🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Accounting
3
answers
0
watching
19
views
23 Nov 2019

Stock A's beta is 1.5 and Stock B's beta is 0.5. Which of thefollowing statements must be true about these securities? (Assumemarket equilibrium.) Stock B must be a more desirable addition to aportfolio than Stock A. Stock A must be a more desirable additionto a portfolio than Stock B. The expected return on Stock A shouldbe greater than that on Stock B. The expected return on Stock Bshould be greater than that on Stock A. When held in isolation,Stock A has greater risk than Stock B.

Watch
3
answers
0
watching
19
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Nestor Rutherford
Nestor RutherfordLv2
24 Jan 2019
Get unlimited access
Already have an account? Log in
Share

Related questions

1. Which of the following statements is true about apartnership?

a. One capital and one drawings account is used for eachpartnership.

b. The capital account is used to record each partner'sinvestment and that partner's designated share of the earnings.

c. Partnerships are subject to separate income taxes.

d. The drawings account is closed to retained earnings at theend of the period.

2. Which of the followingstatements does not correctly describe preferred stock?

a. Preferred shareholders have a preference with respect todividend payments.

b. Preferred shareholders have a preference with respect toassets in the event of dissolution.

c. Preferred shareholders have voting rights on a per sharebasis.

d. Preferred stock typically has a fixed dividend rate.

3. Which of the followingstatements is false?

a. Common stockholders have a residual claim on assets in theevent of liquidation.

b. Shares of stock held in the treasury are subtracted from thenumber of issued shares in the determination of the number ofoutstanding shares.

c. Common stockholders have voting rights at annual stockholdermeetings.

d. Corporations are governed by their stockholders.

4. Which of the following would not be reportedas a financing activities cash flow?

a. Issuing common stock for cash.

b. Cash dividend payments.

c. Purchasing treasury stock.

d. Purchase of a building by signing a note payable.

5. Which of the following is not reported as acash flow from investing activities?

a. Sale of a depreciable asset for cash.

b. Purchasing land in exchange for common stock.

c. Selling a long-term investment at a loss for cash.

d. Purchase of a patent in exchange for cash.

6. Which of the following transactions would be reported withinthe investing section of the cash flow statement?

a. The cash sale of land at a loss.

b. The purchase of a building in exchange for common stock.

c. The receipt of a stock dividend from a stock investment.

d. The cash receipt of a dividend from a stock investment.

7. Which of the following would be subtracted from net incomewhen determining cash flows from operating activities under theindirect method?

a. A decrease in utilities payable.

b. Patent amortization expense.

c. A decrease in prepaid rent.

d. A loss on the sale of a depreciable asset.

7. Which of the following would be added to net income whendetermining cash flows from operating activities under the indirectmethod?

a. A decrease in accounts payable.

b. Patent amortization expense.

c. An increase in prepaid insurance.

d. A gain on the sale of a depreciable asset.

8. Which of the following would not be a cashflow from financing activities?

a. Issuance of common stock for cash.

b. Borrowing cash on a long-term note payable.

c. Collection of a cash dividend.

d. Repayment of principal on a long-term note payable.

9. The cash payment of a previously declared dividend increaseswhich of the following ratios?

a. Debt-to-equity.

b. Earnings per share.

c. Price/earnings ratio.

d. Asset turnover.

10. The debt-to-equity ratio measures which of thefollowing?

a. Liquidity.

b. Solvency.

c. Profitability.

d. Market strength.

11. Negative financial leverage occurs when the:

a. Average net (after tax) interest rate on borrowed funds isless than the company's earnings rate on its assets.

b. Return on assets is more than return on equity.

c. Return on equity is more than return on assets.

d. Operating expenses exceed gross profit.

12. Which of the following ratios is notconsidered to be a test of profitability?

a. Current ratio.

b. Profit margin.

c. Return on assets.

d. Earnings per share.

13. Home Depot's operating strategy is to offer a broadassortment of high-quality merchandise and services at competitiveprices using highly knowledgeable service-oriented personnel andaggressive advertising. Which of the following isnot as critical to achieving Home Depot'sstrategy?

a. Cost control

b. Product differentiation

c. High level of customer service

d. High sales volume

13. Which of the following ratios is not partof the DuPont model?

a. Asset turnover.

b. Debt-to-equity.

c. Net profit margin.

d. Return on equity.

Which of the following statements is notcorrect?

Purchasing fixed assets through debt financing decreases thefinancial leverage ratio.

Accruing an expense will affect the net profit margin ratio.

Return on equity may increase even when the financial leverageratio decreases.

Purchasing treasury stock results in a decrease in assetturnover.

13. At the end of the first year of operations, the total costof the trading securities portfolio is $245,000. Total fair valueis $250,000. The financial statements should show

A. an addition to an asset of$5,000 in the current assets section and a realized gain of $5,000in "Other revenues and gains."

B. an addition to an asset of$5,000 and an unrealized gain of $5,000 in the stockholders' equitysection.

C. an addition to an asset of$5,000 in the current assets section and an unrealized gain of$5,000 in "Other revenues and gains."

D. an addition to an asset of$5,000 and a realized gain of $5,000.

14. Comanic Corp. has commonstock of $5,400,000, retained earnings of $2,000,000, unrealizedgains on trading securities of $100,000 and unrealized losses onavailable-for-sale securities of $200,000. What is the total amountof its stockholders' equity?

A. $7,400,000

B. $7,200,000

C. $7,500,000

D. $7,300,000

17. Stockholders of a company maybe reluctant to finance expansion through issuing more equitybecause

A. their earnings per share maydecrease.

B. the price of the stock willautomatically decrease.

C. dividends must be paid on aperiodic basis.

D. leveraging with debt is alwaysa better idea.

18. Which of the following is notan advantage of issuing bonds instead of common stock?

A. Income to common shareholdersmay increase.

B. Tax savings result.

C. Stockholder control is notaffected.

D. Earnings per share on commonstock may be lower.

19. A major disadvantageresulting from the use of bonds is that

A. earnings per share may belowered.

B. bondholders have votingrights.

C. interest must be paid on aperiodic basis.

D. taxes may increase.

21. If the market interest rateis 5%, a $10,000, 6%, 10-year bond, that pays interest semiannuallywould sell at an amount

A. less than facevalue.

B. equal to facevalue.

C. greater than facevalue.

D. that cannot bedetermined.

23. If bonds are issued at adiscount, it means that thE

A. bondholder will receiveeffectively less interest than the contractual interestrate.

B. market interest rate is higherthan the contractual interest rate.

C. market interest rate is lowerthan the contractual interest rate.

D. financial strength of theissuer is suspect.

24. In the balance sheet, theaccount, Premium on Bonds Payable, is

A. deducted from bondspayable.

B. classified as a revenueaccount.

C. added to bondspayable.

D. classified as a stockholders'equity account.

25. Bond interest paidis

A. higher when bonds sell at adiscount and lower when bonds sell at a premium.

B. the same whether bonds sell ata discount or a premium.

C. higher when bonds sell at adiscount.

D.lower when bonds sell at apremium.

27. Lowe Company has $1,500,000of bonds outstanding. The unamortized premium is $19,600. If thecompany redeemed the bonds at 101, what would be the gain or losson the redemption?

A. $15,000 loss

B. $4,600 loss

C. $15,000 gain

D. $4,600 gain

28. Robin Corporation retires its$800,000 face value bonds at 104 on January 1, following thepayment of annual interest. The carrying value of the bonds at theredemption date is $829,960. The entry to record the redemptionwill include a

A. debit of $2,040 to Loss onBond Redemption.

B. credit of $32,040 to Premiumon Bonds Payable.

C. credit of $2,040 to Loss onBond Redemption.

D. debit of $32,000 to Premium onBonds Payable.

29. If there is a loss on bondsredeemed early, the

A. loss is debited directly toRetained Earnings.

B. loss is debited to InterestExpense, as a cost of financing.

C. bonds' carrying value was lessthan the redemption price.

D. bonds' carrying value wasgreater than the redemption price.

30. Over the term of the bonds,the balance in the Discount on Bonds Payable accountwill

A. fluctuate up and down if themarket is volatile.

B. increase.

C. decrease.

D. be unaffected until the bondsmature.

1.The useful life of a plant asset is:

The length of time it is used productively in a company'soperations

Never related to its physical life

Its productive life, but not to exceed one year

Determined by the FASB

Determined by law

2. Depreciation:

Measures the decline in market value of an asset

Measures physical deterioration of an asset

Is the process of allocating to expense the cost of a plantasset

Is an outflow of cash from the use of a plant asset

Is applied to land

3. Plant assets are

Tangible assets used in the operation of a business that have auseful life of more than one accounting period

Current assets

Held for sale

Intangible assets used in the operations of a business that havea useful life of more than one accounting period

Tangible assets used in the operation of business that have auseful life of less than one accounting period

4. A company has net sales of $870,000 and average accountsreceivable of $174,000. What is its accounts receivable turnoverfor the period?

0.20

5.00

20.0

73.0

1,825

5. FICA taxes include:

Social Security taxes

Charitable giving

Employee income taxes

Unemployment taxes

6. Times interest earned is calculated by:

Multiplying interest expense times income

Dividing interest expense by income before interest expense

Dividing income before interest expense and any income tax byinterest expense

Dividing interest and income tax expense by income beforeinterest and income tax expense

7. Amortization:

Is the systematic allocation of the cost of an intangible assetto expense over its estimated useful life

Is the process of allocating to expense the cost of a plantasset to the accounting periods benefiting from its use

Is the process of allocating the cost of natural resources toperiods when they are consumed

Is an accelerated form of expensing an asset's cost

Is the same as depletion

8. A method of estimating bad debts expense that involves adetailed examination of outstanding accounts and their length oftime past due is the:

Direct write-off method

Aging of accounts receivable method

Percentage of sales method

Aging of investments method

Percent of accounts receivable method

9. A company purchased a tract of land for its natural resourcesat a cost of $1,500,000. It expects to mine 2,000,000 tons of orefrom this land. The salvage value of the land is expected to be$250,000. The depletion expense per ton of ore is:

$0.75

$0.625

$0.875

$6.00

$8.00

10. The matching principle requires:

That expenses be ignored if their effect on the financialstatements are less important than revenues to the financialstatement user

The use of the direct write-off method for bad debts

The use of the allowance method of accounting for bad debts

That bad debts be disclosed in the financial statements

That bad debts not be written off

11. Liabilities:

Must be certain

Must sometimes be estimated

Must be for a specific amount

Must always have a definite date for payment

Must involve an outflow of cash

12. In the accounting records of a defendant, lawsuits:

Are estimated liabilities

Should always be recorded

Should always be disclosed

Should be recorded if payment for damages is probable and theamount can be reasonably estimated

13. A contingent liability:

Is always of a specific amount

Is a potential obligation that depends on a future event arisingout of a past transaction or event

Is an obligation not requiring future payment

Is an obligation arising from the purchase of goods or serviceson credit

Is an obligation arising from a future event

14. Total asset turnover is calculated by dividing:

Gross profit by average total assets

Average total assets by gross profit

Net sales by average total assets

Average total assets by net sales

Net assets by total assets

15. If the times interest ratio:

Increases, then risk increases

Increases, then risk decreases

Is greater than 1.5, then the company is in default

Is less than 1.5, the company is carrying too little debt

16. Promissory notes that require the issuer to make a series ofpayments consisting of both interest and principal are:

Debentures

Discounted notes

Installment notes

Indentures

Investment notes

17. A company borrowed $300,000 cash from the bank by signing a5-year, 8% installment note. The present value factor for anannuity at 8% for 5 years is 3.9927. Each annuity payment equals$75,137. The present value of the note is:

$75,137

$94,013

$300,000

$375,685

18. A bond traded at 102

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in