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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- Critically discuss the view that preference shares are best described as debt rather than equity.What is the impact on stockholders equity when a company uses debt financing as a source of funding?1. difference b/w creditors and stockholders 2. why does "maximizing firm value" equal to "maximizing stockholders' equity"?
- 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 Stock7.) Describe the debt and equity markets? How do organizations obtain financing from each market? What are the costs involved with obtaining financing in each market? What are some considerations a entity might consider before choosing which market to raise capital?Is there a consequence for reported profit or loss if a particular financial instrument, for example, a preference share, is designated as debt rather than equity? Explain the consequence.
- State two reasons why a company might prefer to issue debt capital rather than equity capital.The cost of equity is easier to estimate than the cost of either debt or preferred stock. True FalseIndicate 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.)
- Should preferred stock be considered as equity or debt? Explain.TOPIC: Introduction to Financial Management 1. Which of the following can be accepted as main points to note when it comes to a company's financial objective? O It is generally accepted that the main financial objective of a company should be to maximize (or at least increase) shareholder wealth. O There are practical difficulties in selecting a suitable measurement for growth in shareholder wealth. Financial targets such as profit maximization and growth in EPS might be used, but no financial target on its own is ideal. O Financial performance is therefore assessed in a variety of ways: by the actual or expected increase in the share price, growth in profits, growth in EPS, and so on. 2. Which of the following statement/s depicts agency relationships and conflicts? I. The owners expect the agents to act in the best interests of the owners. Ideally, the 'contract' between the owners and the managers should ensure that the managers always act in the best interests of the…1. What are some factors that affect capital structure decisions made by management? What are the arguments in support of using debt as part of the capital structure? 2. Does capital structure influence the value of a firm? Why or why not?