Why would a company decide to pay investors cash? What are the two ways to give cash back to investors and talk about the trade-off of those two regarding: Tax considerations Share price support/signaling Flexibility

Q: How to use Return on Equity ratio to determaine whether a company needs to issue stocks or bonds to…

A: Return on equity is a ratio which is used by companies to measure financial performance and helps…

Q: How had dividend policy been used by firms as a “signal”. Why is it necessary for firms to send such…

A: Dividend is paid by the firm to the investors as a return. It can be paid in cash or stock. Dividend…

Q: What does the Trade-off Theory say about the corporate's financing choices?Briefly explain.

A: Trade off theory is a capital structure theory which is trying to trade off between the benefit of…

Q: Why is the total cost of bringing a general cash offer to the market lower than an IPO

A: Initial Public Offering (IPO) is the sale of stock by a company for the first time. Under this…

Q: How does a firm's dividend policy reflect its approach to financial decision-making, and what are…

A: The concept ensures that the company prioritizes its investments and growth before committing to…

Q: Which of the following theories is supported by the argument that shareholders can transform a…

A: The correct answer is:b. "bird-in-the-hand" theoryExplanation:The "bird-in-the-hand" theory,…

Q: Explain Costco's company’s financial payout policy in the context of the forces that shape payout…

A: Costco, one of the largest retailers in the world, has gradually become a household name with its…

Q: Discuss the usefulness of the DuPont Analysis in analyzing the drivers of companies’ profitability.…

A: Ratio analysis is a tool used by the financial analyst to measure the financial performance of the…

Q: What are the advantages/disadvantages of using the discounted cash flows method of estimating the…

A: Discounted cash flows method : Discounted cash flow method considers the time value of money in…

Q: Do you think companies have more incentive to report securitization as a sale or secured borrowing…

A: Window Dressing: It refers to the more formal steps that have been done to enhance the financial…

Q: Explain "frce cash flows. Why do managers like to retain free cash flows instead of distributing it…

A: Free cash flows : As the name suggests, free cash flows relates to the fund that are leftover to a…

Q: If you want to value a firm that consistently pays out its earnings as dividends, the simplest model…

A: Valuing companies: There are several methods that are used to value a company. Four of the most…

Q: We discussed several explanations for dividend levels by various firms. Which of the following would…

A: The dividend policy of a firm plays a critical role in communicating its financial health and future…

Q: When looking to invest corporate dollars, is the top-down approach is preferred over the bottom-up…

A: Answer: Corporations are exposed to factors which are related to macroeconomic. Therefore, while…

Q: How does the WACC DCF methodology mechanically incorporate interest tax shields (select the best…

A: The correct answer is "By estimating a discount rate that incorporates the tax benefits of debt."In…

Q: What are the advantages and disadvantages of a company raising capital through the issuance of…

A: Equity is the owner’s share of capital in the company.  Equity share capital is the owned capital.…

Q: If the financial markets are competitive and complete, which ones of the following goals of a firm…

A: A financial market is defined as the marketplace, where the trading of the securities used to occur…