ccording to the risk shifting (or asset substitution) hypothesis O Shareholders are keen to take excessively risky projects as they OFirms should never pay dividends O Companies become too conservative in their investment when

Q: Explain with an example of how a healthy company might not have a spectacular ROE because there is…

A: Return in Equity or R.O.E. Return on equity refers to as the percentage of return, a company is…

Q: One advantage of using leverage is that it allows the original owners of the firm to maintain their…

A: Financial leverage of a company suggests that the company has debt along with equity in its capital…

Q: What are some of the risks an investor would face when investing in a stock? In addition to the…

A: Explanation:- The chance or possibility of experiencing damages in relation to the projected returns…

Q: During difficult economic times, poor ______________ distributions can be demotivating. long term…

A: Difficult economic times are a phase of the economy where there is a decline in economic activity…

Q: Which of the following is an example of a way in which companies can create value by exploiting real…

A: Company has to take decisions while doing business but decisions must be based on logical and…

Q: shareholders

A: NPV or net present value is one of the capital budgeting methods that are calculated to decide on…

Q: .(True or False) Risk shifting refers to a situation in which management of a firm with risky debt…

A: Risk Risk The chance of loss in an investment or the uncertainties involved in an investment is…

Q: Efficient Markets Hypothesis imply that investment strategies purely based on publicly available…

A: The Efficient Market Hypothesis (EMH) argues that the stocks currently trading on exchanges reflect…

Q: Which of the following is true regarding IPO pricing?     Answers: Underpricing is more popular…

A: Correct answer is (a) Underpricing is more popular which hurts the firm.

Q: Suppose profits earned by one firm are independent of profits earned by other firms. When managers…

A: Individuals, organizations, or entities that possess equity or shares in a corporation are known as…

Q: Increasing the cost of borrowing shares most likely:   Enhances market efficiency. Has no impact on…

A: Market is considered as efficient only if: Intrinsic Value = Stock price Stock prices fully relects…

Q: a future investment opportunities? or should maintain its liquidity to fund its investment rather…

A: Companies have cash from the operations of the company and they have options to use the cash one is…

Q: ith a decline in the number of publicly traded companies and the growth of other investment vehicles…

A: The high net worth individuals are those individuals which trade or invest in big amount and having…

Q: The stakeholder capitalism model:   typically avoids the flaw of impatient capital. tries to meet…

A: The finance model means s the theoretical and practical framework used to understand the behavior of…

Q: Firm's that choose to hold more current assets are in general is more ILLIQUID that firms that do…

A: Current assets are resources of value that the company expects to utilize or transform in 1 year to…

Q: Which of the following are negative consequences of compensating managers with stock?   Question…

A: Providing managers with stock as a form of compensation might in fact have unfavorable outcomes,…

Q: 2.322Both investors and companies employ leverage (borrowed capital) whenattempting to generate…

A: Advice to Prevent Collapse1. Reduce Leverage: By lowering the leverage ratio, Lehman Brothers might…

Q: This idea states that there will always be someone who is willing to pay for an asset at a higher…

A: Dividend growth model is about determination of market price by using dividend and it's growth.…

Q: 1 which is INCORRECT about a perfect capital market? there is no financial frictions such as…

A: The perfect market is defined as the market under which there are never any opportunities of…

Q: A high level of financial leverage exposes firms to default risk. However, as a result of it,…

A: Financial leverage is related to the capital structure of company and it is very important for the…

Q: Which of the following statements is least accurate? A. The variance on a well-diversified portfolio…

A: The dividend is distribution of profits to the shareholders of company and dividend is taxable in…

Corporate Ethics

Ethics refers to the moral values and principles that guide an individual. Corporate ethics refers to the moral behavior of a company and its employees while conducting business. Business ethics is another name for corporate ethics. Business ethics reflects the purpose of doing the business. Business ethics is the distinction between what is right and wrong in the workplace and the selection of the right set of actions. Every corporate entity follows business ethics to a large extent in order to survive and compete successfully in the market. Corporate entities that strictly adhere to business ethics gain the trust of their stakeholders and thus gain more customers. An organization follows compliance, i.e., following certain business policies, rules, procedures, and practices to deal with the problem arising from the business environment. Business ethics also ensures that they meet compliance requirements as it was connected with the activities of an organization.