Q: According to financial bep, what is the position of bep, what will be the operation if there is only…
A: Financial break even point is a point where earnings before income tax is equal to financial cost of…
Q: Which of the following statements is false? The cost of debt securities is highest due to their…
A: The situation under which any entity can encounter loss, injury or damage is known as a risk. Risks…
Q: If the after-tax cost of debt is less than the cost of equity in a fırm, which of the following…
A: The weighted average capital cost (WACC) consists of the measurement of a capital price of the…
Q: Are assets: (a) always lower than liabilities or (b) financed by the stockholders' equity?
A: Assets are the property of the business which can be converted into money and which gives benefit to…
Q: calculate the: -after-tax cost of debt -the cost of preferred stock -the cost of equity from…
A: A combination of long-term debts and different types of stocks to raise funds for the business…
Q: FIND weighted Average Cost of Capital Answer 1 FIND the weighted Cost of Preferred…
A: The weighted average cost of capital indicates the total average cost of the business entity from…
Q: Financial leverage measures how much earnings per share (and ROE) respond to changes in debt. True…
A: A firm can finance its business operations through various sources of capital such as debt and…
Q: In what ways is preferred stock like long-term debt? In what ways is it like equity?
A: Preferred stocks are issued to raise capital for the firm. Other forms of fund raising methods are…
Q: s it true of false that stock sold for amounts in excess of par value results in a gain reported on…
A: A company issues its common stock at par value or at an amount more than the par value. The amount…
Q: hat is Return on Equity (ROE), and why is it important?
A: The ratio refers to a measure used by the companies and investors to determine the company's…
Q: Does dividend policy affect on Debt to equity ratio? And what does the negative D/E ratio indicat
A: Debt equity ratio indicates the level of use of financial leverage in a company and the formula for…
Q: The debt to equity ratio is a: Group of answer choices A)Liquidity ratio. b)Solvency ratio.…
A: Debt to equity ratio is calculated the solvency of the company by checking how much of the equity…
Q: Which of the following is one measure of liquidity? a. Quick ratio b. Profit margin c.…
A: Introduction: Liquidity: Liquidity means which can be easily converted in to the cash with in short…
Q: which of the following is not an advantage of equity rather than debt financing a. lower cost b.…
A: Financing is a procedure where a company arrange for funds to operate its business. It is done…
Q: the effect of Treasury shares are resold at more than cost on total equity is No Effect Can't be…
A: The treasury shares are the shares that have been reacquired by the issuing firm from the…
Q: market capitalization is higher, lower, equal to total shareholders' equity
A: Market capitalization is computed by multiplying the current market price of the shares with the…
Q: Why does have equity habve a higher vost of capital compared to debt?
A: Reasons why equity have higher cost of capital than debt is 1) Debt has tax advantages I,e tax…
Q: How is preferred stock similar to long-term debt? How is it comparable to equity?
A: The Answer :
Q: When liabilites increase and stock holder equity decreases, what is the total assets? shouldn't it…
A: According to the accounting equation, the total of liabilities and the stockholder equity is the…
Q: Which of the following is the reason that preferred dividends declared during the period are…
A: Identify the correct option: Earnings per share (EPS): The amount of net income available to each…
Q: The most difficult component cost of financing to measure is the cost of ________ a Preferred…
A: The component cost of financing for debt is interest.
Q: one of the following is true regarding the business and financial risk: Select one: a. the business…
A: Business risk refers to that type of risk which involves the decline in profitability and stability…
Q: Financial risk is the additional risk that stockholders face as a result of using debt, as opposed…
A: Risk denotes the variability in return. When the return fluctuates, then the risk of the security…
Q: explain the effect of additional debt on the weighted average cost of capital (WACC)?
A: When the company takes on additional date in its capital structure then it increases the risk of…
Q: a. How does the return on total assets differ from the return on stockholders’ equity?b. Which ratio…
A: a. When return on total assets is considered, interest expense is added to the net income and…
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: 1. Why is there a cost associated with retained earnings? 2. What is Coleman's estimated cost of…
A: Given: The firm tax rate is 25% The current price of coleman’s is 12% The current price of firm is…
Q: What are the charateristics of Debt financing and Equity fianancing? If a company wanted to maximize…
A: Answer: Usually for a company there are various sources available to raise funding. Such a issuing…
Q: Which of the following statements is false? a. the common stock account has a credit balance. b. the…
A:
Q: Which company is more reliant on equity to fund their assets based on the ratios you have? What are…
A: The Decision regarding the Capital Structure of a Company is a very important aspect. A company can…
Q: Since stock represents ownership in the company, equity investing is less risky than debt investing,…
A: Investment in equity Vs Investment in Debt Investment in equity helps in acquiring ownership in 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: While computing the cost of equity using the formula , rs=D1P0+grs=D1P0+g, we do not make any…
A: The question is related to cost of capital which is always after tax or post tax. i.e. cost of…
Q: What is the difference between book value per share of common stock and market value per share? Why…
A: Book Value per share: Book value per share can be calculated as follows: BVPS = Total Equity −…
Q: Cost of equity can be calculated using the SML approach or the dividend discount models. True or…
A: Cost of equity is the return that the company pays to its shareholders in exchange for providing the…
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: Why would a company’s return on total assets be different from its return on common stockholders’…
A: Equity: Each company needs finance to run the business. Equity is one of the method through which…
Q: ly based on tax rate structure may be less than optimal.
A: Equity: This is one of the tax system evaluationcriteria pertaining to the concept of equal or…
Q: Why are flotation costs higher for stock than for debt?
A: Floatation cost is the cost that the company has to bear when it issues new securities in the…
Q: Cost of Capital
A: INTRODUCTION In simple words cost of capital is the cost incurred for using capital both equity and…
Q: How does the equity method discourage the manipulation of net income by investors?
A: Equity method is used for accounting for investments by one company in another company when the…
Q: a Calculate the cost of each capital component: i the after-tax cost of debt| i the cost of…
A: Note: This post has several qeuestions. The first question, with its three sub-parts, has been…
Q: Ratios: Which of the following ratios is not considered to be a test of profitability? Long-Term…
A: Profitability ratios are a group of financial indicators that are used to evaluate a company's…
Q: explain the differences between equity capital and debt capital. which category would stocks fall…
A: Capital is the requirement of the business. As per requirement of short term or long term…
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.
Q: Explain how the use of more debt in the company affects return on equity (ROE).
A: ROE or Return on Equity relates to portion of equity capital invested by owner that are generally…
True
False
Step by step
Solved in 3 steps
- Is there a consequence for reported profit or loss if a particular financial instrument, for example, a preference share, is designated as debt rather than equity? Explain the consequence.For purposes of computing the WACC, if the book value of equity exceeds the market value of equity, then: the market value of equity should be used. the book value of equity should be used. the market value of equity less retained earnings should be used. the book value of equity less retained earnings should be used.a. How does the return on total assets differ from the return on stockholders’ equity?b. Which ratio is normally higher? Why?
- The most difficult component cost of financing to measure is the cost of ________ a Preferred stock b Short-term debt c Common stockIs it true of false that stock sold for amounts in excess of par value results in a gain reported on the income statement?Explain the effect of D/E on asset returns, equity returns (assuming that cost of debt is not affected), asset beta and equity beta (assuming that debt beta is zero). Should an investor choose to invest in a stock of a company with high or low D/E, or why expected returns on these stocks are equivalent, although they are not equal?
- Explain how the Du Pont system of analysis breaks down return on assets. Also explain how it breaks down return on stockholders’ equity.Critically discuss the view that preference shares are best described as debt rather than equity.Why does have equity habve a higher vost of capital compared to debt?
- When only equity counts as capital, the higher the capital ratio, the O lower the leverage measure. O lower the degree of financial leverage. O higher the leverage measure. O lower the leverage measure AND lower the degree of financial leverage. O lower the degree of financial leverage AND higher the leverage measure.Which of the following statements is CORRECT?a.The capital structure that maximizes the stock price is generally the capital structure that also maximizes earnings per share.b.The capital structure that maximizes the stock price is generally the capital structure that also maximizes its WACC.c.The capital structure that maximizes the stock price is generally the capital structure that also minimizes its WACC.d.Since debt is cheaper than equity, increasing the debt ratio will always reduce WACC.e.When a company increases its debt ratio, the costs of equity and debt both increase. Therefore, the WACC must also increase.Which of the following is not a potential source of financial leverage? Group of answer choices Accounts payable. Long-term debt. Interest payable. Common stock.