Answer the following statements true (T) or false (F)
1) Paid-in capital and retained earnings are internally generated equity.
2) The corporate charter identifies the maximum number of shares of stock the corporation may issue,
which is called 'available for issue' stock.
3) The issue price is the price the stock initially sells for the first time it is sold.
4) Usually, the issue price exceeds par value because par value is normally set as a percentage of the issue price of the stock.
5) An underwriter usually assumes some of the risk of issuing stock by agreeing to buy all of the stock the firm cannot sell to its clients.
1. FALSE - Paid-in capital is externally generated and retained earnings is internally generated.
2. FALSE - The corporate charter identifies the maximum number of shares of stock the corporation may issue, which is called authorized stock.
3. TRUE
4. FALSE - Usually, the issue price exceeds par value because par value is normally set quite low.
5. TRUE
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