Short Term Investments:
Short term investments are basically the type of investments in which the funds are blocked for comparatively much lesser time period than the long term investments. Also, such investments generate output within a very short time span but their value, on the other hand also is comparatively lesser than the long term investments. The idea behind the motive of short term investments is to promote liquidity so that the investors who require funds within a couple of months or a year may invest in them. Generally, the maximum period of a short term investment is one year.
Trading Securities:
An active investment in debt or equity to earn short term profits or gains is known as trading securities. Also, trading securities are divided on the basis of the motive behind them. There are three different aspects of trading securities that are trading, for sale and holding till maturity. The trading securities are traded in open market and are always valued at fair market value in the books of accounts.
Short-term investments in trading securities are a part of short term assets and are valued at their current market value. As by its very basic nature the trading securities are generally meant to be sold within a short period of time, so any incomes or losses due to such events would form part of the income statement under
The difference between the in available-for-sale securities and the manner of recording it.
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Chapter C Solutions
FINANCIAL ACCT.FUND.(LOOSELEAF)
- What is the cost of preferred stock if the annual dividend is $8.75, stock price is $12, and the flotation cost is $3? How is the cost of preferred stock impacted if the annual dividend increases to $9? What if the annual dividend decreases to $8.50?arrow_forwardToday, a firm has a stock price of $14.26 and an EPS of $1.15. Its close competitor has an EPS of $0.48. What would be the expected price of the competitor's stock if estimated using the method of comparables? Do not include a dollar sign in your answer.arrow_forwardUnder which of the following circumstances would you want to buy a stock? Select one: a. The HPR is greater than zero. b. A stock's holding period return is greater than the CAPM return c. A stock's CAPM return is greater than its holding period return d. The stock's price is higher than its valuearrow_forward
- 10.Which of the following statement on stock valuation is incorrect?a.In dividend discount model, the stock value is the present value of all future dividends.b.We may use the dividend discount model to value all firms. c.Enterprise value is the sum of equity and debt minus cash. d.We may use price-earnings ratio to compute the value to comparable firms.arrow_forwardParticulars 1. Discount rate АВС XYZ 18.5% 14.25% Not 2. Historical growth rate 2.2218% available 3. Sustainable growth 4.5% 20% rate 4. Fundamental value of stock using dividend growth model through historical growth rate 5. Fundamental value of stock using dividend growth model through sustainable growth rate 6. Fundamental value of stock using residual income growth model through historical growth rate 7. Fundamental value of stock using residual income growth model through sustainable growth rate Not Tavailable 3395 Not available 3953 Not 427.30 available 420.35 1 96.5arrow_forwardWhat is a capital gain? The total amount of return expected from a stock investment. O The present value of the future dividends of a stock. O The present value of the future sale of the stock you own. None of the above.arrow_forward
- How will the change in required return influence the price of a stock? How will the dividend growth rate influence the price of a stock?arrow_forwardIf the support and resistance levels of a stock are $15.15 and $15.60 and there has not been a break out or breach, what is the likely share price? O A. between $15.15 and $15.60 O B. below $15.15 O C. above $15.60arrow_forwardLet's explore the difference between "expected" and "actual" return of a stock. 1) How might we calculate what the expected return of a stock should be? 2) How might we calculate the "actual" return of a stock?arrow_forward
- Suppose instead of paying a dividend, Payout Corp. announces that it will repurchase stockwith a market value of $10,000. What happens to the stock price when the repurchaseproposal is announced? subpart d needs to be solvedarrow_forwardWhich of the following represents the value of a stock calculated using the zero-growth model? Multiple choice question. (Dividends)Discount rate Dividends / Discount rate Dividends × Discount rate Discount rate / Dividendsarrow_forwardA stock that does not pay a dividend must have a capital gains yield that is equal to the required return. Select one: True Falsearrow_forward
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning