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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?
How does the firm's required rate of return on investment enter into inventory decisions?
What additional information does the fixed asset turnover ratio provide over the total asset turnover ratio? For which industries does it carry greater significance?
Vigo Vacations has an equity multiplier of 2.5. The company's assets are financed with some combination of long-term debt and common equity. What is the company's debt ratio?
How does the deductibility of interest and dividends by the paying corporation affect the choice of financing (that is, the use of debt versus equity)?
How does a firm's required rate of return on investment enter into the analysis of changes in its credit and collection policies?
How do ordering costs for items purchased externally differ from ordering costs for items manufactured internally within the firm?
How can you increase the Sharpe ratio of a portfolio? What type of stocks would you have to add to it in order to do so?
How can the adherence to high standards of ethical business practice contribute to the goal of shareholder wealth maximization?
How can the acquisition of additional information be an effective tool of risk management? Give an original example of the use of this technique.
Give two reasons stockholders might be indifferent between owning the stock of a firm with volatile cash flows and that of a firm with stable cash flows.