Week 7 class 1

Week 7 class 1 - Week 7 class 1 13 A healthy companys...

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Week 7 class 1 13. A healthy company’s return on shareholders’ equity should exceed its return on total assets because of the interest expense component of return on assets. Interest expense should be lower than the income a company earns on its investments. 14. Issuance of shares increases cash. The repurchase of shares and the payment of cash dividends decrease cash. (20-30 min.) P 9-1A 1. Corporations report contributed capital and retained earnings separately to comply with provincial and federal laws. The laws require corporations to report shareholders’ equity by source to distinguish contributed capital, which cannot be used for cash dividends, from retained earnings. 2. We should first determine the market value of the land. Then divide the land’s value by the market value of each share of stock. The result will tell us how many shares to issue for the land. 3. Investors buy common shares in the hope of earning higher returns on their investment than are available on an investment in preferred shares. 4. The redemption value of our preferred shares requires us to pay the preferred shareholders this amount when we buy back the preferred shares.
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5. Book value per common share = Total Shareholders’ equity Preferred equity Number of shares of common shares outstanding The shareholder can multiply book value per share by
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This note was uploaded on 10/18/2010 for the course ACF ACC220 taught by Professor Fiona during the Spring '08 term at Seneca.

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Week 7 class 1 - Week 7 class 1 13 A healthy companys...

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