Number 5-10 I. Directions: Write TRUE if the statement is correct; write FALSE if the statement is wrong. Write your answer onthe space provided af ter each number._1. Equity funding involves repayment._2. The primary disadvantage of equity funding is that the firm's owners relinquish part of theirownership interest and may lose some control._3. Return on equity depends on company's earnings._4. Debt financing gives privilege of ownership in a company._5. When an entrepreneur financed his/her business with debt, lender has the right to tel him/ her howto run a business._6. When an entrepreneur financed his/ her business with debt, payments are unpredictable and he/ shehas no idea what needs to pay every month to pay off the loan._7. When an entrepreneur financed his/ her business with debt, he/she keeps al the profits._8. The lender can force the entrepreneur into bankruptcy if he/she cannot pay his/ her loan payments._9. To force a borrower into bankruptcy for not making their loan payments every month, the lendermust go to court and prove that the business owner cannot pay the debt.-----_10. If a corporation goes bankrupt, lenders can go after the assets of the corporation, and not of theowners.

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Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter2: Basic Accounting Systems: Cash Basis

Section: Chapter Questions

Problem 2.6E: Effects of transactions on stockholders’ equity For Target Corporation (TGT), indicate whether the...

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1. IS THE FOLLOWING STATEMENT TRUE or FALSE? “A financial security is simply a contractbetween the provider of funds and the user of these funds that clearly specifies the amount of money that hasbeen provided and the terms and conditions of how the user is going to repay the provider.”a. Trueb. False2. IS THE FOLLOWING STATEMENT TRUE or FALSE? “A share of stock represents ownership of acorporation divided up into units, so that multiple people can own a percentage of the business.”a. Trueb. False3. A consol is a bond that:a. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 30 years.b. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 50 years.c. Does not pay an annual coupon (i.e., the annual coupon payment is $0) but when it matures pays out thepar value of the bond.d. Pays a fixed annual coupon amount forever.e. Does not pay an annual coupon (i.e., the annual coupon payment is $0) and never matures
Indicate whether the following statements are (True) or (False) and correct the false statements: The financial manager prepares financial statements that recognize revenue at the point of sale and expenses when incurred. Capital markets are for investors who want a safe temporary place to deposit funds where they can earn interest and for borrowers who have a short term need for funds. Common stock dividends paid to stockholders are equal to the earnings available for common stockholders divided by the number of shares of common stock outstanding.
39 - Which of the following transactions will cause a change in a company's equity ? a) Sale of a vehicle that is among the assets of the business at net book value B) Paying employees NS) lending a loan D) Selling goods on credit at cost TO) Giving the same amount of promissory note for the debt without bond
In making a financing decision, how would a financial manager answers questions like: 1. How should the cash required for investment be raised?2. Should we borrow from a bank or should we issue new shares ofstocks?
Which of these is a main characteristic of debt capital?(a) Investors in debt participate in the ownership of the firm.(b) Investors in debt are paid interest.(c) Debt is more risky for the investor and less risky for the firm.(d) If dividends are not paid, this can lead to foreclosure, legal proceeding and financial distress.
2. What is meant by owners’ equity? Multiple Choice It refers to outstanding loans and credit that a firm has to return. It refers to the money contributed to a firm that never has to be paid back. It refers to a firm’s economic resources. It refers to a firm’s “goodwill” or reputation. It refers to debts a firm owes to others.
a)- Do manager of a firm care more about their EPS than retained earnings? Explain why, just start your explanation with because.... b) Do vendors of a firm care more about cash flow than EPS? Explain why, just start your explanation with because.... c) Do investors care more about EPS than stock price? Explain why d) Do banks (or creditors who loaned money to a firm) care more about the firm's working capital or the firm's dividends? Which one and why? e. Which of the following will raise a firm's stock price: stock repurchases or a new stock issue? Briefly explain why? Start your explanation with because...
Which of the following statements about stockholders' equity is not correct? Group of answer choices a)Stockholders' equity is the shareholders' residual interest in the company resulting from the difference in assets and liabilities. b)Stockholders' equity accounts are increased with credits. c)Stockholders' equity results only from contributions of the owners. d)The purchase of land for cash has no effect on stockholders' equity.
The difference between equity financing and debt financing is that Group of answer choices A. equity financing involves borrowing money. B. debt financing involves selling part of the company. C. debt financing means the company has no debt. D. equity financing involves selling part of the company.
A firm’s cost of capital: a. is the average rate it pays investors for the use of their money (capital). b. is the cost the facility housing its executive offices. c. is the rate earned by its stockholders. d. is the rate at which it borrows from its bank. Please do not give solution in image format Thankyou
The required return on assets will change, if O a. one of the firm's business lines is closed. O b. leverage increases. O C. if the credit rating companies downgrade the firm's corporate debt. O d. if the interest payment to creditors increases.
Stockholders can best be defined as which of the following? A. investors who lend money to a business for a short period of time B. investors who lend money to a business for a long period of time C. investors who purchase an ownership in the business D. analysts who rate the financial performance of the business

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