Answer:
Price earnings ratio = 19 times.
Explanation:
Price earning ratio is calculated as for the common equity, as the earnings on preference share is fixed.
Accordingly, the earnings for equity = Net income - preference dividend = $112,000 - $12,000 = $100,000
Number of shares outstanding = 20,000
Earnings per share = $100,000/20,000 = $5 per share.
Selling price of the share = $95
Thus, price earnings ratio = $95/$5 = 19 times.
This reflects that the 19 times of earnings is the price of share.
B. "Report any differences on the enclosed statement directly to our auditors; no reply is necessary if this amount agrees with your records"
C. "If you do not report any differences with 15 days, it will be assumed that this statement is correct"
D. "The following invoices have been selected for confirmation and represent amounts that are overdue"
Answer:
The correct answer is letter "C": "If you do not report any differences with 15 days, it will be assumed that this statement is correct".
Explanation:
Accounts Receivable, or AR, is an accounting term used to refer to the money that is owed to a company by its customers. The customers, who may be individuals or corporations, are the debtors since they owe money for the goods or services provided by the company. When the product is sold in credit the company sets a number of days so that the customer can pay the bill amount. The term usually is 30, 60 or 90 days.
In that sense, and auditor may find 15 days suitable for a debtor for report changes in a statement, otherwise, it is considered as correct.
B. Investing actvity
C. Operating activity
D. Financng activity
Answer:
A. Noncash financing and Investing activity
Explanation:
The Cash Flow Statement records all Cash related transactions and used to determine the movement in the Balance of Cash and Cash Equivalent. When mortgage note is issued in exchange of a building, this is simply an Exchange of Assets without the movement of cash. Non - Cash activities are not shown in the Cash Flow Statement.
Answer:
Audit is an independent examination of records,financial statements or process in order to give report to the party that has commissioned the audit
Explanation:
Audit can be of the three types highlighted in the question.
Audit of financial statements involves an external auditor examining the financial statements of clients i.e the income statement,statement of financial position.the cash flow statement as well statement of changes in equity e.t.c with a view to expressing an opinion on whether the financial statements show a true and fair view of the performance of the organisation audited and sometimes whether they were prepared in line with generally accepted accounting standards such as US GAAP.
Compliance audit is simply to find out whether the person audited has conformed with certain laid down policies and procedures such as the policies to follow in granting credit facilities to bank customers.
Process audit is about examining a process to see if the steps taken by the person carrying the tasks are logical and to find out areas for improvement in order to cut down time and resources used.
B. Low-cost diversification
C. A targeted risk level
D. Low-cost record keeping
Answer:
A. A superior risk-return trade-off
Explanation:
In a normal and efficient market a professional portfolio management service is able to offer Low-cost diversification, A targeted risk level, and even a Low-cost record keeping. What they cannot offer is a superior risk-return trade-off, this is because risk-return holds a very correlated trade-off in which the higher amount of risk your portfolio holds the higher returns you can get from it, but this does not get rid of the risk which can cause you to lose all of your money. Therefore "superior" is unnachievable.
Answer:
Possible outcome of stock price at end of 6 months (0.5 years)
Outcome 1:
Stock price = 35
Strike price = 45
Payoff call = max{ST - K,0} = max{35-45,0} = 0
Present value =
PV = 0/(1+5%)^0.5 = 0
Outcome 2:
Stock price = 49
Strike price = 45
Payoff call = max{ST - K,0} = max{49-45,0} = 4
Present value =
PV = 4/(1+5%)^0.5 = 3.903
Probability of both outcomes = 0.5
Value of call option = 0.5*0 + 0.5*3.903 = 1.95
Short sale arbitrage opportunity:
Short the stock and buy a call option. Invest the proceeds at 5% for 6 months:
Short stock = +41.6
long call = -1.95
Proceeds = 41.6 - 1.95 = 39.65
Amount after 6 months = 39.65*(1+5%)^0.5 = 40.629
Case 1:
Stock price = 35
Payoff from long call = 0
Buy the stock at market price and close the short stock position = -35
Total payoff = 40.629 - 35 = 5.629
Case 2:
Stock price = 49
Payoff from long call = 49 - 45 = 4
Buy the stock from market price and close the short stock position = -49
Total payoff = 40.629 + 4 - 49 = -4.3708
Present value of payoff from both cases = (0.5*5.629 + 0.5*(-4.3708))/(1+5%)^0.5
= 1.2581/1.0246 = 1.2277
Arbitrage payoff = 1.2277
Answer:
The short sale proceeds in an arbitrage strategy is 1.2277
Explanation:
From the question given,
The Possible outcome of stock price at end of 6 months (0.5 years)
The Outcome is:
The Stock price = 35
The Strike price = 45
The Payoff call = max(ST - K,0) = max(35-45,0) = 0
The Present value = PV = 0/(1+5%)^0.5 = 0
The possible Outcome 2:
The Stock price = 49
The Strike price = 45
The Payoff call = max{ST - K,0} = max{49-45,0} = 4
The Present value =
PV = 4/(1+5%)^0.5 = 3.903
Then,
The Probability of both outcomes = 0.5
Value of call option = 0.5*0 + 0.5 x 3.903 = 1.95
Therefore, the Short sale arbitrage opportunity is:
The Short the stock and buy a call option.
Invest the proceeds at 5% for 6 months:
Short stock = +41.6
long call = -1.95
Proceeds = 41.6 - 1.95 = 39.65
Amount after 6 months = 39.65*(1+5%)^0.5 = 40.629
The Case 1:
Stock price = 35
Payoff from long call = 0
Buy the stock at market price and close the short stock position = -35
The Total payoff = 40.629 - 35 = 5.629
For Case 2:
Stock price = 49
Payoff from long call = 49 - 45 = 4
Buy the stock from market price and close the short stock position = -49
Total payoff = 40.629 + 4 - 49 = -4.3708
The Present value of payoff from both cases = (0.5*5.629 + 0.5*(-4.3708))/(1+5%)^0.5
= 1.2581/1.0246 = 1.2277
Then the Arbitrage payoff = 1.2277
Answer: They would want to change the corporate charter to allow cumulative voting instead of noncumulative voting.