Answers to the Questions of Chapter 1

Answers to the Questions of Chapter 1 - Chapter1

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
An Overview of Financial Management 1-1 When you purchase a stock, you expect to receive dividends plus capital gains.   Not all stocks pay  dividends immediately, but those corporations that do, typically pay dividends quarterly.  Capital  gains (losses) are received when the stock is sold.  Stocks are risky, so you would not be certain  that your expectations would be met—as you would if you had purchased a U.S. Treasury security,  which offers a guaranteed payment every 6 months plus repayment of the purchase price when the  security matures. 1-2 If investors are more confident that Company A’s cash flows will be closer to their expected value  than Company B’s cash flows, then investors will drive the stock price up for Company A.  Consequently, Company A will have a higher stock price than Company B. 1-8 The four forms of business organization are sole proprietorships, partnerships, corporations, and  limited liability corporations and partnerships.  The advantages of the first two include the ease and  low cost of formation.  The advantages of corporations include limited liability, indefinite life, ease of  ownership transfer, and access to capital markets.  Limited liability companies and partnerships 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Answers to the Questions of Chapter 1 - Chapter1

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online