Answer:
(1) A practice known as "equity" finance
(2) Busing a share of TouchTech stock would give Nick "a claim to partial ownership"
(3) "the bondholders" will be paid first"
(4) Of the three statements provided, statement # 1 and statement # 3 are correct
(5) A government that is engaged in civil war mist likely pays a "higher" interest rate
Explanation:
Lets look at the answer to each question individually below:
(1) Touch Tech is selling stocks to raise money. The process involves issuing common shares through investment banks in a primary market to raise capital. The firm is essentially selling pieces of itself to investors, or "shareholders" which is known as equity finance
(2) The firm sells a part of itself to the investors who buy stocks and shares in the company. This means that essentially the company is selling ownership up to a certain amount. This gives the shareholders rights to residual income of the company. So each shareholders is a part owner and their individual ownership depends on the percentage of shares that they hold relative to the total shares outstanding.
(3) Shareholders by definition have a claim on the residual income/cashflows of the company. This is income that has been derived after paying for operating activities, other expenses, interest payments, and tax payments. Bondholders are debt holders of a company and in terms of seniority of claim, the debt holders are paid off first. The shareholders come at the very bottom of the hierarchy in terms of getting paid compared to debt holders, the government, and preference shareholders.
(4) Expectation of a recession would mean a company finds it hard to achieve sales and therefore impacts the profitability. If the profitability is impacted negatively, shareholders would get a lower rate of return on their investment which would push down the demand for share, and this is why the price of the shares would likely decline. Similarly, if investors believe the Touch Tech will be able to earn good sales figures and good profitability, the rate of return on investment would be expected to be higher. Therefore, in this case, the increased demand for shared would drive up the price of the shares as well. Therefore both these statements are true,
On the other hand, the Dow Jones Industrial Average is NOT a stock exchange. An example of a stock exchange is the NYSE (New York Stock Exchange) where investors can buy and sale shares. This is the exchange where Nick can buy the shares. The DJIA is simply an index that indicates how the prices of a select number of stocks from across the board are moving. The level at which the DJIA is at gives investors and idea as to how the overall market is performing rather than looking at the share price and volume trades of each individual stock.
(5) A war torn government issuing bonds would be perceived by investors as having difficulties in pay back its debts. Tax collections and economic performance of the country would be deeply impacted by the civil war. This would make the risk of not getting paid back a lot higher for a bondholder than a government that is stable and plenty of cash reserves. To compensate for this added risk, the government of a war torn state would have to offer investors a higher rate of return in exchange for their investment.
Answer: E
Explanation:
Weak form efficiency advocates that past price movements, earnings and volume data does not affect the price of stock and therefore cannot be used in the prediction of its future direction.
Weak form efficiency is also called random walk theory. It states that the prices of future securities are random and past events does not affect the prices. Advocates believe every information needed can be found in the stock prices and there is no need for past information. It is an irrational decision by amateur investors.
Answer:
The correct answer is letter "B": historical prices.
Explanation:
American Economist Eugene Fama (born in 1939) proposed the Efficient Market Hypothesis (EMH) stating that it is impossible to beat the market. There are three types of EMH: The Weak, Strong, and Semi-Strong EMH. The Weak form of the EMH suggests that current stock prices reflect all the data of past prices and technical analysis is useless to predict stock price fluctuations.
Answer:
The overall rate of return is 16.67%
Explanation:
The computation of the overall rate of return is shown below:
= Actual amount return ÷ investment amount
= ($15,000 × 23% + $140,000 × 16%) ÷ ($155,000)
= ($3,450 + $22,400) ÷ ($155,000)
= ($25,850) ÷ ($155,000)
= 16.67%
Hence, the overall rate of return is 16.67%
We simply applied the above formula and the same is to be considered
B. The second advisor because the total first-year cost is $5,000.
C. The first advisor because the total first-year cost is $5,000.
D. Because the cost is approximately the same, either advisor could be selected.
Answer:
The answer is A.
Explanation:
According to the details given in the question on the two financial advisor's approach, the first advisor does not request a payment but a commission on the funds purchased with the inheritance money. The second advisor does request payment for the job and also a share on the assets managed with the inheritance money.
If Kirby wants to minimize the upfront expenses which can be described as the sum that is paid before a service or a job is done, then the first advisor is the better option. So the answer is A.
I hope this answer helps.
Answer:
a. 2,800,000 shares
b. $49.50
Explanation:
a. Poison is a tactic used by a company threatened with an unwelcome takeover bid to make itself unattractive to the bidder
Shares that the unfriendly outside group must acquire for the poison pill to go into effect is
= 20% of 14,000,000 shares.
= 14,000,000 × 20%
= 2,800,000 shares
b. The new purchase price for the existing stockholders will be
=$66 × (1 - 0.25)
= $49.50
Accounts Payable 13,900
Accounts Receivable 8,200
Allowance for Uncollectible Accounts $900 credit
Cash Sales 24,000
Lightning uses the percentage-of-credit-sales method and estimates 4% of sales are uncollectible. What is the ending balance of the allowance account after the year-end adjustment?
$3,900
$4,860
$3,000
$2,100
Answer:
$3900
Explanation:
Calculation to determine the ending balance of the allowance account after the year-end adjustment
Balance in allowance for uncollectible account$ 900
Add Bad debts during the period $3,000
($75,000*4%)
Ending Balance in allowance for uncollectible account$ 3,900
($900+$3,000)
Therefore the ending balance of the allowance account after the year-end adjustment is $3900
Answer:
a. Cash basis - amount is $3,600
b. Accrual basis - amount is $1,200
Explanation:
a.
Under the cash basis, the amount which will be recorded is as:
In cash basis, it is the method or way of recording the accounting transactions for the revenue and the expenses only when the cash (corresponding) is received or when the payments are made.
So, in this $3,600 is paid, the full amount will be recorded.
b.
Under Accrual basis, the amount which will be recorded as:
In Accrual basis, it is the method or way of recording the accounting transactions for the revenue when it is earned and the expenses is recorded when it is incurred.
So, in this the expense to be recorded for 2 months, it is computed as:
For per month = $3,600 / 6
= $600 per month
For 2 months, it is:
= $600 × 2
= $1,200
Therefore, the amount is $1,200 for 2 months.