What does it mean when a company’s free cash flow is negative in one or more years? Do negative values of free cash flow in any way alter or invalidate the notion that a company’s fair market value equals the present value of its free cash flows discounted at the company’s weighted-average cost of capital? Suppose a company’s free cash flows were expected to be negative in all future periods. Can you conceive of any reasons for buying the company’s stock?

Q: Which of the following actions should Paperang Inc. take if it wants to reduce its cash conversion…

A: Cash conversion cycle is that the total period of time taken by the firm to finish its operating…

Q: What is the incentive for managers to overstate a restructuring reserve in the current period in…

A: In order to create a restructuring reserve, the company will incur those expenditures which will be…

Q: Which of the following statements is true? a. High liquidity means a company is short on cash and…

A: Debtholders are just like the creditors of the company and they will have prior claim on the assets…

Q: A firm cannot maintain a return on common equity less than the required rate of return and stay in…

A: Required rate of return is the minimum return rate which is accepted by the shareholders for the…

Q: Is a negative free cash flow (FCF) always a bad sign? A negative free cash flow means that the…

A: Yes. Negative free cash flow is not necessarily bad. Most rapidly growing companies have negative…

Q: All else the same, which of the following management decisions would help alleviate the problem of a…

A: To alleviate the problem of excess cash, company’s management can take following steps- Investment…

Q: Is it possible for a company that has negative net income and negative operating cash flow to end…

A: Your take-home pay, or net income, is the amount left over after taxes and other withholdings. Net…

Q: Assume you are an investor interested in buying out a publicly traded company. There are several…

A: The cash flow statement, also known as the statement of cash flows, is a financial statement that…

Q: Which of the following methods can NOT be used to improve the firm’s cash conversion cycle?…

A: Cash conversion cycle (CCC) expresses the length of time, in days, that it takes for a company to…

Q: Why would a company decide to pay investors cash? What are the two ways to give cash back to…

A: Cash is paid in terms of dividends.

Q: Can Retained Earnings grow too large? If so, what strategies might management take to reduce it

A: Answer: Retained earnings is the cumulative or collective profit hold by company in shareholders…

Q: Taggart Technologies is considering issuing new common stock and using the proceeds to reduce its…

A: The objective of the question is to understand the financial implications of Taggart Technologies…

Q: ou observed that high-level managers make superior returns on investments in their company’s stock.…

A: The Efficient Market Hypothesis (EMH) is a theory in finance that states that financial markets are…

Q: Why do companies accelerate depreciation on their tax return but often use slower depreciation…

A: Companies generally use accelerated depreciation on their tax return, as these methods result in a…

Q: If a company is thinking about distributing excesscash through a stock repurchase program in lieuof…

A: The company chooses to repurchase its shares in the following situation. To reduce outstanding share…

Q: After tax cash flow = Earnings after tax  +  __________ A sunk cost is one that has been incurred…

A: Cash flows after tax can be computed by adding back the depreciation or other sunk cost to the…

Q: Which ONE of the following statements is FALSE? O Firms report peripheral gains and losses on a…

A: Restructuring  is a process in which company change their capital structure, and debt convert into…

Q: Explain how capital adequacy requirements may affect a commercial bank’s dividend payout and growth…

A: Capital adequacy requirement refers to the amount of capital a bank must have as per the requirement…

Q: 12. Which of the following statements is FALSE? A) The Law of One Price implies that leverage will…

A: Leverage is referred as the usage of the debt or borrowed capital, which helps in undertaking the…

Q: Which of the following situation in which the quality of the company’s pay-out to shareholders may…

A: A dividend is an amount that is paid to the shareholders on their investment. It is declared out of…

Q: If a company lowers its cash dividend payment, does that always send a bad signal? If not, provide…

A: Every company receives their capital in the form of equity or debt. Equity is from the shareholders…

Q: Following IFRS, which statement is false? Group of answer choices If the revaluation initially…

A: The objective of this question is to identify the false statement among the given options related to…

Q: return on investment

A: First option is wrong because the return on investment will increase if the invested capital…

Q: m valuation, earnings and cash flows, re the cost of equity is the appropriate d y is the cost of…

A: The Cost of Equity is generally higher than the Cost of Debt since equity investors take on more…

Q: How does a short-term cash flow crisis impact a firm's competitive strategy?

A: It is very important for any business to have cash in hand or at the bank for meeting day-to-day…

Q: What would be the appropriate discount rate for this calculation?

A: Discount Rate: It represents the rate of return applied in capital budgeting for the purpose of…

Q: Which of the following is one of the causes of over capitalization? a. Reduction in the market…

A: Over Capitalization means when a company have huge amount of debt in its book and its Net assists…

Q: Suppose that on its historical Income Statements, a firm always split its total depreciation and…

A:

Q: What would be a reason a company would want to overstate income?A. to help nudge its stock price…

A: Income of the business is very important and useful measure of profitability of the business. More…

Q: Which is CORRECT? O Agency costs rise with the increases in the employee ownerships of that firm O A…

A: The agent is the person that acts on behalf of principal and every action shall be in benefit of…

Q: Why isn't the share price of a long-lasting company like Johnson & Johnson extremely high to reflect…

A: The question focuses on how future cash flows affect a company's share price, which touches on basic…

Q: The main lesson to be learned from the Modigliani and Miller theory of capital structure assuming…

A: Modigliani – Miller theory has following assumptions- There exist a perfect capital market, and…

Q: Why does the WACC decrease as a firm begins to take on debt and then increase after a certain point?

A: WACC: It is also known as Weighted Average Cost of Capital. It is the mixture of weighted cost of…

Q: Companies often are under pressure to meet or beat Wall Street earnings projections in order to…

A: 1.

Q: hat does it mean when a company has zero net income but its stock price has increased? How do you…

A: Equity method: The equity method is used to record the profit earned by a company by investing in…

Q: For the example below, list and describe the input(s) (observable or unobservable) and valuation…

A: Level 1 - Quoted Prices in Active Markets: It includes inputs that are based on quoted prices in the…

Q: State whether the following statement is true or false and provide a written explanation of your…

A: Dividend growth model A method that helps the investors to calculate the current price of the stock…

Q: we know that depreciation is linked to the net cash flows of the company's investments. In fact, any…

A: Depreciation expense: Depreciation expense is the reduction in a particular asset due to its use or…

Q: What effect will disinflation following a highly inflationary period have on the reported income of…

A: Disinflation is the reduction or lowering of the pace of inflation. In other words, in situation of…

Q: Which of the following statements is INCORRECT?     Cutting the firm's dividend to increase…

A: Statement 3"A firm will increase its share price by reducing the total payout to shareholders." is…

Q: Which of the following is true about a firm with products in the decline stage of their lifecycle? O…

A: The decline phase in the life cycle of a firm's product is when the sales start declining and…