Is capital rationing always a bad thing? Explain

Q: What is the incentive for managers to overstate a restructuring reserve in the current period in…

A: In order to create a restructuring reserve, the company will incur those expenditures which will be…

Q: what happens to the cost of debt if the pourcentage of debt gets lower in the capital structure

A: Cost of debt is the return that is expected by all debt holders. They get their return in the form…

Q: Economists worry about the "Too Big to Fail" problem because those banks:

A: “Too big to fail” firms are the ones that have become so deeply ingrained in the economic system…

Q: Even if prices follow a random walk, they still may not be informationally efficient. Explain why…

A: Random walk theory laid down that the prices of a stock changes in an unpredictable manner.…

Q: What is meant by positive financial leverage?  What about negative financial leverage?

A: Leverage -It refers to the use of source of funds  for which the firm has to pay a fixed cost.

Q: What are the disadvantages of cutting expenses/costs and utilising trade credit insurance, when it…

A: Answer: Trade Credit Insurance is the methods that is applied by the company to protect its debts…

Q: We think of banks as being interest rate intermediaries. That is, the borrow cheaply, and then lend…

A: Following are the types of risk faces by banking industry other than interest rate:

Q: Why should we try to control inflation or should we let the market take care of lowering price…

A: Inflation is a general increase in the price of goods and services over some period of time. It has…

Q: Why do you think Dividend Irrelevance theory is unrealistic?

A: The dividend irrelevance theory was proposed by Merton Miller and Franco Modigliani. According to…

Q: Short run vs. Long Run a.Why on the long run, fiscal and monetary policies are not effective?

A: Short Run: This refers to the factor of production where capital is fixed. The time period in such a…

Q: Why do you think banks are willing to offer savers higher rates of return if they agree to less…

A: Savers are those persons who deposit money in various deposit accounts for the purpose of earning…

Q: What is the worst that can happen if you invest your money?

A: Investors have different options to make investments, and the motive behind investments is to…

Q: Too much money in an economy with too little goods and services creates:

A: High amount of money in the market with little goods or services will create an imbalance in the…

Q: What are three explanations for capital rationing? How might firmsotherwise handle these situations?

A: Capital Rationing: Capital rationing is a situation which generally takes place when the management…

Q: Explain how pure risk has an adverse effect on the economy

A: Pure risk is one of the major type of risk which is beyond the control and can affects the economy…

Q: What is off balance sheet financing?  Why do we care about it?

A: Financial statements can be defined as a summary of the financial performance of the business over…

Q: Suppose interest rates in the economy increase. How would such a change affect the costs of both…

A: In Finance, the Capital Asset Pricing Model is a model used to determine a theoretically appropriate…

Q: you think that the pandemic has impacted the ability of firms to raise

A: Pandemic have impact on whole business scenario and financial conditions.

Q: Do you think some investors may take advantage of the interest rate reduction, despite economic…

A: Investors deals in various investment options like derivatives instruments that require margin money…

Q: Do you think investors should practice dollar cost averaging when investing their money? Why or why…

A: Dollar-Cost Averaging: Dollar-Cost averaging is an investment approach that involves investing an…

Q: What does it mean to have negative working capital?

A: Working capital, also known as net working capital (NWC), is the difference between a company's…

Q: Debt-deflation leads to lower income because: O falling prices redistribute income from debtors to…

A: Debt deflation is an economic theory. It occurs when fall in prices leads to increase of debt burden…

Q: Which type of market efficiency is not true? Why

A: An efficient market is one where the market price is unbiased and reflects all known information. If…

Q: advantages of negative interest rate policies?

A: There are pros and cons of negative interest rate policies. In fact, in my opinion negative interest…

Q: What would be a sign of a shortage in financial markets?

A: The financial market refers to the market in which people trade financial securities like bonds,…

Q: Explain why a capital market is needed when the banking system stagnates in financial markets?

A: Capital market is a market for equity shares and long-term debt. It describes any exchange…

Q: Why short selling are risky than buying margin?

A: Short selling is riskier than buying on margin.   Short selling is borrowing shares from your broker…

Q: hich explanation BEST describes John Maynard Keynes' "The Para Individuals should reduce spending to…

A: Paradox of thrift explain about the nature of humans during the period of economic recession and how…

Q: A change in money demand or a shift in the money demand curve is caused by a change in * the…

A: the increase demand of money shift the demand curve up.

Q: Why does the use of debt lower the profit margin and the ROA?

A: Company needs to raise the fund to have the capital which needs for the business for multiple…

Q: What are the differences between mutually exclusive, non-mutually exclusive,and capital rationing…

A: DIFFERENCE BETWEEN  MUTUALLY EXCLUSIVE ,  NON MUTUALLY  EXCLUSIVE ,AND CAPITAL RATIONING DECISION…

Q: How does an increase in the income rate affect the breakeven point?

A: Break-even sales is the dollar amount of revenue at which a business earns a profit of zero i.e. No…

Q: WHY IS EQUITY MORE EXPENSIVE THAN DEBT?

A: Equity is owner's equity or shareholder's equity. It represents the value that would be returned to…