Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 14, Problem 1PS
Sources of funds True or false?
- a. Net stock issues by U.S. nonfinancial corporations in most years are small but positive.
- b. Most capital investment by U.S. companies is funded by
retained earnings and reinvesteddepreciation. - c. Debt ratios in the United States are lower than in most other developed economies.
Expert Solution & Answer
Summary Introduction
To discuss: Whether the give statements are true or false.
Explanation of Solution
a.
The net stock issues by the nonfinancial companies in country U in majority of the years are neither small nor positive. Thus, the net equity issues are negative, it means that the repurchases of shares are larger than the share issues.
Hence, the given statement is false.
b.
Majority of the capital investments by country U corporations are funded by the depreciation that are invested again and by the retained earnings.
Hence, the given statement is true.
c.
In country U the debt ratios are lower when compared to other developed economies.
Hence, the given statement is true.
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Students have asked these similar questions
Which of the following statements most accurately describes the relationship between the economic health of a nation
and credit spreads?
A.
Credit spreads increase during an expanding economy because corporations are expected to have volatile earnings.
B. Credit spreads and economic well-being are not correlated.
C. credit spreads increase during an expanding economy because corporates invest in more speculative projects.
D. Credit spreads decrease during an expanding economy because corporate cash flows are expected to rise.
Which of the following is NOT usually associated with “financial risk”?
a. A rise in the country’s interest rates.
b. A new government has been voted in.
c. Fluctuation in a country’s currency.
d. Difficulty in accessing funds from banks.
With respect to the circular flow model of national income, which of the following statements is false?
An increase in investment, a fall in taxes and an increase in exports increases economic activity
OA rise in savings, an increase in exports and a decrease in taxes increases economic activity
OA rise in government spending, a fall in imports and an increase in investment increases economic activity
K A rise in exports, a fall in savings and an increase in transfer payments increases economic activity
Chapter 14 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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