On average, the expected return on debt is lower than the expected return on equity because equity has greater dispersion (variability) of returns. O True O False

Q: Rates of returns on annuities cannot be calculated with a formula. True False

A: Rate of return refers to the return earned by the investors over the investment ampunt which is…

Q: Susan is reviewing a graph that plots earnings per share (EPS) against earnings before interest and…

A: Financial statements are comprehensive reports that provide a summary of an organization's financial…

Q: One main assumption of the segmented markets theory is that: Select one: O A. Bonds of different…

A: The theory which states that short term interest rate and long term interest rates are not related…

Q: Which of the following statements is correct? A.) A flat yield curve occurs when the…

A: Options given in the question:A.) A flat yield curve occurs when the yield-to-maturity is virtually…

Q: Equity investors expect to be compensated for two things

A: In financial terms, risk can be defined as the possibility that the real profits from an outcome or…

Q: The pricing efficiency of financial markets can be expected to decrease if the cost of skillful…

A: Skilled financial manpower is very important in financial sector and valuation of assets in…

Q: An abnormal return occurs:   Only when the actual return is lower than the expected return. Only…

A: A market is said to be efficient, if intrinsic Value of the Security is equal to Market price of the…

Q: Which of the following is false about diversification? Select one or more: a. diversification only…

A: Introduction: Diversification is a risk management strategy. A diversified portfolio have a mix of…

Q: Debt will always have a cost basis. that is less than equity. OA. True OB. False

A: Debt - Debt is referred to as the amount of money that is borrowed by one party from another and is…

Q: Is default risk premium likely to be pro-cyclical (i.e., increasing during economic expansion) or…

A: The difference between the company's actual interest rate and risk free rate within the industry is…

Q: Which of the following statements is false? (You may select more than one answer.)a. The total-cost…

A: Capital budgeting refers to the process by which long-term investment proposals are evaluated based…

Q: In determining the optimal weighted average cost of capital, an MNC can never have too much debt.…

A: The Weighted Average Cost of Capital is always post tax. It is calculated with the help of following…

Q: True or False Returns from the overall market can be thought of as a combination of three factors:…

A: The operating profit of a corporation is the entire earnings from its core business tasks for a…

Q: According to the Capital Asset Pricing Model, higher investment risk, however it is measured,…

A: The CAPM model is being used for finding the required rates of returns of the security for given…

Q: In a recession when income and wealth are falling, the demand for bonds a. rises; right Ob. falls;…

A: Bonds are good and secure sources of investment and these provide a fixed rate of return to the…

Q: Which of the following statements is not correct? Group of answer choices A)Purchasing fixed assets…

A: A)Purchasing fixed assets using cash decreases the current ratio. Purchasing fixed asset using cash…

Q: Ceteris paribus, current financial market returns will increase as

A: Capital goods are those fixed assets for the company which help in the production process. They are…

Q: Interest costs for short-term debt are generally lower than interest costs for long-term debt…

A: Companies and people use debt to tide over liquidity problems or to get access to funds to buy…

Q: explain the difference between ROA and ROE   a. The net Interest margin for each one is different.…

A: Please explain the difference between ROA and ROE

Q: predict

A: Financial planning is always a challenging task for nay company & the things become even more…

Q: According to MM propositions, at what debt-equity ratio should the cost of equity be the lowest?…

A: MM proposition II:- For any firm in a given risk class , the cost of equity is equal to the constant…

Q: Market prices and credit spreads change much faster than credit ratings.   Select one: True False

A: Credit ratings refer to quantified indicators of the credibility of borrowers. Higher the rating,…

Q: Classify each of the following in terms of its effect on interest rates (increase or decrease): I.…

A: Interest ratesInterest rate is referred to as the amount a lender charges to a borrower and is a…

Q: A declining trend in the capital outlay ratio could be an indicator of deferred replacement of…

A: Capital Outlay Ratio:/The capital outlay ratio is a financial metric used to assess the efficiency…

Q: Typically, short-term interest rates: А. are more volatile than long-term interest rates В. are less…

A: Short-term interest rates are usually averages of daily rates, calculated as a percentage. The…

Q: Lower financial leverage is related to the use of additional   O   a.   Debt financing   O…

A: Financial leverage refers to the amount of money borrowed by a company to finance its assets and new…

Q: When estimating cost of debt, the firm should not simply use current short-term rates because these…

A: When estimating the cost of debt, firms typically should not simply use current short-term rates…

Q: The appropriate benchmark for the return on equity is: A)the weighted average cost of capital.…

A: Total earning of the firm that is held in the hands of shareholders of the company.

Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.