Homework Help for Finance (page 4)
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which one of the following statements concerning financial leverage is correct?
A) Financial leverage refers to the use of common stock.
B) Financial leverage increases profits and decreases losses.
C) Financial leverage has no effect on a firm's return equity.
D) Increasing financial leverage will always decrease the earning per share.
E) Financial leverage magnifies both profits and losses.
One of the major functions of the securities markets is to:
A) advertise the sale of stocks and bonds of major corporations.
B) provide long-term funding for investors.
C) assist businesses in funding long-term funding to finance business expansion.
D) provide investors with information and advice regarding the value of stock and bond issues offered by major corporations.
Which of the following is a primary market transaction?
a) You sell 200 shares of IBM stock on the NYSE through your broker.
b) You buy 200 shares of IBM stock from your brother. The trade is not made through a broker--you just give him cash and he gives you the stock.
c) IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker.
d) One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction.
e) IBM sells 2,000,000 shares of treasury stock to its employees when they exercise options that were granted in prior years.
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