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University of Florida *
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206
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Finance
Date
Nov 24, 2024
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Uploaded by ChiefOpossum3761
A. Redeem outstanding shares
B. Issue additional shares
C. Use debt financing
D. Pay out dividends -
✔✔
C
Company A regularly modifies its capital structure by repurchasing stock. Which one of the following is a
true statement?
A. Investors may feel that management is manipulating the stock price.
B. Stock repurchases are not an attractive alternative to dividend payments.
C. Partial disclosure to the SEC is required for repurchases.
D. Stock repurchases do not offer tax deferral advantages over dividends. -
✔✔
a
A lender is evaluating the creditworthiness of a company that has high levels of operating leverage. In
determining the debt capacity of the company, the bank would MOST LIKELY prefer a:
A. high total liabilities to total assets ratio.
B. high debt to tangible net worth ratio.
C. low long-term debt to capital ratio.
D. low times interest earned ratio. -
✔✔
c
A distribution business has used several bank loans to finance its expansion plans. After a fire destroyed
the company's facility and inventory, it went out of business due to the loss of revenue during the
month it was closed. What type of insurance coverage should the company have had to prevent its
demise?
A. Cost reimbursement
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Related Questions
Which of the following statements is false?
A.
Mutual funds are pool investor funds to purchase financial instruments and thus reduce risks through diversification.
B.
Initial public offering (IPO) occurs when firm issues stock in the public market for the first time.
C.
The difference between current assets and non-current assets equals to working capital.
D.
Owner’s equity is the residual interest in assets that remains after subtracting an entity’s liabilities.
arrow_forward
If the stock market is efficient, why do companies manage their earnings?
O To avoid violating debt covenants.
O To receive bonuses based on reported earnings.
O Because companies do not believe the Efficient Market Hypothesis.
O All of the above.
arrow_forward
Which of the following statements is NOT true?
A.
Stock owners benefit from stock price increases
B.
Higher stock prices allow companies access to more capital
C.
Common stocks are not securities
D.
Stock prices tend to be very volatile
arrow_forward
Which of the following is false?
a. Under GAAP, companies cannot record gains on transactions involving their own shares.
b. Under IFRS, companies cannot record gains on transactions involving their own shares.
c. Under IFRS, the statement of stockholders’ equity is a required statement.
d. Under IFRS, a company records a revaluation surplus when it experiences an increase in the price of its common stock.
arrow_forward
Which one of the following statements is correct?
A) Modigliani and Miller argued that dividend decisions are more important than capital structure decisions.
Dividend policy is usually set by shareholders during the Annual General Meeting of a company.
C) A share repurchase is an alternative to a dividend as a means for redistributing cash to the equity market.
Shareholders typically view dividend increases as a signal of financial distress.
arrow_forward
Which of the following would not be an appropriate reason for a firm to repurchase its stock:
As an investment if management believes the market has undervalued the stock price.
In order to have sufficient shares to cover employee stock programs.
Solely to boost Earnings Per Share.
Both A and B.
arrow_forward
Please don't give image format and complete all required
arrow_forward
Which of the following actions would improve a firm's liquidity?
a.
Selling shares and reducing accounts payable.
b.
Buying bonds.
c.
Selling bonds and increasing cash.
d.
Both Selling bonds and increasing cash and Selling shares and reducing accounts payable.
arrow_forward
In a strong-form efficient market, accounting announcements:
will impact stock price only if it is related to cash flows
will impact stock price if it involves new public information
will imoact stock brice if it it affects a firms ability to borrow funds
will no impact stock price
arrow_forward
A company might purchase treasury stock for all of the following reasons excepta. it wants to increase its net assets by buying its stock low and reselling it at a higher price.b. management wants to decrease the earnings per share of common stock.c. management wants to avoid a takeover by an outside party.d. the company needs the stock to distribute to employees as part of its employee stockpurchase plans.
arrow_forward
* Your answer is incorrect.
A company may repurchase its own shares for all of the following reasons, except
O to reduce the number of shares issued and thereby increase earnings per share and return on equity.
to have additional shares available for use in the acquisition of other companies.
O to attempt to influence the market price of the shares.
O to reduce the number of shares issued in order to meet debt to equity bank covenant requirements.
arrow_forward
Which of the following is a difference between stocks and bonds?
Select one:
a.
cash flows to bondholders are not known and not promised, cash flows to stockholders are known and promised
b.
companies issue stocks to grow the company and issue debt to pay bills
c.
required returns on debt are typically lower than required returns on equity
d.
dividends are legal obligations of the firm; coupons are not.
Clear my choice
arrow_forward
Which of the following statements is true?
a. High liquidity means a company is short on cash and may be unable to pay its debts.b. When a company decides to go public through an IPO, it is typically targeting to sell its shares to only a handful of shareholders. c. If the company has a higher than expected extremely high profit this year, equity holders will benefit more than debt holders as debtholders are the residual claimers for the cash flows of the company.d. In the extreme case, the debt holders take legal ownership of the firm's assets through a process called bankruptcy.e. Equity holders expect to receive dividends and the firm is always legally obligated to pay them.
arrow_forward
not use ai please
arrow_forward
Statement I. Appropriation reserve is used to restrict earnings available for dividends Statement II. The issuance of stock dividends increases share capital and total shareholders' equity
a. Statement I and II are trueb. Statement I and II are falsec. Statement I is true, Statement II is falsed. Statement I is false, Statement II is true
arrow_forward
When additional shares of stock are issued, the earnings per share decreases (assuming no change in total earnings). Please explain how this occurs and what the impact on a firm’s decision to raise capital by equity, as oppose to debt.
arrow_forward
Which of the following statements is FALSE?
O A. Public companies typically have access to much larger amounts of capital through the public markets.
B. The two advantages of going public are greater liquidity and better access to capital.
OC. The process of selling stock to the public for the first time is called a seasoned equity offering (SEO).
arrow_forward
In calculating earnings per share, a company uses the treasury stock method when
a.
it recognizes the assumed impact of exercising outstanding warrants.
b.
it develops a methodology to handle the premium paid on exercised share options.
c.
it needs to value the cash received for a convertible bond.
d.
it needs to value treasury stock repurchased during the year.
arrow_forward
Which one of the following statements about ordinary equity is correct?
a. Shareholders have a residual claim to the firm's assets.
b. Shareholders are repaid an ordinary share's value on the share's maturity date.
c. Shareholders' return is always positive.
d. Equity that is listed on the ASX must pay a dividend.
arrow_forward
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Related Questions
- Which of the following statements is false? A. Mutual funds are pool investor funds to purchase financial instruments and thus reduce risks through diversification. B. Initial public offering (IPO) occurs when firm issues stock in the public market for the first time. C. The difference between current assets and non-current assets equals to working capital. D. Owner’s equity is the residual interest in assets that remains after subtracting an entity’s liabilities.arrow_forwardIf the stock market is efficient, why do companies manage their earnings? O To avoid violating debt covenants. O To receive bonuses based on reported earnings. O Because companies do not believe the Efficient Market Hypothesis. O All of the above.arrow_forwardWhich of the following statements is NOT true? A. Stock owners benefit from stock price increases B. Higher stock prices allow companies access to more capital C. Common stocks are not securities D. Stock prices tend to be very volatilearrow_forward
- Which of the following is false? a. Under GAAP, companies cannot record gains on transactions involving their own shares. b. Under IFRS, companies cannot record gains on transactions involving their own shares. c. Under IFRS, the statement of stockholders’ equity is a required statement. d. Under IFRS, a company records a revaluation surplus when it experiences an increase in the price of its common stock.arrow_forwardWhich one of the following statements is correct? A) Modigliani and Miller argued that dividend decisions are more important than capital structure decisions. Dividend policy is usually set by shareholders during the Annual General Meeting of a company. C) A share repurchase is an alternative to a dividend as a means for redistributing cash to the equity market. Shareholders typically view dividend increases as a signal of financial distress.arrow_forwardWhich of the following would not be an appropriate reason for a firm to repurchase its stock: As an investment if management believes the market has undervalued the stock price. In order to have sufficient shares to cover employee stock programs. Solely to boost Earnings Per Share. Both A and B.arrow_forward
- Please don't give image format and complete all requiredarrow_forwardWhich of the following actions would improve a firm's liquidity? a. Selling shares and reducing accounts payable. b. Buying bonds. c. Selling bonds and increasing cash. d. Both Selling bonds and increasing cash and Selling shares and reducing accounts payable.arrow_forwardIn a strong-form efficient market, accounting announcements: will impact stock price only if it is related to cash flows will impact stock price if it involves new public information will imoact stock brice if it it affects a firms ability to borrow funds will no impact stock pricearrow_forward
- A company might purchase treasury stock for all of the following reasons excepta. it wants to increase its net assets by buying its stock low and reselling it at a higher price.b. management wants to decrease the earnings per share of common stock.c. management wants to avoid a takeover by an outside party.d. the company needs the stock to distribute to employees as part of its employee stockpurchase plans.arrow_forward* Your answer is incorrect. A company may repurchase its own shares for all of the following reasons, except O to reduce the number of shares issued and thereby increase earnings per share and return on equity. to have additional shares available for use in the acquisition of other companies. O to attempt to influence the market price of the shares. O to reduce the number of shares issued in order to meet debt to equity bank covenant requirements.arrow_forwardWhich of the following is a difference between stocks and bonds? Select one: a. cash flows to bondholders are not known and not promised, cash flows to stockholders are known and promised b. companies issue stocks to grow the company and issue debt to pay bills c. required returns on debt are typically lower than required returns on equity d. dividends are legal obligations of the firm; coupons are not. Clear my choicearrow_forward
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SEE MORE QUESTIONS
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Recommended textbooks for you
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College

Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College