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Is it possible to construct a portfolio of stocks which has an expected return equal to the risk-free rate?
Describe what exactly is meant when someone is describing the value of the firm versus the value of the equity of the firm.
Define underpricing, and explain why the majority of IPOs are underpriced. What role do investment banks play in the price-setting process?
Define the term NAL as it is used in lease analysis, and then explain how the NAL is calculated.
Is an initial public offering an example of a primary or a secondary market transaction? Explain.
Consider a firm that repurchases shares from its stockholders in the open market, and explain why this action might be detrimental to the stockholders from whom the firm buys shares.
Briefly discuss the methods available for a firm to repurchase its shares and explain why you might expect the stock price reaction to the announcement of each of these methods to differ.
Shapland Inc. has fixed operating costs of $500,000 and variable costs of $50 per unit. If it sells the product for $75 per unit, what is the breakeven quantity?
If you were starting a business, what tax considerations might cause you to prefer to set it up as a proprietorship or a partnership rather than as a corporation?
A firm sells $100,000 of its accounts receivable to factors at a 2 percent discount. The firm's average collection period is one month. What is the dollar cost of the factoring service?
A firm can deliver a negative signal to stockholders by increasing the level of dividends or by reducing the level of dividends. Explain why this is true.
If you bought a share of stock, what would you expect to receive, when would you expect to receive it, and would you be certain that your expectations would be met?
Why is the ROE a more appropriate proxy of wealth maximization for smaller firms rather than for larger ones?
If British pounds sell for $1.50 (U.S.) per pound, what should dollars sell for in pounds per dollar?
Why do we need different tools for analyzing the financial statements? Don't the numbers in the financial statements speak for themselves?
What is the equation for ROA in the DuPont system, and how do the factors in that equation influence the ratio?
If a firm's ROE is low and management wants to improve it, explain how using more debt might help.
What is a firm's fundamental, or intrinsic, value? What might cause a firm's intrinsic value to be different than its actual market value?
If a capital market is not efficient, what is the impact on a firm seeking to raise capital in that market? Why?
How is the annual financing cost for a short-term financing source calculated? How does the annual financing cost differ from the true annual percentage rate?
What four financial statements can be found in a firm's 10-K filing? What checks are there on the accuracy of these statements?
What effect did the expansion have on sales and net income? What effect did the expansion have on the asset side of the balance sheet? What effect did it have on liabilities and equity?
What does it mean when a company's return on assets (ROA) is equal to its return on equity (ROE)?
How is it possible for an employee stock option to be valuable even if the firm's stock price fails to meet shareholders' expectations?
What are common-size, or standardized, financial statements, and how are they prepared?