Both stock and bond returns are based on the cash flows generated by the issuing firm. How do shareholders and bondholders differ in their claimof the firm’s cash flows? How doessuch claim difference cause the risk difference between stocks and bonds?

Q: what is meant by “The money market is necessary but not sufficient for the liquidity of securities…

A: Solution- The money market is an organized exchange market where participants can lend and borrow…

Q: How to use Return on Equity ratio to determaine whether a company needs to issue stocks or bonds to…

A: Return on equity is a ratio which is used by companies to measure financial performance and helps…

Q: The minimum rate of return a firm must earn on its assets to maintain the current value of its…

A: The choice of financing makes the cost of capital a crucial variable for every company, as it will…

Q: How might an issue (negative or positive) within the overall stock market impact the company’s stock…

A: The performance of an individual company depends on the news and performance of its own business,…

Q: Explain the statement “The money market is necessary but not sufficient for the liquidity of…

A: Money market instruments would be considered as investments under short term securities. These…

Q: Describe what a common stock yield is and why it is important for an investor. Describe and explain…

A: Common stock yield- Common stocks are securities that represent individuals ‘ownership in a…

Q: Tell whether the following statements describe the characteristics of stocks or bonds. e. Issues of…

A: Stocks are the shares held by owners of the companies. They represent part ownership in the…

Q: Explain what a common stock yield is and why it matters to investors. Also, define and explain the…

A: The yield on common stocks: Common stocks represent individuals' ownership of a company. Individuals…

Q: What is the blend of long-term financial sources used to finance the firm which may include debt,…

A: Long term financial sources could be debt, equity or preferred stock. The blend of these is required…

Q: Explain the statement “The money market is necessary but not sufficient for the liquidity of…

A: Money market is an organized market which meets short term requirements of the borrowers and…

Q: Discuss how changes in the general stock and bond markets could lead to changes in the required rate…

A: Required rate of return- is the minimum rate of return which an investor expects in return  for a…

Q: Why might conflicts arise between stockholders and debtholders?

A: A stockholder or a shareholder can be an individual or a company who own one or more shares of a…

Q: What is the difference between a stock split and a stock split effected in the form of a stock…

A: Stock split is an events that increase the outstanding shares and reduce the stated par value. For…

Q: What is the difference between a cash dividend and a stock dividend?

A: Cash dividends are the amount of cash distributed to stockholders by a company out of its earnings,…

Q: Which of the following is not a financing activity: O Issuance of bonds payable O Sale of investment…

A: Introduction: Statement of cash flows: All cash in and out flows are recorded in statement of cash…

Q: ders and debtholders differ in their claim of the firm’s cash flows? How does such a claim…

A: Introduction : In simple words, stock refers to the equity claim in a company under which the holder…

Q: n the general stock and bond markets lead to changes in the required rate of return on a firm’s…

A: Step 1 The required reimbursement rate is the minimum refund that an investor will receive from…

Q: The cash flows associated with common stock are more difficult to estimate than those related to…

A: Common stock is the pool of common shares that a company issues

Q: Which of the following characteristics accurately describes the stock market? An active market that…

A: Stock market is the place where trading of shares done. This helps to determine the share value of a…

Q: Why do stock companies prefer equity financing in raising money for their operations than debt…

A: Equity financing refers to the process whereby a company raises the funds by issuing equity. The…

Q: Which of the following holds true about the Stock market? a. It is for Purchase and sale of goods.…

A: A stock market is a market in which stocks of companies are traded among the buyers and sellers.…

Q: When using discounted dividend method to estimate stock price, which of the following should be used…

A: When using discounted dividend method to estimate stock price, used required return of equity as…

Q: why is money market necessary but not sufficient for the liquidity of securities on the stock market

A: Money market (MM) is a place where short term (ST) securities are traded. Generally, governments or…

Q: Discuss how financial leverage or trading on equity is advantageous to the firm.

A: Trading on equity/ financial leverage is the process to earn higher returns on the debt of the…

Q: For purposes of measuring a firm’s leverage, should preferred stock be classified as debt orequity?…

A: We cannot categorize preferred stock as entirely debt or equity. It is a mixture and is alike bonds…

Q: In what major ways do stocks differ from bonds? When would bonds be a better investment choice than…

A: Bonds are units of corporate debts issued by companies and securitized as tradable assets. Shares…

Q: From the firm’s perspective, how are dividends different from interest payments?

A: Even though interest and dividend are two distinct ideas, both are critical components of a…

Q: What factors to determine in choosing either Bonds /  Preference Shares or Ordinary Shares  as the…

A: Capital Structure is the structure of the firm capital which consists the mix of debt , equity and…

Q: /hen attempting to raise cash, a company may find it more advantageous to issue bonds rather an…

A: Solution Definition of Bonds Bonds payable are a form of long-term debt, which include a formal…

Q: The difference between equity shares and preference shares and debt?

A: The various source using which an entity can raise its finance to run its business operations are;…

Q: Which of the following is an example of an action done by a firm to conduct financial structuring?…

A: A corporation's financial structure refers to the mix of debt and equity used to support its…

Q: Is preferred stock comparable to long-term debt in any way? Is it comparable to equity in any way?

A: Preferred stocks are the form of shares being issued by a company for increasing its capital. The…

Q: Which one of the following is referred as Equity finance? O a. Sale of money market instruments O b.…

A: Equity refers to the amount which is being invested or owned by shareholders means the owner of the…

Q: Does governance of firm affect the prices of their bonds?

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: What is the difference between shares and bonds from the perspective of an investor

A: Institutional investors are high net worth institutions who invest in stocks for the purpose of…

Q: Defining common stock yield and its importance to investors Define and explain a bond yield's…

A: "As per the policy of our company, we are allowed to answer only the first three sub-parts in case…

Q: Secondary Market can be best described in which of the following statement? a. It is a market for an…

A: Stock market there are buying and selling of securities are done depending on demand and supply of…

Q: At times, companies issue their shares for consideration other than cash. What is the measurement…

A: Issue of common stock for non-cash assets or services: Corporations often issue common stock for the…

Q: Which one of the following is not a money market instrument? a. Equity Shares b. Bankers'…

A: money market instruments are short term liquid instruments which are highly liquid.

Q: How does preferred stock compare to long-term debt? In what respects is this comparable to equity?

A: The preferred stock and common stock are the financial instruments to raise money from the market.