small
b) Relatively large
c) Below average

With more people in a pool of limited resources, each person will get a smaller share.
Likewise, a company with a certain number of shares to be divided into a big group of
shareholders, each shareholder will get a small portion of it, thus relatively small
shareholding.

Under the Amalgamation Scheme, ____ in value of shareholders must approve the
takeover.

a) 51%
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 b) 75%
c) 90%

It is to ensure that there is a major shareholding support of the scheme from

the target company’s major shareholders and not the decision of minorities.

The Authority Organization for Singapore Takeovers Code and Mergers is_____.

a) MAS (Monetary Authority of Singapore)

b) ACRA (Accounting and Corporate Regulatory Authority)
c) SIC (Securities Industry Council)

A Bond market is not known as ____.

a) Fixed income Market

b) Debt Securities Market
c) Coupon Market

There is no coupon market in the financial instruments world.

Which of the following does not belong to International Bond Market?

a) Corporate bond
b) Global bond
c) Dragon bond

Corporate bond is issued by Local Corporation and are substantially placed locally. Thus it
is not classified under International Bond Market as it does not go to the international
market.

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