CHAPTER 12 QUESTIONS 12-1 Operating leverage affects EBIT and‚ through EBIT‚ EPS. Financial leverage generally has no effect on EBIT—it only affects EPS‚ given EBIT. 12-2 Because Firm A has a higher fixed operating costs‚ its operating income will change by a greater percentage than Firm B’s operating income if sales change. Firm A has a higher degree of operating leverage than Firm B. 12-3 If sales tend to fluctuate widely‚ then cash flows and the ability to service fixed charges
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Investment Risk in Stock Market Securities Introduction: Stories of people making fortunes from the securities market have enticed many others into risky investments. Congress created the Securities & Exchange Commission (SEC) to protect investors. Many corporation managers became greedy and made self-serving decisions that created the principle-agent problems. The solutions for these problems lead to more unethical behavior from management. The creative use of financial statements even tricked
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Why Invest at all? Why invest? This came to me sometime in late 2004/early 2005 as I strongly felt the need for making my money work better for me. We were blessed with twin daughters‚ and full of hopes and dreams. I was transforming to become more financially responsible and aware. No one needed to educate me on why invest‚ as I suddenly realised that to achieve these dreams‚ I needed to shed a bit of my happy-go-lucky attitude and set longer term financial goals. And to achieve these financial
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Week 7 Chapter 6: Investors in the Share Market True/False QUESTIONS 1. Investing in shares of publicly listed corporations should‚ on average‚ over time provide a higher return than investing in fixed-interest securities. a. True b. False 2. Investments through a stock exchange are limited to ordinary shares issued by listed corporations. a. True b. False 3. Portfolio theory contends that a diversified share portfolio enables an investor to significantly reduce the portfolio’s exposure to systematic
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The Wm. Wrigley Jr. Company: Capital Structure‚ Valuation‚ and Cost of Capital Wm. Wrigley Jr. Company is a well-known leader that manufactures confections such as gums‚ mints‚ hard and chewy candies‚ lollipops‚ and chocolates. The company was founded in 1891 and its headquarters is based in Chicago‚ Illinois. It has operations in over 40 countries and distributes many of its world famous brand such as Double mint‚ Extra‚ Skittles‚ Orbit to more than 180 countries. Investment strategy of Blanka
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Course | SECURITIES INVEST (Fa12) | Test | Chapter 1 self assessment | Started | 9/8/12 4:38 PM | Submitted | 9/8/12 5:00 PM | Status | Completed | Score | 34 out of 34 points | Time Elapsed | 21 minutes. | Instructions | | * Question 1 1 out of 1 points | | | Corporate shareholders are best protected from incompetent management decisions by Answer | | | | | Selected Answer: | the threat of takeover by other firms. | Correct Answer: | the threat of takeover
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Stock Repurchase Repurchase of stock can be viewed in each of the following way: investment‚ financing‚ shareholder distribution and control issue. Repurchase of stock can be a way to use firm’s excess debt capacity. By doing so‚ firm can lower the cost of equity financing. If debt financing is more flexible and cheap‚ replace equity financing with debt financing is a good way to lower the weighted cost of capital. In this sense‚ such action is a financing issue because it controls the cost of
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Stock-Trak Evaluation When our investments class first started I knew very little about stocks‚ mutual funds and options but with every class that I took I started to understand exactly what each meant. This became very important in my research of companies to choose for stocks‚ mutual funds and options. I took a few things into consideration: the economy‚ the time of season‚ and the products the company is best known for; also from the companies chosen I look at their three month six month and
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for your screen of equities? -All the Above On what screen is it possible to generate a printable report detailing background information and basic financial data for a specific company? -DES Which of the following functions allows you to view historic end of day pricing for a security? -I and IV Which function on Bloomberg displays all 4 of the following: I. Shares outstanding II. 1 Yr. Total Return III. Company Address IV. Company Description -DES Within the equity screening functionality
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penny stocks is a very good opportunity of investment. If you do not have a basic understanding of how to trade penny stock it will be a great risk in investing and you may make boundless mistakes out of ignorance and absence of direction. It is more favorable to invest in companies which are waiting for their future rather than companies which have already matured are now in decline. While investing in penny stocks‚ there is no doubt that there is a huge insubstantially in the investment. Without
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