Finance

11. Investors and creditors are particularly interested in this financial statement because it tells them what is happening to the company’s most important resource?

List and describe the three career opportunities in the field of finance. Finance has three main career paths: financial management, financial markets and institutions, and investments. Financial management involves managing the finances of a business. Financial managers—people who manage a business firm's finances—perform a number of tasks. They analyze and forecast a firm's finances; assess risk, evaluate investment opportunities, decide when and where to find money sources and how much money to raise, and decide how much money to return to the firm's investors. Bankers, stockbrokers, and others who work in financial markets and institutions focus on the flow of money through financial institutions and the markets in which financial assets are exchanged. They track the impact of interest rates on the flow of that money. People who work in the field of investments locate, select, and manage income-producing assets. For instance, security analysts and mutual fund managers both operate in the investment field.

3.     (TCO 7) ABC Inc. was incorporated on 1/15/12. Their corporate charter authorized the following capital stock:

 Preferred Stock: 7%, par value $100 per share, 100,000 shares.

 Common Stock: $1 par value, 500,000 shares.



The following transactions occurred during the year:



1/19/12 – Issued 100,000 shares of common stock for $17 cash per share.

1/31/12 – Issued 3,000 shares of preferred stock for $115 cash per share.

11/1/12 – Repurchased 30,000 shares of common stock for $22 cash per share.

12/1/12 – Declared and paid a total dividend of $95,000. 



Required: 

1. Prepare the journal entry for each transaction listed above.

2. In your own words, explain the main differences between common and preferred stock.

(Points : 25)

A: That would definitely be Corporate Finance. It provides the knowledge of finance that relates to use the capital investment effectively to run the business

8. An entity shall not classify a debt security as held-to-maturity if the entity has the intent to hold the security for only an indefinite period. Consequently, a debt security shall not, for example, be classified as held-to-maturity if the entity anticipates that the security would be available to be sold in response to what circumstances?

preferred stock, and bonds) and prepare a seminar to explain the valuation process to the firm’s

15. Gibraltar Corporation has 200,000 shares of 9%, $50 par value cumulative preferred stock authorized, 80,000 shares issued and 75,000 outstanding, as well as 300,000 shares of $10 par value common stock issued and outstanding. Dividends relative to the preferred stock are two years in arrears. If Gibraltar declares a $2,137,500 dividend during the current period, the amount of the dividend applicable to the preferred and common stockholders is:

Preferred dividends are generally fixed they can be valued as a constant growth rate of zero. You use the zero growth models for the preferred stock and the assumption that the dividends always stay the same and you use the constant growth model for common stock because the dividend grows by a specific percent a year.

Most of the time the price of the preferred dividends is higher than the common stock because there is more risk for investors but there is also more payoff if it does well.

Some liabilities are not contractual obligations and may not be payable in cash. True False

(e) The total value of the firm is independent of the amount of debt it uses. (Points : 20)

1. Describe the field of finance. How is it different from the field of accounting?

b. The fair value of a liability cannot differ from the amount appearing on the balance

(c) What were the components of total current liabilities on December 31, 2004 (otherthan accounts payable already discussed above)?

The redemption available after the third anniversary of the original issue date is weighted towards equity. This option guarantees that the investors will receive at least the principal back. The mandatory redemption behaves like debt because there is a definite maturity date. The protective covenants are also weighted toward debt because the risk is limited and gives priority to the Series B Preferred Stockholders. Dividends are usually associated with equity; however, in this case the dividends are behaving more like debt interest payments. The dividends are paid at a fixed 8%