Which of the following statements concerning net income is MOST correct? A) Net income represents income that may be reinvested in the firm or distributed to its owners. B) Net income represents sales minus operating expenses at a specific point in time. C) Negative net income reduces a company’s cash balance. D) Net income represents […]
The process of shelf-registration is beneficial to the issuing firm because it will reduce the time needed for the firm to take an issue to market. Indicate whether the statement is true or false ANSWER TRUE
Common-size balance sheets are balance sheets of companies with almost identical total assets (within 2% of each other). Indicate whether the statement is true or false ANSWER FALSE
Three ways that savings can be transferred through the financial markets include all of the following EXCEPT A) indirect transfer using the investment banker. B) indirect transfer using the venture capital firm. C) indirect transfer using the financial intermediary. D) direct transfer of funds. ANSWER B
Financial ratios cannot be used to evaluate the creation of shareholder wealth because they are based on accounting numbers that reflect historical cost and not current market values. Indicate whether the statement is true or false ANSWER FALSE
The five basic principles of finance include all of the following EXCEPT A) Incremental profits determine value. B) Money has a time value. C) Risk requires a reward. D) Cash flow is what matters. ANSWER A
Which of the following statements is an example of a futures market transaction? A) An executive has a portion of his current year salary deferred until he retires. B) An investor purchases 100 shares of IBM hoping to sell it in two years for a profit. C) A company purchases an option to buy 1000 […]
The purchase of a pool of mortgages is often financed through the sale of securities called mortgage-backed securities, or MBS. This is a key part of the securitization process. Indicate whether the statement is true or false ANSWER TRUE
General Electric (GE) has been a public company for many years with its common stock traded on the New York Stock Exchange. If GE decides to sell 500,000 shares of new common stock, the transaction will be describe as A) a money-market transaction because GE raises new money to fund its business. B) a secondary […]
Common stockholders may use financial ratios to monitor manager actions to help lessen agency problems. Indicate whether the statement is true or false ANSWER TRUE
