2 a) Critically discuss the view that preference shares are best described as debt rather than equity. b) Examine the difference between public and private companies.
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2 a) Critically discuss the view that
b) Examine the difference between public and private companies.
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Solved in 2 steps
- Identify the term being referred to: A theory that states that how high or low an entity pays out dividends does not affect the decisions of investors. *1. difference b/w creditors and stockholders 2. why does "maximizing firm value" equal to "maximizing stockholders' equity"?1. How to determine the market value of a publicly traded company, and how does it work? 2. What is the process of determining the value of the privated company? 3. Why the values are important part of business, company mangers, creditors and equityinvestors?
- Which of the below statements is false for equity? A. Limited liability B.Residual claim on firm value C.Payouts to equity holders must be made before interest payments D.Voting RightsWhich of the following best describes the possible result of treasury share transactions? a. May decrease but not increase net income. b. May increase net income if the cost method is used. c. May increase but not decrease retained earnings. d. May decrease but not increase retained earnings.If a publicly traded company is trying to maximize its perceived value to decision makers external to the corporation, the company is most likely to report too small a valuefor which of the following on its balance sheet?a. Assetsb. Liabilitiesc. Retained Earningsd. Common Stock
- Determine whether it is common stock, preferred stock, or bonds that has the feature best related to the following considerations. a. Ownership and control of the firm b. Obligation to provide return c. Claims to assets in bankruptcy d. High cost of distribution e. Highest return f. Highest risk g. Tax-deductible payment h. Payment partially tax-exemptto corporate recipientAre the companies financed primarily with debt or equity? Why?The cost of equity is easier to estimate than the cost of either debt or preferred stock. True False
- Indicate whether the following statement is true or false. Provide the relevant explanations. The higher the proportion of equity in a company’s overall capital structure, the higher return required by its debtholders. (Explain your reasoning – in your explanation, provide a numerical example supporting your answer.)Which of the following is not a characteristic that sets preferred stock apart from common stock?A. voting rightsB. dividend paymentsC. transferabilityD. ownership(I) A share of common stock in a firm represents an ownership interest in that firm. (II) Preferred stockholders hold a claim on assets that has priority over the claims of common stockholders, but after that of bondholders. A. (I) is true, (II) false B. (I) is false, (II) true C. Both are true D. Both are false
