transcations to change its risk profile. Which of the following transcations will for sure increase the risk-estimate of the company (and increase the borrowing interest rate) from the z-score perspective. Mark all that apply; more than one answer could be correct. Sold held-to maturity investments for a profit Write-off some obsolete inventory Collect cash from accounts receivable

transcations to change its risk profile. Which of the following transcations will for sure increase the risk-estimate of the company (and increase the borrowing interest rate) from the z-score perspective. Mark all that apply; more than one answer could be correct. Sold held-to maturity investments for a profit Write-off some obsolete inventory Collect cash from accounts receivable

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter5: Risk Analysis

Section: Chapter Questions

Problem 9QE

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All else the same, which of the following management decisions would help alleviate the problem of a buildup of excess cash? O Increase credit terms to customer; i.e. allow them more time to pay Borrow short term to increase the size of the Interest Tax Shield O Reduce credit terms to customers: i.c. make them pay sooner O Reduce the dividend payout ratio to crcate higher levels of retained earnings In evaluating the accuracy of your forecast, which of the following might be indicative of the need for a revised forecast? O The company's Dividend Payout Ratio is likely too high in the forecast period O The growth rate of Sales is trending toward 4-5% over the forecast period O The ratio of Sales/(Invested Capital) is much higher in the forecast period than in the Historical period from which you derived your forecast O The firm's Forecast D/E ratio is holding steady over the course of the forecast An effective financial plan can be either static or dynamic (True or False) O True False
Arbitrage is the idea that one can (select the best answer): Group of answer choices Buy and Sell different assets or packages of assets at different prices such you can earn a riskless profit without investing any capital. Earn rates of return greater than the average for the market by successfully “picking” stocks. Earn abnormal returns above what CAPM would predict for a particular security.
Which of the following is true with Money Market? Select one: a. Attracts long term investor and borrower b. None of the options c. Deals with old stocks issued by companies d. Needs fixed place for trading e. Provides long term instruments which are already issued by companies The project is accepted Select one: a. If the profitability index is negative b. None of the option c. if the profitability index is less than one d. If the profitability index is greater than hundred e. If the profitability index is zero
Solve soon i will give u 2 like sure Investors are most likely to use what type of valuation across a variety of different securities? a. Discounted Cash Flow Model b. Residual Operating Income Model c. Dividend Discount Model
Which of the following statements is correct? A. Investors appreciate illiquid assets in their portfolios as they can easily sell them off to cover margin calls. B. Liquid assets can quickly be converted into cash without changing prices too much. O C. Corporate bonds are among the most liquid financial assets as they trade at a very high frequency. D. Liquid assets tend to be cheaper as investors are not willing to pay for their liquidity benefits.
Provide an analysis of how the following investment patterns can be explained using theories of behavioral finance. Once a firm's current earnings become known, the information content should be quickly digested by investors and incorporated into the efficient market price. However, if the security’s price is close to its 52-week high, investors are reluctant to bid prices up even if the company has an extremely positive earnings surprise.
Saving cash in the bank is not as attractive as it was in the past, and Large Rock is lookingto invest some of its surplus cash. In a meeting with senior managers in the company, youmention the Modern Portfolio Theory which was pioneered by Markowitz. Explain a. The purpose of the Markowitz Portfolio Theory,b. Who would benefit from this theory,c. What is the key component of the theory
Which of the following businesses are most exposed to interest rate risk? * A. A company with a high equity to debt ratio B. A company with a large amount of floating rate debt C. An al-equity company D. An investment company with an investment portfolio that matches its investment horizon.
You have been hired at the investment firm of Bowers & Noon. One of its clients doesn’t understand the value of diversification or why stocks with the biggest standard deviations don’t always have the highest expected returns. Your assignment is to address the client’s concerns by showing the client how to answer the following questions: What is the Capital Asset Pricing Model (CAPM)? What are the assumptions that underlie the model? What is the Security Market Line (SML)?
We learned interest rates differ across firms, and it varies with a firm's investment horizons because investors (or lenders) consider borrower's risk. But how do they decide or evaluate the borrower's risk? Could you explain it combined with concepts or principles we have learned? (Hint: the opportunity cost of capital, but not limited to.)
Which of the following statements are CORRECT? Check all that apply: The aftertax cost of debt decreases when the market price of a bond increases. A decrease in a firm's WACC will increase the attractiveness of the firm's investment options. Cost of capital is also known as the minimum expected or required return an investment must offer to be attractive.
Saving cash in the bank is not as attractive as it was in the past, and Big Rock is lookingto invest some of its surplus cash. In a meeting with senior managers in the company, youmention the Modern Portfolio Theory which was pioneered by Markowitz.Required: Explain to the senior managers,a. The purpose of the Markowitz Portfolio Theory,b. Who would benefit from this theory,c. What is the key component of the theory

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		Sold held-to maturity investments for a profit
		Write-off some obsolete inventory
		Collect cash from accounts receivable
		Buy long-term investments withcash