WSJ News Brief Chapter 8 William Boswell
docx
keyboard_arrow_up
School
West Chester University of Pennsylvania *
*We aren’t endorsed by this school
Course
250
Subject
Finance
Date
Jan 9, 2024
Type
docx
Pages
2
Uploaded by williamboswell222
Boswell 1
William Boswell
Dr. Blazer
BUAD 341
04/11/2022
Chapter 8: Common Stock
The article I have chosen this week for Chapter 8 is “Shopify Plans 10-for-1 Stock Split,
Seeks to Protect CEO’s Voting Power”. The article speaks on why Shopify is asking its investors
to approve the changes for a 10-for-1 split and the founder share structure to help CEO Tobi
Lutke increase his voting power to 40%. Shopify’s company’s shares, which surged above
$1,600 last year during the pandemic, have fallen about 55% so far this year. They closed Friday
at $603.18 on the New York Stock Exchange, giving the company a $76 billion market
valuation. Due to this happening, Shopify has proposed to their investors to let Tobi Lutke
receive a new “founder share” which will combine with his existing super voting Class B shares,
increasing his voting power to 40% from 34%. Under the current situation, if a portion of super
voting Class B shares go under 5%, then they would convert into Class A shares. With this
information we can defer, that Shopify has a non-constant growth model, since the rates for
future growth can change at any minute. Since the rates would be fluctuating ever so often, this
could impact Shopify in a negative way with their rates as of now just rising over 2%.
There are three components used that Shopify uses to get their required rate of return.
They are dividend yield, earnings growth, and their change in the level of valuation, which is the
price to earnings ratio or P/E Ratio. Other metrics Shopify could use to determine the value a
share of stock would be Earnings per share (EPS), Price-to-Book Ratio (P/B Ratio), and the
Debt-to-Equity Ratio (D/E Ratio). With the Earnings per share method, we could evaluate
whether a stock is high or too low by the amount of company's profit divided by the outstanding
shares of its common stock. If the company’s EPS is high, the more profitable it is. When using
Boswell 2
the Price-to-Book Ratio, investors evaluate an effective approach for investors to find
undervalued companies with high growth and values a company’s stock price properly. However,
this type of ratio has limits and may not be the best method to use to evaluate a company’s stock
like the P/E Ratio. The debt-to-equity ratio is used to evaluate a company's financial leverage and
is calculated by dividing a company’s total liabilities by its shareholder equity. By doing this, we
can determine if the company has a higher or lower leverage ratio, which indicates how much of
risk a company’s stock is on shareholders.
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Documents
Related Questions
6. Review Warren Buffett’s 2022 letter to shareholders and write a few sentences on anything thatinterests or inspires you. The letter may be found here:https://berkshirehathaway.com/letters/2022ltr.pdf
arrow_forward
please explain give me
arrow_forward
Your broker Luke works for a major bank that is working on the merger between ABC Inc. and XYZ Corp. The news is going to be released to the public next week. If you decide to buy some stocks now and split the profits with Luke, your actions should be categorized as ______.
Question 27 options:
A)
It is not possible to tell from the information given
B)
ethical but illegal
C)
unethical but legal
D)
unethical and illegal
E)
ethical and legal
arrow_forward
The Financial Sector-End of Chapter Problem
You are discussing buying stocks with a friend and mention that you want to buy a few shares of Amazon stock. Your friend
says that's a terrible idea because Amazon has never paid dividends to its shareholders so you would never receive any of
Amazon's profits or make any money off the stock.
What might you say to your friend to defend your desire to purchase a few shares of Amazon stock?
You explain that
the price of Amazon stock will always have to rise because dividends are not paid.
the fundamental value of the stock is not determined by the dividends paid, but by the present value of future profits.
purchasing stock is better than purchasing bonds because stockholders are the first in line to get paid if the company
goes bust.
buying a few shares will give you a significant say in how Amazon will be run in the future.
arrow_forward
Discuss the pros and cons of having the directors formally announce a firm’s future dividend policy.
Around 150 words please
arrow_forward
خـــــتـــام, [21.06.20 14:51](Treasury Stock—Ethics) Lois Kenseth, president of Sycamore Corporation,is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation’s CEO. She decidesthat buying them out by purchasing their shares could eliminate them as opponents, and she is confi dentthey would accept a “good” off er. Kenseth knows the corporation’s cash position is decent, so it has the cashto complete the transaction. She also knows the purchase of these shares will increase earnings per share,which should make other investors quite happy. (Earnings per share is calculated by dividing net incomeavailable for the common shareholders by the weighted-average number of shares outstanding. Therefore, ifthe number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.)InstructionsAnswer the following questions.a. Who…
arrow_forward
Types of common stock
In some cases, individuals who start a business have special voting rights that help them exercise more control over the firm. They own a special class of stock called (dual, founder) shares.
Consider this case:
The CEO of EchoStar Communications, Charlie Ergen, owned around 5% of the company’s stock, but his multiple votes per share gave him around 90% of the vote.
Source: “Dish Network 2010 Annual Report,” on Dish Network Investor Relations, http://files.shareholder.com/downloads/DISH/1330128565x0x480914/DC45515A-D65F-475D-B6C2-CF83AE7A10D6/DISH_-_Web_Posting_-_3.30.11.pdf.
Based on this example, which of the following statements is true?
A. Classified shares are not issued with the purpose of providing super voting rights to a certain class of investors.
B. Classified shares have super voting rights, which give more control to a certain class of investors.
arrow_forward
Kulikowski Inc., a client, is considering the authorization of a 10% common stock dividend to common stockholders. The financial vice president of Kulikowski wishes to discuss the accounting implications of such an authorization with you before the next meeting of the board of directors.
Instructions
a. The first topic the vice president wishes to discuss is the nature of the stock dividend to the recipient. Discuss the case against considering the stock dividend as income to the recipient.
b. The other topic for discussion is the propriety of issuing the stock dividend to all “stockholders of record” or to “stockholders of record exclusive of shares held in the name of the corporation as treasury stock.” Discuss the case against issuing stock dividends on treasury shares.
arrow_forward
MS-24. Assessing the Financial Statement Effects of a Stock Split
The following is taken from a Motley Fool article dated June 15, 2018, concerning Aflac Ins
LO4
AFL
Quacking about a split. Supplemental-insurance giant Aflac is best known for the white duck it has as
its spokesperson, but the insurance products it provides to workers in the U.S. and Japan help millione
get the coverage they need in areas that few insurance companies cover. Thats been a successful
model, and the insurer has seen its share price rise substantially over the years. In February. Aflac
announced that it would do a 2-for-1 split effective March 16, putting it in the form of a 100% stock
dividend. CEO Daniel Amos celebrated the announcement, noting that "this is the ninth split of the
company's common stock since listing on the NYSE in 1974 and the first in 17 years." Aflac pointed to
improving liquidity as a key reason for the move.
a. Aflac's common stock has a par value of $0.10. What adjustments will it…
arrow_forward
None
arrow_forward
What are the types of common stock?
There are many types of common stock, each of which offers the investor different risks and rewards. Suppose you currently own stock in two different types of companies, Company A and Company B.
The chart below depicts the share values of Company A and Company B’s stock for the years 2000-2012. Based on what you know about the different company types, identify which line is more likely to correspond to which company.
Company A
Company B
Company A is a stock company known for its stable stream of earnings that risk.
Company B is stock company known for fluctuating P/E ratios and of high earnings.
True or False: One way of protecting against the kind of stock-value losses suffered by most stocks during the 2009 recession is by investing in cyclical stocks.
True
False
arrow_forward
hello, I need help please
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you

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

Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Related Questions
- 6. Review Warren Buffett’s 2022 letter to shareholders and write a few sentences on anything thatinterests or inspires you. The letter may be found here:https://berkshirehathaway.com/letters/2022ltr.pdfarrow_forwardplease explain give mearrow_forwardYour broker Luke works for a major bank that is working on the merger between ABC Inc. and XYZ Corp. The news is going to be released to the public next week. If you decide to buy some stocks now and split the profits with Luke, your actions should be categorized as ______. Question 27 options: A) It is not possible to tell from the information given B) ethical but illegal C) unethical but legal D) unethical and illegal E) ethical and legalarrow_forward
- The Financial Sector-End of Chapter Problem You are discussing buying stocks with a friend and mention that you want to buy a few shares of Amazon stock. Your friend says that's a terrible idea because Amazon has never paid dividends to its shareholders so you would never receive any of Amazon's profits or make any money off the stock. What might you say to your friend to defend your desire to purchase a few shares of Amazon stock? You explain that the price of Amazon stock will always have to rise because dividends are not paid. the fundamental value of the stock is not determined by the dividends paid, but by the present value of future profits. purchasing stock is better than purchasing bonds because stockholders are the first in line to get paid if the company goes bust. buying a few shares will give you a significant say in how Amazon will be run in the future.arrow_forwardDiscuss the pros and cons of having the directors formally announce a firm’s future dividend policy. Around 150 words pleasearrow_forwardخـــــتـــام, [21.06.20 14:51](Treasury Stock—Ethics) Lois Kenseth, president of Sycamore Corporation,is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation’s CEO. She decidesthat buying them out by purchasing their shares could eliminate them as opponents, and she is confi dentthey would accept a “good” off er. Kenseth knows the corporation’s cash position is decent, so it has the cashto complete the transaction. She also knows the purchase of these shares will increase earnings per share,which should make other investors quite happy. (Earnings per share is calculated by dividing net incomeavailable for the common shareholders by the weighted-average number of shares outstanding. Therefore, ifthe number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.)InstructionsAnswer the following questions.a. Who…arrow_forward
- Types of common stock In some cases, individuals who start a business have special voting rights that help them exercise more control over the firm. They own a special class of stock called (dual, founder) shares. Consider this case: The CEO of EchoStar Communications, Charlie Ergen, owned around 5% of the company’s stock, but his multiple votes per share gave him around 90% of the vote. Source: “Dish Network 2010 Annual Report,” on Dish Network Investor Relations, http://files.shareholder.com/downloads/DISH/1330128565x0x480914/DC45515A-D65F-475D-B6C2-CF83AE7A10D6/DISH_-_Web_Posting_-_3.30.11.pdf. Based on this example, which of the following statements is true? A. Classified shares are not issued with the purpose of providing super voting rights to a certain class of investors. B. Classified shares have super voting rights, which give more control to a certain class of investors.arrow_forwardKulikowski Inc., a client, is considering the authorization of a 10% common stock dividend to common stockholders. The financial vice president of Kulikowski wishes to discuss the accounting implications of such an authorization with you before the next meeting of the board of directors. Instructions a. The first topic the vice president wishes to discuss is the nature of the stock dividend to the recipient. Discuss the case against considering the stock dividend as income to the recipient. b. The other topic for discussion is the propriety of issuing the stock dividend to all “stockholders of record” or to “stockholders of record exclusive of shares held in the name of the corporation as treasury stock.” Discuss the case against issuing stock dividends on treasury shares.arrow_forwardMS-24. Assessing the Financial Statement Effects of a Stock Split The following is taken from a Motley Fool article dated June 15, 2018, concerning Aflac Ins LO4 AFL Quacking about a split. Supplemental-insurance giant Aflac is best known for the white duck it has as its spokesperson, but the insurance products it provides to workers in the U.S. and Japan help millione get the coverage they need in areas that few insurance companies cover. Thats been a successful model, and the insurer has seen its share price rise substantially over the years. In February. Aflac announced that it would do a 2-for-1 split effective March 16, putting it in the form of a 100% stock dividend. CEO Daniel Amos celebrated the announcement, noting that "this is the ninth split of the company's common stock since listing on the NYSE in 1974 and the first in 17 years." Aflac pointed to improving liquidity as a key reason for the move. a. Aflac's common stock has a par value of $0.10. What adjustments will it…arrow_forward
- Nonearrow_forwardWhat are the types of common stock? There are many types of common stock, each of which offers the investor different risks and rewards. Suppose you currently own stock in two different types of companies, Company A and Company B. The chart below depicts the share values of Company A and Company B’s stock for the years 2000-2012. Based on what you know about the different company types, identify which line is more likely to correspond to which company. Company A Company B Company A is a stock company known for its stable stream of earnings that risk. Company B is stock company known for fluctuating P/E ratios and of high earnings. True or False: One way of protecting against the kind of stock-value losses suffered by most stocks during the 2009 recession is by investing in cyclical stocks. True Falsearrow_forwardhello, I need help pleasearrow_forward
arrow_back_ios
arrow_forward_ios
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 CollegeCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage

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

Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage