To determine the fair rate of return on capital for a regulated firm, regulators apply so called the Blank______ rule. Multiple choice question. "profitability" "economic value added" "fair rate of return" "bankruptcy avoidance"
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To determine the fair
"profitability"
"economic value added"
"fair rate of return"
"bankruptcy avoidance"
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- The assumption that a business enterprise will not be sold or liquidated in the foreseeable future is known as the: Question 12 options: economic entity assumption. materiality. going concern assumption. fair value principle. Which of the following is not a category to measure financial statement elements? Question 13 options: Cash-flow measures. Current (market) value measures. Cost-based measures. Hybrid measures.The fair rate of return rule means that regulators determine the fair rate of return on capital for the company and allow Blank______. Multiple choice question. an increase in rates only if the company wants to generate revenues that are over and above this fair rate an increase in rates only if the companies can prove that they are unable to generate revenues at all and this fair rate would help them achieve it an increase in rates only if the company can show that revenues are sufficient to achieve this fair rate an increase in rates only if the company can show that revenues are insufficient to achieve this fair rateDetermine 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 recipient
- The term Capital forbearance refers to: a. Capital injected by the shareholders of a FI for expansion. b. Freezing of the undistributed capital of an FI by the regulators. c. Regulators’ policy of allowing an FI to continue operating even when its capital funds are fully depleted. d. Mandatory actions that have to be taken by regulators as a DI’s capital ratio fallsWhich of the following is NOT an acceptable basis on which to measure an expense? A cash outflow. O A pro rata measure. O An estimation. O All of these options are acceptable. O An invoice price. Which of the following is a likely explanation as to why preparers would choose to deliberately understate the reported profit of a listed entity? O To reduce investors' expectations of future earnings. O To decrease the entity's weighted average cost of capital. To reduce the entity's tax liability. O To satisfy the qualitative characteristic of faithful representation. O All of these are likely explanations why preparers would deliberately understate the reported profit.For the example below, list and describe the input(s) (observable or unobservable) and valuation technique(s) used. Determine the appropriate classification in the fair value hierarchy. Company A invested in the common stock of a private furniture manufacturer, Company Z. Quoted prices are not available for Company Z’s stock. Company Z’s fair value is measured as the present value of future cash flow. The measurement requires management assumptions such as discount rate, the amount and the timing of future cash flow.
- Which of the following is false regarding book and market values? Select one: O a. Financial managers should rely on book values, and not market values, when analyzing the firm's tax liability. O b. Book value is an accounting summary of value and is inferior to market value as a source of current information regarding the true value of the firm. c. Market value always exceeds book value. O d. The market value of fixed assets is often difficult to determine.The primary financial market does not ensure the collection of saved income from holders of financial capital available on the national and international market. Select one:falseFalseWhich of the following statement is INCORRECT? Question 15 options: 1) The finance manager manages the short-term balance sheet items of the company, such as current assets and current liabilities. 2) The finance manager uses investment evaluation techniques to decide whether to purchase fixed assets. 3) The finance manager seeks to maximise the firm’s wealth when deciding on the choice of capital sources such as debts and equity. 4) The right-hand side of the balance sheet refers to the company’s investment decisions to buy fixed assets to generate returns.
- Overall do you agree or disagree with the argument that financial statements should be stated as Fair Market Value or Historical Cost? Can you come to definite conclusion? Or is the preferable method used depending upon the business application?Q.Briefly explain the over-investment problem from the perspective of the agency costs between debtholders and equity holders.Positive covenants specify actions a borrowing company must take as part of the indenture. These covenants eliminate the possibility that managers of financially distressed firms will pass on positive NPV projects. Question options: a) True b) False
