1. The term ex-dividend means...
A) The shares trade without the dividend
B) The shares do not pay a dividend
C) The dividend will be reduced by a small percentage
D) The payment is made in stock not cash
2. Which of the following statement is correct?
A) The shorter the operating cycle the less cash invested in liquid assets.
B) The longer the operating cycle the less cash invested in liquid assets.
C) A companyâs operating cycle does not provide information concerning the liquidity needs.
D) The length of the companyâs payableâs period is directly linked to the firmâs profitability.
3) Using common size analysis allows the analysts to compare the same company in different years and the analysts to focus on change in the composition of expenses over time.
A) True
B) False
4) The book value of equity is the value of the company as perceived by investors
A) True
B) False
5) Trends in profit margins such as the net profit margin can provide useful information analysts as to the companyâs future profitability.
A) True
B) False
6) ABC company with a return on assets of 15% and return on equity of 22% would debt to equity ratio of .47
A) True
B) False
1. The term ex-dividend means...
A) The shares trade without the dividend
B) The shares do not pay a dividend
C) The dividend will be reduced by a small percentage
D) The payment is made in stock not cash
2. Which of the following statement is correct?
A) The shorter the operating cycle the less cash invested in liquid assets.
B) The longer the operating cycle the less cash invested in liquid assets.
C) A companyâs operating cycle does not provide information concerning the liquidity needs.
D) The length of the companyâs payableâs period is directly linked to the firmâs profitability.
3) Using common size analysis allows the analysts to compare the same company in different years and the analysts to focus on change in the composition of expenses over time.
A) True
B) False
4) The book value of equity is the value of the company as perceived by investors
A) True
B) False
5) Trends in profit margins such as the net profit margin can provide useful information analysts as to the companyâs future profitability.
A) True
B) False
6) ABC company with a return on assets of 15% and return on equity of 22% would debt to equity ratio of .47
A) True
B) False
Related questions
True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders.
True
False
Points:
Close Explanation
Explanation:
The current risk-free rate of return is 3.80% and the current market risk premium is 6.10%. Blue Hamster Manufacturing Inc. has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Blue Hamsterâs cost of equity is selector 1
13.99%
14.65%
13.32%
17.32%
.
Points:
Close Explanation
Explanation:
Fuzzy Button Clothing Company is closely held and, as a result, cannot generate reliable inputs for the CAPM approach. Fuzzy Buttonâs bonds yield 10.20%, and the firmâs analysts estimate that the firmâs risk premium on its stock relative to its bonds is 3.50%. Using the Bond-Yield-plus-Risk-Premium approach, the firmâs cost of equity is selector 1
13.01%
17.13%
13.70%
15.07%
.
Points:
Close Explanation
Explanation:
The stock of Cute Camel Woodcraft Company is currently selling for $25.67, and the firm expects its dividend to be $1.38 in one year. Analysts project the firmâs growth rate to be constant at 7.20%. Using the discounted cash flow (DCF) approach, Cute Camelâs cost of equity is estimated to be...
16.98%
13.21%
12.58%
11.95%
.
Points:
Close Explanation
Explanation:
It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF approach. In general, there are three available methods to generate such an estimate:
| ⢠| Carry forward a historical realized growth rate, and apply it to the future. |
| ⢠| Locate and apply an expected future growth rate prepared and published by security analysts. |
| ⢠| Use the retention growth model. |
Suppose Cute Camel Woodcraft Company is currently distributing 70.00% of its earnings in the form of cash dividends. It has also historically generated an average return on equity (ROE) of 12.00%. Cute Camel Woodcraft Companyâs estimated growth rate is...
11.70%
3.60%
12.30%
42.00%
.
