1. A reverse split reduces the number of shares outstanding.

2. Firms with a large number of acceptable capital budgeting projects generally have a high dividend payout ratio.

3. On a 2-for-1 stock split, the shares outstanding are doubled, and the stock's par value is halved.

4.Leasing is often referred to as off-balance sheet financing because lease payments are shown as operating expenses on a firm's income statement, and under certain conditions, leased assets and associated liabilities do not appear on the firm's balance sheet.

5. An option is a contract which gives its holder the right to buy (sell) an asset at a predetermined price within a specified period of time.

6. As the price of a stock rises, the premium investors are willing to pay for a call option increases because of the immediate capital gain that can be realized by exercising the option and from the possibility that the stock price could go higher.

7. The owner of a convertible bond owns, in effect, both a bond and a call option.

8. Convertible securities are bonds or preferred stocks that, under specified terms and conditions, can be exchanged for common stock at the option of the holder.

9. Leveraged buyouts (LBOs), popularized in the 1980s, occur when a firm's managers decide to try and gain control of their publicly owned company by buying out existing shareholders using large amounts of borrowed money.

10. Call provisions on preferred stock generally state that the company must pay an amount greater than the par value of the preferred stock when the preferred stock is called.

11. One of the primary benefits of issuing preferred stock to fund capital budgeting projects is that failure to pay preferred dividends does not trigger bankruptcy.

12. The estimated end-of-lease value of the property is called the residual value.

13. A call option on a share of common stock Verizon Inc. that has an exercise price of $25.00 when the shares of Verizon stock are selling for $22.00 is said to be an in-the-money option.

14. A put option on a share of AT&T stock has an exercise price of $12.50, if AT&T stock currently sells for $10.00 a share the put option is said to be out-of-the-money.

15. One of the main reasons why foreign firms are interested in buying U.S. companies is to gain entrance to the U.S. market. A decline in the value of the dollar relative to most foreign currencies makes this competitive strategy more feasible.

16. If we have two identical call options with different strike prices, the option with higher strike price will have a higher price.

17. If we have two identical put options with different exercise prices, the put option with the higher exercise price will have a higher price.