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Question
Which of the following tends to cause differences between market values and book values?
I. Accounting often creates a dichotomy between realized and unrealized income.
II. Accountants allocate goodwill when a firm is acquired for more than book value.
III. Many accounting values are transactions-based and hence backward-looking.
IV. The use of fair-value accounting.
V. Accountants refuse to assign a cost to equity capital.
A. I and II only
B. I and III only
C. II and IV only
D. I, III, and IV only
E. I, III, and V only
F. I, III, IV, and V only
Answer
This answer is hidden. It contains 1 characters.
Related questions
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Q:
The following table presents forecasted financial and other information for Scott's Miracle-Gro Co.: What is an appropriate estimate of Scott's terminal value as of the end of 2014, using a warranted multiple of free cash flow as your estimate?A. $155 millionB. $2,898.5 millionC. $3,007.0 millionD. $4,365.0 millionE. $7,042.2 millionF. None of the above.
Q:
The weighted average cost of capital for a firm is the:A. discount rate which the firm should apply to all of the projects it undertakes.B. rate of return a firm must earn on its existing assets to maintain the current value of its stock.C. coupon rate the firm should expect to pay on its next bond issue.D. minimum discount rate the firm should require on any new project.E. rate of return shareholders should expect to earn on their investment in this firm.F. None of the above.
Q:
Which of the following statements are correct concerning diversifiable, or unsystematic, risks?
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II. There is no reward for accepting diversifiable risks.
III. Diversifiable risks are generally associated with an individual firm or industry.
IV. Beta measures diversifiable risk.
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Q:
Unsystematic risk:
A. can be effectively eliminated by portfolio diversification.
B. is compensated for by the risk premium.
C. is measured by beta.
D. is measured by standard deviation.
E. is related to the overall economy.
F. None of the above.
Q:
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A. beta; alpha
B. beta; standard deviation
C. WACC; beta
D. standard deviation; beta
E. standard deviation; variance
F. None of the above.
Q:
When making a capital budgeting decision, which of the following is/are NOT relevant?
I. The size of a cash flow.
II. The risk of a cash flow.
III. The accounting earnings from a cash flow.
IV. The timing of a cash flow.
A. I only
B. II only
C. III only
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Q:
Which of the following statements related to the internal rate of return (IRR) are correct?
I. The IRR is the discount rate at which an investment's NPV equals zero.
II. An investment should be undertaken if the discount rate exceeds the IRR.
III. The IRR tends to be used more than net present value simply because its results are easier to comprehend.
IV. The IRR is the best tool available for deciding between mutually exclusive investments.
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B. I and III only
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E. I, II, III, and IV
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Q:
Which of the following figures of merit does not directly take into consideration the time value of money?
I. Payback period
II. Internal rate of return
III. Net present value (NPV)
IV. Accounting rate of return
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Q:
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Q:
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II. Distress costs
III. Management incentives
IV. Financial flexibility
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B. I and III only
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Q:
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A. the incurrence of debt by a corporation in order to pay dividends to shareholders.
B. the exclusive use of debt to fund a corporate expansion project.
C. the borrowing or lending of money by individual shareholders as a means of adjusting their level of financial leverage.
D. best defined as an increase in a firm's debt-equity ratio.
E. the term used to describe the capital structure of a levered firm.
F. None of the above.
Q:
You believe interest rates will soon fall.
a. Would you rather own a three-year, 6 percent coupon, fixed-rate bond or an equivalent-risk, three-year, floating-rate bond currently paying 6 percent interest?
b. Would your answer to (a) change if you were contemplating issuing a bond rather than owning one? If so, how?
c. Would your answer to (a) change if, as an investor, you believed interest rates would soon rise? If so, why?
Q:
Depreciation expense:
A. reduces both taxes and net income.
B. increases the net fixed assets as shown on the balance sheet.
C. reduces both the net fixed assets and the costs of a firm.
D. is a noncash item that increases net income.
E. decreases current assets, net income, and operating cash flows.
Q:
Which one of the following is the financial statement that summarizes changes in the company's cash balance over a period of time?
A. income statement
B. balance sheet
C. cash flow statement
D. shareholders' equity statement
E. market value statement
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A. income statement
B. balance sheet
C. cash flow statement
D. sources and uses statement
E. market value statement
Q:
Which one of the following is the financial statement that shows a financial snapshot, taken at a point in time, of all the assets the company owns and all the claims against those assets?
A. income statement
B. creditor's statement
C. balance sheet
D. cash flow statement
E. sources and uses statement
Q:
Which of the following statements are true?
I. Underwriters help private companies access public stock markets through IPOs.
II. Shelf registrations and private placements are examples of seasoned security issues.
III. Issue costs for debt are typically greater than issue costs for equity.
IV. Private equity financing is a common source of financing for startup firms.
A. I and II only
B. I and III only
C. I, II, and IV only
D. I, III, and IV only
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Q:
The sustainable growth rate of a firm is best described as the:
A. minimum growth rate achievable assuming a 100 percent retention ratio.
B. minimum growth rate achievable if the firm maintains a constant equity multiplier.
C. maximum growth rate achievable excluding external financing of any kind.
D. maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.
E. maximum growth rate achievable with unlimited debt financing.
F. None of the above.
Q:
Which one of the following correctly defines the retention ratio?
A. one plus the dividend payout ratio
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C. additions to retained earnings divided by dividends paid
D. net income minus additions to retained earnings
E. net income minus cash dividends
F. None of the above.
Q:
The retention ratio is:
A. equal to net income divided by the change in total equity.
B. the percentage of net income available to the firm to fund future growth.
C. equal to one minus the asset turnover ratio.
D. the change in retained earnings divided by the dividends paid.
E. the dollar increase in net income divided by the dollar increase in sales.
F. None of the above.
Q:
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Q:
Which of the following are viable techniques to cope with the uncertainty inherent in realistic financial projections?
I. Simulation
II. Ad hoc adjustments
III. Scenario analysis
IV. Sensitivity analysis
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B. III and IV only
C. II, III, and IV only
D. I, II, and III only
E. I, III, and IV only
F. I, II, III, and IV
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A. decrease in the fixed asset turnover rate
B. decrease in the financial leverage ratio
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D. increase in the day's sales in inventory
E. no change in the total asset turnover rate
Q:
Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?
A. current ratio
B. debt-to-equity
C. retention
D. asset turnover
E. return on assets
Q:
Below is a recent income statement for Gatlin Camera:
Q:
Consider the following premerger information about a bidding firm (Buyitall Inc.) and a target firm (Tarjay Corp.). Assume that neither firm has any debt outstanding. Buyitall has estimated that the present value of any enhancements that Buyitall expects from acquiring Tarjay is $2,600. What is the NPV of the merger assuming that Tarjay is willing to be acquired for $28 per share in cash?A. $400B. $600C. $1,800D. $2,200E. $2,600F. None of the above.