What are some of the pros and cons of using stockoptions to compensate managers?

Q: Why should the managers make investment decisions on the basis of cashflows rather than profits?

A: Net income: The bottom line of an income statement which is the result of excess earnings from…

Q: Explain, with examples, why accruals reverse overstate the firm's profit.

A: Aggressive accounting is related to the practice of accounting which is designed in order to…

Q: What are the elements of uncertainty for internal shareholders that remain or are introduced when…

A: elements of uncertainty for internal shareholders  are discussed below

Q: Under what circumstances might a salary or bonus be more appropriate than interest on capital…

A: Partnership: The form of business entity which is formed by an agreement, owned and managed mutually…

Q: How would you define profit planning? What is the importance of profit planning?

A: a) Profit planning is a progression of steps being taken to arrive at an ideal level of profit. Such…

Q: Explain "free cash flows." Why do managers like to retain free cash flows instead of distributing it…

A: Free cash flows (FCF) equals the amount left with the company after the required payments to the…

Q: What do you see as some of the possible problems if shareholder value is seen as a strategy (and not…

A: Strategy refers to the financial approach for the planning of the functions that are based on a…

Q: What does this say about the company's profitability?

A: We are provided with three profitability ratios here - net profit margin ratio, ROA and ROE - and we…

Q: How do profit potential and legal considerations affect a firm’scredit policy?

A: It refers to the policy which states interest rate and duration that are relevant to the funds…

Q: Can Retained Earnings grow too large? If so, what strategies might management take to reduce it

A: Answer: Retained earnings is the cumulative or collective profit hold by company in shareholders…

Q: what differentiates a superior investment manager from an inferior one?

A: 1. Superior investment managers are having a better degree of control over their emptions in…

Q: What is the preferred method of calculating investment turnover, residual income, and return on…

A: Introduction: It is a company unit that is assessed based on how its money is used rather than the…

Q: How behavorial bias affect investment behavior?

A: Behavioral bias is the belief by the investors that unknowingly affects the investors investment…

Q: What methods could be used in profit planning?

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

Q: What is the impact of deferred annuities in consideration to business matter?

A: The legal contract between any entity and an insurance company is a deferred annuity contract. The…

Q: What goals might be persued by managers instead of maximization of shareholders wealth

A: Goals of financial management should be so articulated as to help achieve the objective of wealth…

Q: What do you meant by not for profit objective of the firm?

A: The sole purpose of any business organization is to earn profit. However, there are some…

Q: What is meant by earnings persistence?

A: Earning persistence is one of the attributes of accounting earnings. Basically, it means the…

Q: what does it mean to say that managers should maximize shareholders wealth subject to ethical…

A: Share- It is a unit of ownership in a company's capital. It entitles the shareholder to an equal…

Q: Why is it often difficult for the averageinvestor to take advantage of underpricing?

A: Under Pricing of the stock refers to the situation when the current market price of the company’s…

Q: What is the implication of managerial entrenchment: should company favor debt or equity? Why?

A: Managerial entrenchment theory-says that allotment of shares inside the organization such as…

Q: How does earnings management affect earnings quality?

A: Earnings of a company is referred as net income or bottom line item of a company. It is a very…

Q: How should managers consider income tax issues when choosing a transfer-pricing method?

A:

Q: What is Profitability analysis?

A: Profitability analysis is an important measure for the business to analyze the company's ability in…

Q: What does it mean to say that managers should maximize shareholders' wealth "subject to ethical…

A: The main focus of the manager should be maximizing the shareholder’s wealth. More profit indicates…

Q: What is the investment center manager's preferred technique of calculating investment turnover,…

A: It is a unit of a firm that is evaluated based on the usage of its capital rather than the profits…

Q: Explain what is meant by the term earnings quality.

A: The term earnings refer to the amount of money the company had earned during a particular period of…

Q: How the RISK affects EFFICIENCY (operational or financing) that subsequently affects RETURN (for…

A: Answer: A shareholder is an individuaal or a company who owns sharres in a company. Shareholders are…

Q: How can the use of debt serve to discipline managers?

A: A debt in a capital structure is a liability for the company on which company is bound to earn as…

Q: Can the retiring strategy of a firm jeopardize its profitability? Explain and provide examples of…

A: Retirement planning doesn’t mean one must most effective give attention to their finances.…

Q: What is the investment center manager's preferred method for determining investment turnover,…

A: Introduction: It is a company unit that is assessed based on how its money is used rather than the…

Q: Why is the application of fair value principle in measuring the financial position less objective…

A: the application of fair value principle in measuring the financial position is less objective than…

Q: In what way are profitability and efficiency related? How are profitability and liquidity related

A: The question explains about profitability and efficiency related and profitability and liquidity…

Q: What goals might be pursued by managers instead of maximization of shareholder wealth?

A: The shareholder wealth is the company revenue. The shareholder wealth is increased by increasing of…

Q: Which of the following best describes why the predicted incremental earnings arising from a given…

A: Solution:- Incremental earning that we get from a project are not enough to find out that the…

Q: What is the a required return for this company?

A: Information Provided: Beta = 1.90 Risk-free rate = 10% Expected market return = 20%

Q: Explain how managers should not focus on the current stock value because doing so will lead to an…

A: The managers should act in the best interest of all the stakeholders. They should take such actions…

Q: Can there be a difference between profit maximization and shareholder wealth maximization? If so,…

A: The companies have usually two goals such as profit maximization and wealth maximization. Profit…

Q: How can earnings management affect the quality of ­earnings?

A: The concept of quality earning shows the amount of earning which is not earned by any default or…

Q: Write a brief description of the logic behind the development of the time value formula for…

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