converse would be true if the intrinsic value is less than the stock price. The stock might be a good sell. 3. A satisfactory investment is one that offers an expected return‚ from the combination of current income and capital gains‚ that is commensurate with its perceived exposure to risk. The three steps in security analysis should enable investors to identify satisfactory investment s. First‚ economic analysis assesses the general state of the economy and its potential effects on security returns. Industry
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CHAPTER 18 Investment Decisions: Ratios Test Questions 1.Income multipliers: a. are useful as a preliminary analysis tool to weed out obviously unacceptable investment opportunities. 2.The overall capitalization rate calculated on a potential acquisition: a. is the reciprocal of the net income multiplier. 3.The operating expense ratio: c. expresses operating expenses as a percent of effective gross income. 4.The equity dividend rate: b. expresses before-tax cash flow as a percent of the
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was 35%. How much was its net cash flow? a. $3‚284.75 b. $3‚457.63 c. $3‚639.61 d. $3‚831.17 e. $4‚032.81 12. Wells Water Systems recently reported $8‚250 of sales‚ $4‚500 of operating costs other than depreciation‚ and $950 of depreciation. The company had no amortization charges‚ it had $3‚250 of outstanding bonds that carry a 6.75% interest rate‚ and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in the future‚ the firm
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CASE: Managing Offshore Investments: Who’s Currency?1 The Offshore Investment Fund (OIF) was incorporated in Fairfield‚ Connecticut‚ for the sole purpose of allowing U.S. shareholders to invest in Maltese securities. The Fund is listed on the New York Stock Exchange. The custodian of the Fund is the Shady Rest Bank and Trust Company of Connecticut (“Shady Rest”)‚ which keeps the accounts of the Fund. The question very quickly arose as to the currency in which the books of the fund were to be
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Additional Funds Needed Method: Most companies expect growth in sales‚ which means its assets also must grow. Asset growth requires additional funds‚ so the firm may have to raise additional external capital if it has insufficient internal funds. If we assume that none of the firm’s ratios will change‚ we can use a simple approach‚ the Additional Funds Needed (AFN) method‚ to forecast financial requirements. • Required Increase in Assets In a steady-state situation in which no excess capacity exists
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Statement of Cash Flows Learning Objectives 1. Identify the purposes of the statement of cash flows 2. Classify activities affecting cash as operating‚ investing‚ or financing activities 3. Compute and interpret cash flows from financing activities 4. Compute and interpret cash flows from investing activities 5. Use the direct method to calculate cash flows from operations 6. Use the indirect method to explain the difference between net income and net cash provided
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The government implements programs to assist individuals in living a better life. In 2009 a program called Cash for Clunkers or CARS (Consumer Assistance to Recycle and Save Act) was created to help get old makes and modeled automobiles off of the road (U.S. Department of Transportation Press Release). This program allowed individuals to voluntarily trade in and purchase vehicles under this act. This program helps consumers pay for a new‚ more fuel efficient car or truck from participating dealers
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Profits With no Cash University Dr. Sep 10‚ 2014 Profits With no Cash It is regularly a common thing in business to make profits without having any cash due to several aspects of business. This is happening by the non-cash flow adjustments that are recorded as transactions while no cash flows are involved. It is possible to make business transactions without cash involvement. In credit transactions‚ cash is not usually transacted but the transactions are usually recorded therefore if
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just see where life would take me. Eventually‚ I see myself coming back home because this is where I grew up‚ and the island and people of Hawaii made me into the person I am today and will be in the future. I also plan on working toward the typical American dream. I’m very uncertain of the type of career I would like to have pursued in life‚ but I just hope I’m doing something I love. I don’t want to be starting and living each day being unhappy and having regret. I’m not planning on having
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benefits of investment wherever possible. Any project which requires an outlay of money or other resources and which then generates a flow of costs and benefits in subsequent periods should be regarded as an investment. The financial appraisal methods helps in guiding whether to incur an expense now so that benefits can be ripped in later periods (investment)‚ or whether the funds should be used to generate immediate benefits‚ now ( consumption ) Deciding where to focus the investment of an organization
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