(TCO A) Which of the following statements is CORRECT? a) One of the disadvantages of incorporating a business is
that the owners then become subject to liabilities in the event the firm goes bankrupt. b) Sole proprietorships are subject to more regulations than corporations. c) In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner. d) Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones. e) Corporations of all types are subject to the corporate income tax. (TCO G) Which of the following statements is CORRECT? a) The statement of cash flows reflects cash flows from the operations, but it does not reflect the effects of buying or selling fixed assets. b) The statement of cash flow shows where the firm's cash is located; indeed, it is provided a listing of all banks and brokerage houses where cash is on deposit. c) The state of cash flow reflects cash flows from continuing operations, but it does not reflect the effects of changes in working capital. d) The statement of cash flows reflects cash flows from operations and from borrowings, but it does not reflect cash obtained by selling new common stock. e) The statement of cash flows how much the firm's cash - the total of currency, bank deposits, and short-term liquid securities (or cash equivalents) - increased or decreased during a given year. (TCO C) Which of the following statements is CORRECT? a) The slope of the SML is determined by the value of beta. b) The SML shows the relationship between companies' required returns and their diversifiable risks. The slpe and intercept of this line cannot be influenced by a firm's managers, but the position of the company on the line can be influenced by its managers. c) Suppose you plotted the returns of a given stock against those of the market, and you found that the slope of the regression line was negative. The CAPM would indicate that the required rate of return on the stock should be less than the risk-free rate for a well diversified investor, assuming investors expect the observed relationship to continue on into the future. d) If investors become less risk averse, the slope of the Security Market Line increase. e) If a company increases its use of debt, this is likely to cause the slope of its SML to inrease, indicating a higher required return on the stock
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