The financial market offers the investors a means to sell their financial asset thereby a. Increasing the wealth of investor b. Offering liquidity to such assets c. Decreasing the wealth of investor d. Diluting the liquidity of such assets

The financial market offers the investors a means to sell their financial asset thereby a. Increasing the wealth of investor b. Offering liquidity to such assets c. Decreasing the wealth of investor d. Diluting the liquidity of such assets

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 3MCQ

See similar textbooks

Related questions

Q: Why do DCMs use dividends and not earnings in their formulas? a. Because earnings are not equal to…

A: DCMs seek to evaluate the fair value of a company regardless of current market conditions, taking…

Q: Choose the correct statement about Wealth Maximization: a. Wealth maximization ignores both time and…

A: Increasing the value of business by increasing value of equity i.e. creating shareholders' wealth is…

Q: Financial engineering has been disparaged as nothing more than paper shuffling. Critics argue that…

A: Through time, traditional financial assets such as shares, bonds, and contracts have generated…

Q: What factors affect the interest rate used to discount the cash flow expected from a financial asset

A: the interest rate that is used to discount the cashflow expected from a financial asset is nothing…

Q: Companies invest in short term investments for safekeeping purposes. Right O Wrong

A: Short-term investments, otherwise called marketable securities or transitory ventures, are those…

Q: The finance manager manages the short-term balance sheet items of the company, such as current…

A: Finance manager of company take both long term and short term financial decsions which includes…

Q: Creditors look for اخترأحد الخيارات a. Net working capital for their safety b. High net working…

A: Creditors are the current liabilities of the business from whom the company purchased raw material…

Q: Why might the riskiness of cash flow from the residual value of the real estate differ from the…

A: It is nothing but the salvage value or scrap value of an asset. It speaks to the measure of…

Q: A disadvantage of using the payback period to compare investmentalternatives is that it;

A: Payback period: The payback period is the time period required to recover the initial investment of…

Q: If the book value of the liabilities exceed the market value of the assets, which of the following…

A: Book Value of the liabilities exceed the market value of assets It means assets are insufficient to…

Q: Which statement is not correct? A. The main objective (role) of financial intermediaries is to…

A: Answer: Option C is the correct answer. Because "Financial intermediaries did not absorb the risks".

Q: The major reasons to incorporate include all except ____________? Ease and cheapness to set up…

A: Incorporation is a form of business in which a separate legal entity is created. When an…

Q: a. Wealth Maximization is vague b. Wealth Maximization is a modern approach c. Wealth Maximization…

A: The usual assumption in financial management for the privet sector is that the primary financial…

Q: Why are investors attracted to the income statement and cash flow statement when it comes to…

A: Answer: Income statement is the statement showing income and expenses summary throughout the period.…

Q: some examples for these conditions؟ Purchase and sale of assets Increase or decrease in cash & cash…

A: The accounting equation justifies the rules and nature of accounting means the double entry…

Q: UE OR FALSE 1. A company buys marketable securities when the cash outflows exceed the cash inflows.…

A: Following are the answers to statements with explanation given.

Q: The tendency of investors to sell assets that have made gains while keeping assets that are losing…

A: Explanation : Disposition effect : The disposition effect focuses on human proclivity to sell stock…

Q: Select the incorrect statements relating to finance from the following: i. Finance represents the…

A: Finance means how to manage the funds of the company , how to procure , how to invest , how to…

Q: Most companies invest excess cash in bonds as investments in order to profit long-term from the…

A: Companies invest in securities because they can utilize them to produce cash or resell them to take…

Q: How would you argue for a significant increase in both dividends and repurchases instead of using…

A: Introduction: Stock repurchase allows the company's promoters as well as key stakeholders to reclaim…

Q: Cash flows from selling machinery would be classififed as investing activities. True False

A: Investing activities is an important section in cash flow statement which shows all cash inflows and…

Q: Too much investment in current assets reduces firm profitability, whereas too little investment in…

A: Too much investment in current assets reduces firm profitability: The firm that invests more in…

Q: Match the best answer to each statement. This category include short-term, highly liquid investment…

A: Current assets refer to the assets of a company that are held for the short term and capable of…

Q: An investor has a long-term investment in stocks. Regular cash dividends received by the investor…

A: PLEASE LIKE THE ANSWER, YOUR RESPONSE MATTERS option C is correct.

Q: A loss on sale of long-term investments: Select one: a. Reduces the cash received but increases the…

A: Loss on Sale of Long Term Investment: Long-term capital gains or losses are incurred when an…

Q: True or False: When a company borrows money to finance the purchase of an asset to use in its…

A: Every organization's wants to achieve that much earing so that they can save amount after paying its…

Q: Why do equity investors often use borrowed funds? Explain positive and negative financial leverage…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: e purchase of real estate is: a. a financing activity if the firm uses debt financing…

A: Step 1 A cash flow statement is a financial statement that shows how much cash and cash equivalents…

Q: Analyze the truth of this statement: Under the cost method of accounting for investments, a…

A: Cost Method of Accounting for Investments: When it comes to recognizing particular investments in a…

Q: Marketable securities or cash equivalents (Choose the INCORRECT statement) a) are acquired with the…

A: Marketable Securities or cash equivalents are the assets of the company which falls under current…

Q: Which of the following functions does not require financial markets? transporting of cash…

A: Financial markets are the platforms where corporate houses list their shares and other securities…

Q: Which of the following activities does not increase cash? Multiple Choice Increasing current…

A: Since we follow a double-entry accounting system every transaction will be affected by two accounts…

Q: Which of the following circumstances would result in an increase in cash from operations but not an…

A: Cash flow statement: It is a statement which reports the cash inflows and outflows of a business…

Q: Which of the following returns is consistent with contractual cash flows that are SPPI?…

A: (1) S.P.P.I. Test - The solely payments of principal and interest test. (2) This requires that the…

Q: Investing activities include transactions that affect issuance of common stock A Financing…

A: The statement of cash flow is one of the most important financial statement to be prepared at the…

Q: a)What is the basic principle in determining the price of a financial asset? b)Why is it difficult…

A: Financial assets include cash, securities, shares, mutual funds, and bank deposits. Financial assets…

Q: [S1] Analysts and investors may differ on the value they give to an asset or business depending on…

A: S1: Estimate of Value of an asset or investment is based on many assumptions, other factors and risk…

Q: Interest rates are important to financial institutions since an interest rate increase will decrease…

A: The interest rate is the amount charged by a lender to a borrower for the use of assets on top of…

Q: An investment vehicle, the investee, is created and financed with a debt instrument held by a debt…

A: a) An investment vehicle is an item used only to generate positive yields by investors. Reduced…

Q: An advantage that money has over other assets is that it: Answer a. Provides a higher return to the…

A: MONEY HAS A ESSENTIAL CHARACTERISTIC THAT THE MUST HAVE INTRINSIC VALUE.

Q: Which of the following is not a source of funds for immediate liquidity purposes? a. Proceeds from…

A: Liquidity refers to the ability to obtain cash so that immediate requirements can be met. It refers…

Q: What effect will the cash payment of an account payable have on the Balance Sheet? Group of…

A: We have the following question What effect will the cash payment of an account payable have on the…

Q: Which of the following actions would improve a firm's liquidity? a. Selling shares and…

A: Liquidity is referred to as an ease of the conversion of the assets or security, which can ready…

Q: An assumption inherent in a company’s IFRS statement of financial position is that companies recover…

A: IFRS are the international financial reporting standards which describes the rules and principles…

Q: Which of the following statements about transaction costs and financial intermediation is not true?…

A: Transaction costs are costs caused when the products or services are bought or sold. It reflects the…

Q: An investment made in a fixed asset is similar to an investment made by a bank when it lends money.…

A: Fixed asset: Fixed asset is a long-period section of an asset or property that an entity has and…

Question

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 Discussion

VIEW

Step 2 Correct Option

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

An investment vehicle, the investee, is created and financed with a debt instrument held by a debt investor and equity instruments held by some other investors. The equity tranche is designed to absorb the first losses and to receive any residual return from the investee. One of the equity investors who hold 30% ofthe equity is also the asset manager. The investee uses its proceeds to purchase a portfolio of financial assets; thus, exposing them to the credit risk associated with the possible default of principal and interest payments of the assets. The transaction is marketed to the debt investor as an investment. Such investment has minimal exposure to the credit risk associated with the possible default of the assets in the portfolio. It is because of the nature of the assets and of the equity tranche.The returns of the investee are significantly affected by the management of the investee’s asset portfolio. Managing the asset portfolio includes decisions about the selection,…
The following are goals‘andobjectives in working-capitalmanagement. Which is the LEASTACCURATE? a. Payables management includes the analysis of the business's use of trade payables and short-term non-trade payables but not long-term non-trade payables.b. Availability of money marketable securities support the cash management function by providing a return on excess cash.c. Receivable management involves setting the credit term but not the implementation of how receivables are collected.d. Inventory management allows the entity to determine the best level of this asset while balancing the risk of over- and under- stocking.
a)What is the basic principle in determining the price of a financial asset? b)Why is it difficult to determine the cash flow of a financial asset? c)Why are the characteristics of an issuer important in determining the price of a financial asset? d)What are the two principal roles of financial assets?
Explain what is meant by the term ‘financial distress’. If we assume that financial distress exists, explain how and why financial distress would cause a firm’s equity to become riskier.
Balance Sheet Insolvency occurs when Liabilities are greater than the Assets resulting in negative capital equity. For a Financial Institution, Insolvency Risk can be defined as the risk that there is insufficient capital to offset either a decrease in the market value of assets relative to liabilities or an increase in liabilities relative to the market value of assets. A. Describe a situation where Insolvency Risk could be caused one of the many risks that a Financial Institution may face. B. Describe the best protection against insolvency risk at a Financial Institution.
Buying assets that yield a return greater than the minimum acceptable hurdle rate is a part of which core principles of Finance. a. Financing principle b. Investment principle c. Dividend principle d. Cost principle
Which of the following statements is true? Group of answer choices The Principle of Diversification states that investors are better off by investing in one asset. The Principle of Diversification states that investors are better off by investing in different types of assets. The Principle of Diversification states that investors are better off by investing in risk-free assets. The Principle of Diversification states that investors are better off by investing in an industry of their choice.
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.
What is preferable from the point of view of an investor? a. To value the business using the Asset Valuation method; or b. To value the business using the Equity Valuation
This is a term to describe non-physical assets like stocks and bonds that get their value from future cash flows. Multiple Choice investment financial asset real asset financial markets
Primary markets are important to _______ because of _______; secondary markets are important to _______ because of _______. Answers: Investors; liquidity; firms; ability to raise capital Investors; ability to raise capital; firms; liquidity Firms; liquidity; investors; ability to raise capital Firms; ability to raise capital; investors; liquidity
Cash flows from selling machinery would be classififed as investing activities. True False