The following are the assumptions of the Modigliani and Miller approach, EXCEPT A. Investors think logically B. Dividends are fully declared C. Capital Markets are Perfect D. No corporate taxes exist
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The following are the assumptions of the Modigliani and Miller approach, EXCEPT
A. Investors think logically
B. Dividends are fully declared
C. Capital Markets are Perfect
D. No corporate taxes exist
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- Which of the following is NOT an acceptable basis on which to measure an expense? A cash outflow. O A pro rata measure. O An estimation. O All of these options are acceptable. O An invoice price. Which of the following is a likely explanation as to why preparers would choose to deliberately understate the reported profit of a listed entity? O To reduce investors' expectations of future earnings. O To decrease the entity's weighted average cost of capital. To reduce the entity's tax liability. O To satisfy the qualitative characteristic of faithful representation. O All of these are likely explanations why preparers would deliberately understate the reported profit.1.Which of the following is not something that you would consider when evaluating the optimal capital structure? d. Security Rating. b. EBIT-EPS Analysis. a. Agency Costs. f. Neither the second nor fourth answer is correct. c. Taxes. e. All of the above are considered when determining the optimal capital structure. 2.Which of the following is an argument for the relevance of dividends? b. Reduction of uncertainty. a. Informational content. c. Some investors' preference for current income. d. All of the above. 3.All of the following are true of stock splits EXCEPT: a. Market price per share is reduced after the split. d. Proportional ownership is unchanged. b. The number of outstanding shares is increased. c. Retained earnings are changed.Which of the following is not an assumption made by Modigliani and Miller in relation to the independence hypothesis concerning capital structure?a. No taxesb. There are no bankruptcy costsc. Equal borrowing rates for individual and businessesd. There is imperfect informatione. All of the above are assumptions made by Modigliani and Miller under the independence hypothesis
- Pro forma statements: Multiple Choice must assume that no new equity is issued. must assume that no dividends will be paid. exclude net working capital needs. are projections, not guarantees. are limited to a balance sheet and income statement.If the stock market is efficient, why do companies manage their earnings? O To avoid violating debt covenants. O To receive bonuses based on reported earnings. O Because companies do not believe the Efficient Market Hypothesis. O All of the above.The theory is based on the notion that investors act rationally and consider all available information in the decision-making process, and hence investment markets are efficient, reflecting all available information in security prices. This describes Select one: a. conventional finance. b. irrational investors. c. behavioral finance. d. cognitive errors. e. None of the these
- all financial instruments - no matter how complex the bells and whistles - are based on four simple needs." Which of the below is NOT of these "simple needs"? Group of answer choices Speculation. Raising Capital. Assumption of risk. Insuring Against Risk.6. Why do DCMs use dividends and not earnings in their formulas? a. Because earnings are not equal to economic profit. b. Because only cash flows matter to the investors. c. Because dividends include other cash flows that earnings do not. d. Because earnings artificially inflate the asset's valuationWhich of the follwong is a true statement about Risk Capital or Owner's Equity? There is no legal obligtion to pay it back It is usually the largest asset held by a firm If dividands are not paid in a consistant and timely fashion the shareholders can force the firm into bankrupcy. It is a much riskier means of financing an embrionic organization than debt. All of the above are correct statements
- why are equities regarded as riskier than debentures for investor? a) because they are paid first according to income statement b) because they are usually not paid according to the income statement c)because they have the last claim according to the income statement d)because they normally have the smallest claim according to the income statementWhich of the following is false regarding book and market values? Select one: O a. Financial managers should rely on book values, and not market values, when analyzing the firm's tax liability. O b. Book value is an accounting summary of value and is inferior to market value as a source of current information regarding the true value of the firm. c. Market value always exceeds book value. O d. The market value of fixed assets is often difficult to determine.Choose the correct. Which of the following is not included in the assumption on which Myron Gorden proposed a model on Stock valuation: A. Retained earning the only source of financing B. Finite Life of the firm C. Taxes do not exist D. Constant rate of return on firms investment.