FN3003_

The _______________theory hypothesizes that the amount of dividends should not be the focus of the company, but that the company should simply declare a dividend from the earnings not currently needed for earmarked projects. This theory leads to erratic and unpredictable dividends.

The management of an airline suffering from financial distress decides to put off its plans to remodel some of its planesʹ interiors in order to attract more business clientele since the additional expected cash flow generated would only go to pay off its bondholders. Instead, management uses the funds to repurchase some of its outstanding shares.  This problem is know as Group of answer choices stakeholder holdup underinvestment                                                  reluctance to liquidate failure to maintain

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.

Companies often are under pressure to meet or beat Wall Street earnings projections in order to increase stock prices and also to increase the value of stock options. Some resort to earnings management practices to artificially create desired results. Required: 1. How can a company manage earnings by changing its depreciation method? Is this an effective technique to manage earnings? 2. How can a company manage earnings by changing the estimated useful lives of depreciable assets? Is this an effective technique to manage earnings? 3. Using a fictitious example and numbers you make up, describe in your own words how asset impairment losses could be used to manage earnings. How might that benefit the company?

When a company with rapid sales growth does not have sufficient funds to fund its growth, it can _______. Multiple Choice   Be acquired by another company.   Stop growing.   Cause its debt to be recalled.   Grow broke.   Repurchase its shares.

Which of the following represent diversifiable risks? the president of a company suddenly resigns the economy goes into a recessionary period a company's product is recalled for defects the Federal Reserve unexpectedly changes interest rates Group of answer choices 2 and 4 only 1, 2, and 3 only 1, 2, and 4 only 1, 2, 3, and 4 1 and 3 only

19. Company ABC factored its accounts receivable with a financing vendor using a "with recourse" arrangement.  What impact might this have on the company? Group of answer choices anger vendors due to later payment Improve cash conversion cycle reduce bad debt Increase days sales outstanding

S1: A reduction in dividends distributed to shareholders from one year to the next can lead to loss of investor confidence and reduced market prices for the stock. S2: The entry to record the payment of a cash dividend includes a debit to Retained Earnings and a credit to Cash. Select the correct response: S1 is False; S2 is True S1 & S2 are True O s1 & S2 are False O S1 is True; S2 is False

1.Financial distress is least apt to lead to A. Increase dividends B.financial restructuring C.Liquidation D.Issuing new shares E.Asset restructuring 2.Which following is false regarding with free cash flows? A. If FCFF are positive then FCFE will be positive. B.If FCFF are negative then firms will need to borrow money to reduce net profits to shareholders to maintain investment needs C. If FCFE are positive then FCFF may also be positive D. If FCFE are negative then FCFF maybe positive E. None of the options provided.

Discussion Cash Flow There is a common phrase in business: "Cash is king." "Cash flow is the life-blood of a company. Without it, a company will fail" (Hicks, 2012). Yet, companies often have to take risks that could potentially jeopardize their cash flow (e.g., new projects, growth, capital budgeting, etc.). Assume you are the CFO of a struggling company. While you do have a positive cash flow, it is minimal at best. If something does not change soon, the company will go under. Fortunately, your product development team has just created a new product that will not only save the company from financial demise but will also revolutionize how the industry does business. The problem is that the product is still 2 years away from being able to be sold to the public, and you will run out of cash within the next 6 months. a. How would you propose obtaining the funds needed to keep the company alive and thriving for the next 2 years until you are able to see a return on the product…

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Why do companies accelerate depreciation on their tax return but often use slower depreciation rates on their financial statements? a. to avoid taxes b. to postpone taxes c. to improve earnings d. to improve long term cashflow

Problem 1 A retiree strongly believe that investing in a non-dividend paying growth firm will eventually cause him to lose all his shares. Explain why and how this happens? Problem 2 Managers are reluctant to make dividend changes. Why? Problem 3 High dividend policy is more difficult to manage for a weak firm than a strong firm. Explain in details why?

What does a firm need to do to improve liquidity? O A. Stock up on inventory in order to never run out of stock O B. Extend credit terms to customers in order to gain more sales O C. Pay all bills and payables when due O D. Speed up collection of accounts receivable from customers

Q5

Which of the following statements are false? (you may choose more than one statement)        A    The issue of ordinary shares will not dilute ownership of the company            B    A rights issue will not dilute ownership of the company               C    A bonus issue is a means of raising finance for the business            D    A company can decide on the level of dividends they pay out to ordinary                   shareholders each year