Series 79 Practice Exam questions and
answers with solutions
SEC Rule 147 provides for which of the following?
-The provision for the type of sales materials to be offered
-The use of an offering circular
-A simplified registration requirements
-An exemption from the '33 Act for certain types of offerings - ANSWER Exemption from 33 Act
for certain offerings
Tangent Corp. wants to return money to its shareholders. It sells for $25 million a building that it
owns and leases the building back at a competitive rent. The $25 million is then distributed to
shareholders through a special dividend. How will the company's debt to equity ratio be
impacted? - ANSWER This transaction has the impact of reducing retained earnings (via the
dividend payment), which is a component of shareholder's equity. Thus, the ratio will increase ?
i.e., be negatively impacted.
Which of the following statements is false regarding disclosure requirements under Regulation
FD?
-Reg. FD applies to retail and professional investors such as stock analysts, research analysts,
credit agencies and large institutional investors.
-Reg. FD can usually be satisfied by using a combination of methods including press releases,
news conferences, conference calls and webcasts.
-If a CEO intentionally discloses material information to a group of research analysts, the
company must disclose the same information in a 8K report within 24 hours rather than the
normal 4-day time frame required in an 8K report.
-if ceo unintentionally discloses, within later of 24hr or next business day beginning of
tradingday - ANSWER -If a CEO intentionally discloses material information to a group of
research analysts, the company must disclose the same information in a 8K report within 24
hours rather than the normal 4-day time frame required in an 8K report.
, IF INTENTIONAL = SIMULTANEOUS
Which of the following valuation multiples is most helpful when valuing divisions of public
companies? - ANSWER EV/EBIT
EV/EBIT is helpful in situations where D&A is unavailable (e.g., when valuing divisions of public
companies) or for companies with high capex. EV/EBITDA serves as a valuation standard for
most sectors, but is difficult to calculate for a specific division of a company. It is independent of
capital structure and taxes, as well as any distortions that may arise from differences in D&A
among different companies. In certain sectors, as well as for companies with little or no
earnings, EV/sales may be relied upon as a meaningful reference point for valuation. The P/E
ratio, calculated as current share price divided by diluted EPS (or equity value divided by net
income), is the most widely recognized trading multiple, but difficult to calculate for a specific
division.
An investment club has a good relationship with a broker-dealer that is an underwriter in an
upcoming hot IPO. The club has 23 members and is asking for an allocation of shares in the IPO.
How can the underwriter protect itself by assuring that none of the club's members are
restricted persons? - ANSWER obtain a representation from an authorized representative of the
club, within the 12 months prior to the IPO
Before selling a new issue to any account, an underwriter or broker-dealer must satisfy its
obligation to ensure that a customer is not restricted by obtaining, within the 12 months prior
to the sale, a representation from the account holders or a person authorized to represent
them, that the account is eligible to purchase new issues in compliance with FINRA Rule 5130.
In an M&A sale, first round bids are expected to include all of the following EXCEPT
-Indicative purchase price
-Key assumptions to arrive at the stated purchase price
-Information on financing sources
answers with solutions
SEC Rule 147 provides for which of the following?
-The provision for the type of sales materials to be offered
-The use of an offering circular
-A simplified registration requirements
-An exemption from the '33 Act for certain types of offerings - ANSWER Exemption from 33 Act
for certain offerings
Tangent Corp. wants to return money to its shareholders. It sells for $25 million a building that it
owns and leases the building back at a competitive rent. The $25 million is then distributed to
shareholders through a special dividend. How will the company's debt to equity ratio be
impacted? - ANSWER This transaction has the impact of reducing retained earnings (via the
dividend payment), which is a component of shareholder's equity. Thus, the ratio will increase ?
i.e., be negatively impacted.
Which of the following statements is false regarding disclosure requirements under Regulation
FD?
-Reg. FD applies to retail and professional investors such as stock analysts, research analysts,
credit agencies and large institutional investors.
-Reg. FD can usually be satisfied by using a combination of methods including press releases,
news conferences, conference calls and webcasts.
-If a CEO intentionally discloses material information to a group of research analysts, the
company must disclose the same information in a 8K report within 24 hours rather than the
normal 4-day time frame required in an 8K report.
-if ceo unintentionally discloses, within later of 24hr or next business day beginning of
tradingday - ANSWER -If a CEO intentionally discloses material information to a group of
research analysts, the company must disclose the same information in a 8K report within 24
hours rather than the normal 4-day time frame required in an 8K report.
, IF INTENTIONAL = SIMULTANEOUS
Which of the following valuation multiples is most helpful when valuing divisions of public
companies? - ANSWER EV/EBIT
EV/EBIT is helpful in situations where D&A is unavailable (e.g., when valuing divisions of public
companies) or for companies with high capex. EV/EBITDA serves as a valuation standard for
most sectors, but is difficult to calculate for a specific division of a company. It is independent of
capital structure and taxes, as well as any distortions that may arise from differences in D&A
among different companies. In certain sectors, as well as for companies with little or no
earnings, EV/sales may be relied upon as a meaningful reference point for valuation. The P/E
ratio, calculated as current share price divided by diluted EPS (or equity value divided by net
income), is the most widely recognized trading multiple, but difficult to calculate for a specific
division.
An investment club has a good relationship with a broker-dealer that is an underwriter in an
upcoming hot IPO. The club has 23 members and is asking for an allocation of shares in the IPO.
How can the underwriter protect itself by assuring that none of the club's members are
restricted persons? - ANSWER obtain a representation from an authorized representative of the
club, within the 12 months prior to the IPO
Before selling a new issue to any account, an underwriter or broker-dealer must satisfy its
obligation to ensure that a customer is not restricted by obtaining, within the 12 months prior
to the sale, a representation from the account holders or a person authorized to represent
them, that the account is eligible to purchase new issues in compliance with FINRA Rule 5130.
In an M&A sale, first round bids are expected to include all of the following EXCEPT
-Indicative purchase price
-Key assumptions to arrive at the stated purchase price
-Information on financing sources
