Answered: How you can explain that the…

How you can explain that the stockholders are receiving an adequate return on their investment? Explain your answer with a suitable example(s).

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter2: Financial Reporting: Its Conceptual Framework

Section: Chapter Questions

Problem 6GI

See similar textbooks

Related questions

Q: What steps can you take to put your stock-investing plan into action?

A: Solution: To begin investing in stock securities, you must first get a general grasp of the economy.…

Q: What rate of return can stockholders expect to receive on retained earnings?

A: Stockholders can expect returns more than its WACC on retained earnings.

Q: What is the vocabulary word for money that's in financial markets, and a rate of return for a…

A: The vocabulary word is the term for things generally used in the Financial market.

Q: Explain the Opportunistic Investing strategies?

A: Opportunistic investing strategies are strategies that involve investment in highly risky…

Q: Should managers focus directly on the stock’s actual market price or its intrinsic value, or are…

A: The market price (MP) is the current price at which they can purchase or offer a resource or asset…

Q: When screening for potential equity investments based on return on equity, to controlrisk, an…

A: Return on equity = Net Income / Shareholder's equity

Q: Within the context of services provided by a stockbroker, discuss the two main types of stockbrokers…

A: Stockbroker: A stockbroker is an authorized and directed money related firm that encourages…

Q: What is a satisfactory investment? When the present value of benefits exceeds the cost of an…

A: Satisfactory investment refers to an investment wherein the present value of benefits after…

Q: What is the difference between inside view and outside view in investing? Give a scenario where they…

A: Inside View in investing comes from the individual own experience of investing and they actively…

Q: What is the difference between outside view and inside view in investing?

A: Behavioral finance is a concept in which invetsment decisions are made by the investors based on the…

Q: why is a need for investor to evaluate the investment ?

A: All investments will have a certain percentage of risk. To control the future risks in the…

Q: Which of the following decision criteria is the easiest to use and very popular among investors?…

A: The capital budgeting process uses different methods to analyze the projects. Each method has…

Q: What are three techniques stockholders can use to motivate managers to maximizetheir stock’s…

A: Managers are required to motivate so that they can work specifically for achieving a predetermined…

Q: Contrast investor's use of capital markets with their use of money markets

A: Capital market is basically the one where long term securities are brought and sold. Stock Market ,…

Q: How do earnings and cash are useful assets with future earnings potential? Does investors tend to…

A: Earnings and cash flows are two important aspects for a company. Earnings and positive cash flows…

Q: Explain the Turnaround investing strategies?

A: The turnaround investment strategy is one of the foremost aspects of value investing.

Q: Describe the Procedures used to determine the rate of return internal to nonsimple investments?

A: Procedure to compute the rate of return internal to non-simple investmentIt is an investment for…

Q: explain the strategies that enhance the return on equit

A: Return on equity is a very important financial ratio. This ratio is essentially a measure of…

Q: How do you call a strategy that separately examines capital market conditions and the investor's…

A: The strategy is called as “Integrated Asset Allocation Strategy”.

Q: Discuss how changes in a firm’s operations might lead to changes in the required rate of return on…

Q: Discuss whether you think the stock is a good investment or not.

A: Stock is essentially an equity instrument in which the investor gets part ownership in the company…

Q: Explain the Contrarian Investing Strategy?

A: An investment strategy is a procedure to select the best investment portfolio that gives the maximum…

Q: What theories can define the relationship between financial literacy and investment decision?

A: Behavioral finance is the study of the influence of external factors and the psychology on the…

Q: Describe the SML in words. What is it saying about how investors form required rates of return?…

A: This question talks about Security Market Line (SML) and its implications on.Security Market Line is…

Q: How judgement is important when it comes to choosing the investments to invest in?

A: Capital investment is an irreversible process which makes it important to accept any investment or…

Q: Why do the clientele effect and the information contenthypotheses imply that investors prefer stable…

A: Clientele effect means the preference of different categories of investors to invest in specific…

Q: Explain how to calculate rate of return on common stockholder’s equity.

Q: Which among the following is a better investment products, bonds, stocks or investment funds?…

A: Investment fundIt is the pool of capital that the number of investors makes payment into, which is…

Q: What are the advantages and disadvantages of higher dividends to investors?

A: Dividend can be defined as the division of profits accumulated by the company to its shareholders in…

Q: Do investors generally prefer dividends or share repurchases? Support your answer.

A: Firm issues various securities to arrange the funds for the business and pay periodicals return on…

Q: Define financial fiexibility and use an innovative decomposition of return on common equity to…

A: Financial flexibility is defined as the ability of the company for reacting to an unexpected…

Q: Before investing, what are the factors you should take into considerations in order that your…

A: There are various factors that shall be taken into consideration which making investment decisions…

Q: Should stockholder wealth maximization be thought of as a long-term goal or a short-term goa

A: Answer: The stockholders are the investors in the public company that is an open company. The…

Q: Explain the term Motivations for Investing and types of investments?

A: Making investments in securities is a good method to mobilize the savings and earn a regular source…

Q: How is a stock valued? What are the key variables considered in the valuation?

A: There are many methods of valuation of stock some are based on earnings and growth of stock and…

Q: How would a researcher undertaking capital markets research typically justify that a particular item…

A: A capital market researcher needs to make an analysis of the capital market for investment purpose.…

Q: What is the investor’s expected after-tax internal rate of return on equity invested (ATIRR)?

A: After-tax return refers to the net return after adjusting the tax payable on it.

Q: Why is it important for an investor to create a well-diversified investment portfolio? How should an…

A: It is suggested to investors not to put all eggs in single bucket so to avoid risk of losing all of…

Q: Why do you consider the relationship between the economy and the stock market an integral part of…

A: Economy and stock market movements are directly related. Stock markets reflect the economic…

Q: The fisher effect primarily emphasizes the effects of on an investor's rate of return

A: The fisher effect states that: Long term nominal interest rate = real interest rate + expected…

Q: If you have the chance to invest in the stock market, what company will you invest in and why?…

A: Stock is the group of shares which is offered by the companies to arrange the money from the public.…

Q: 1.What is the relationship between an investment’s risk and its return? Please provide examples if…

A: Note: As per our policy, we only answer one question, when more than one question is posted. The…

Q: Would you expect positive covariances of returns between different types of assets such as returns…

A: Covariance is the measure of the degree to which two variables move together relative to their…

Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

How you can explain that the stockholders are receiving an adequate return on their investment? Explain your answer with a suitable example(s).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Describe the various types of risks to which investors are exposed, as well as the sources of return.
Should investors rely on EPS as an investing tool? Why or why not?
Describe the SML in words. What is it saying about how investors form required rates of return? Thoroughly evaluate the implications of the SML's message.
1.What is the relationship between an investment’s risk and its return? Please provide examples if possible. 2. Difference between Institutional Investors and Individual Investors.
Consider the role of financial statement analysis in an efficient capital market, and review empirical evidence on the association between changes in earnings and changes in stock prices
What are the implications of these calculations? In other words, based on each of the calculations, and being mindful of the need to balance portfolio risk with return, would you recommend that the company pursue the investment? Why or why not? Be sure to substantiate claims.
Which among the following is a better investment products, bonds, stocks or investment funds? Justify your answer.
Why do an investor need to know and understand Portfolio Management and how do they handle their investments through Portfolio Management? Can an investor attain their financial goals through an effective Portfolio Management?
Explain what is the criterion used by a rational investor for choosing a financial investment in terms of its risk return combination.
The objective function of an investor in a CAPM world is to what (mathematically) [what are your trying to maximize]? What is the major assumption about the distribution of returns that we have to make to get to this objective function?
Explain the Opportunistic Investing strategies?
How can the Stock price be a good indicator of your company's financial health and may also reflect the market's attitude?