Q: Explain how materiality differs for failure to follow GAAP and for lack of independence.
A: Generally Accepted Accounting Principles (GAAP): Generally Accepted Accounting Principles are the…
Q: In general terms, how does IFRS for SMEs differ from full IFRS?
A: International Financial Reporting Standards: IFRS (International Financial Reporting Standards) is…
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A: Definition: Financial accounting standards board (FASB): This is the organization that creates,…
Q: Difference Between Traceability and Controllability?
A: Following is the answer to the given question
Q: Which of the following is incorrect?
A: Accounting system is a structured system that is incorporated in a business entity to collect,…
Q: Which of the following statements is FALSE about "backward thought process'? Statement I. It…
A: a) neither of two statements is false
Q: In case where there is a conflict, the requiremnents of Conceptual Framework prevail those of the…
A: SOLUTION CONCEPTUAL FRAMEWORK MEANS THE WAY THE ACCOUNTS IS PREPARED , ACCOUNTING STANDARD BUILD AND…
Q: Why the limitation of portfilio analysis is itsuggests the use of standard strategies that can miss…
A: A portfolio is a collection of various investments. Portfolios are a vital part of a corporation…
Q: What does overstated mean?
A: Definition of Overstated:- Overstated uses two way terms by accountant: The entered or reported…
Q: Are there any reasons to question the validity of the CAPM?Explain.
A: In any ‘well-diversified portfolios’ the relationship between the ‘risk’ and the ‘required rate of…
Q: What are some disadvantages of the APT?
A: APT is the abbreviation used for the arbitrage pricing theory. A theory or a model for asset pricing…
Q: Which of the following factors will most likely have a negative impact or
A: Functions of Budget: Planning: It facilitates planning for future activities. Controlling: Budgets…
Q: Why is the NPV preferred over the IRR?
A: Net Present Value is a method of finding the profitability of a project by discounting future cash…
Q: Which of the following is false about Faithful Representation?
A: Answer Faithful representation is the requirement that the financial statements should be accurate…
Q: Which are the disadvantage of a C corp?
A: C corporation is the corporation that is taxed separately from its owners or shareholders. In other…
Q: MCMC and autocorrelation related to each other? If related, then what are the disadvantages…
A: GIVEN MCMC and autocorrelation related to each other? If related, then what are the…
Q: Which of the following statements is not correct?
A: Leave monetization is actually the leave encashment which means the if there is any earned leaves…
Q: feature of relevant information
A: Which one of the following is a feature of relevant information? Answer :- D. Neutrality
Q: For practical applicationsas opposed to theoretical considerations, which ismore relevant, the CML…
A: Security market line (SML) or Capital market line (CML): The capital market line appears the…
Q: Which of the following statements is NOT correct?
A: The yield of the bond refers to the return that investors will realize on investment when the…
Q: Identify and explain one major disadvantage of incorporating.
A: Incorporating is a legal and systematic method for the formation of a separate business entity for…
Q: What are the types of situations that result in troubleddebt?
A: Troubled debts can result in two different situations, which are as…
Q: What is the major disadvantage of the high-low method?
A: High-low method: High-low method is a method of calculating the variable cost and the fixed cost of…
Q: Why is EBITDA controversial?
A: Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a metric used to assess…
Q: What are the advantages and disadvantages of XERO?
A: XERO is cloud-based software of accounting that suite for small businesses, medium businesses, and…
Q: Usually, which outweighs the other in decentralization—advantages or disadvantages?
A:
Q: What is the primary difference between the APT and the CAPM?
A: APT is an abbreviation used for arbitrage Pricing Theory whereas CAPM is an acronyms used for…
Q: Which of the following statements is false?
A: Sinc as there are multiple questions are given, so as per answering guideline we do only first one.
Q: What is the VIX index? What is it used for? What are considered high values for the VIX and what do…
A: Volatility: - Volatility is a measure of movement or price variation in assets on daily, weekly,…
Q: Analyze the potential disadvantages of the LCNRV method
A:
Q: Explain how materiality differs for failure to follow GAAP and for lack of independence.
A: Auditing means the inspection of financial accounts of the company to determine if the records are…
Q: The Conceptual Framework is not an IFRS.
A: IFRS is an acronym of International Financial Reporting Standards The IFRS provides the standards…
Q: What is the underlying cause of ranking conflictsbetween NPV and IRR?
A: Net Present Value considers the time value of money that discounts the future cash flows to the…
Q: Which of the following is not considered to be an analytical procedure?
A: Answer: Comparisons of financial statements accounts with source documents
Q: What is underpricing? Why is it used? What evidence do we have to support the belief that…
A: Underpricing is a common term used in Initial public offering of shares of a private company which…
Q: costs and benefits of a too-big-to-fail
A: Too-Big-To-Fail Policy: Too-big-to-fail policy means saving a firm or industry whose failure can…
Q: What are the common benefits of GSIS and SSS?
A: GSIS is termed as a "government service insurance system" and it provides coverage of insurance to…
Q: What is anchoring bias?
A: Anchoring bias: Anchoring bias happens if persons depends on moreover on pre-existing data or the…
Q: Why are the realization and matching principles important? Only the importance
A: Accounting principles: These are the assumption, concepts, and guidelines necessary to prepare and…
Q: Which of the following statement/s are incorrect?
A: Liability: Liability: Amount of money or fund entity owns to pay outside or within the organization.…
Q: What is a goingconcern problem? What factors can contribute to such aproblem?
A: Given: To analyse about the going concern problem and its factors contribution as follows,
Q: Which of the following statements is false
A: A Bondholder gets a coupon amount calculated at a rate, on the face value. And at the end of…
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- Which of the following is NOT a potential problem when estimating and using betas, i.e., which statement is FALSE? a. Sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different from the "true" or "expected future" beta. b. The beta of an "average stock," or "the market," can change over time, sometimes drastically. c. Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed. d. All of the statements above are true. e. The fact that a security or project may not have a past history that can be used as the basis for calculating beta.Which of the following is NOTa potential problem when estimating and using betas, i.e., which statement is FALSE? a. The fact that a security or project may not have a past history that can be used as the basis for calculating beta. b. Sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different from the "true" or "expected future" beta. c. The beta of an "average stock," or "the market," can change over time, sometimes drastically. d. Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed. e. The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns. This calculated historical beta may differ from the beta that exists in the future. Please Explain for full creditWhich of the following statements is CORRECT? a. The SML shows the relationship between companies' required returns and their diversifiable risks. The slope and intercept of this line cannot be influenced by a firm's managers, but the position of the company on the line can be influenced by its managers. b. Suppose you plotted the returns of a given stock against those of the market, and you found that the slope of the regression line was negative. The CAPM would indicate that the required rate of return on the stock should be less than the risk-free rate for a well-diversified investor, assuming investors expect the observed relationship to continue on into the future. c. If investors become less risk averse, the slope of the Security Market Line will increase. d. If a company increases its use of debt, this is likely to cause the slope of its SML to increase, indicating a higher required return on the stock. e. The slope of the SML is determined by the value of beta.
- Suppose that as the economy moves through a business cycle, risk premiums also change. For example, in a recession, when people are concerned about their jobs, risk tolerance might be lower and risk premiums might be higher. In a booming economy, tolerance for risk might be higher and premiums lower.a. Would a predictably shifting risk premium such as described here be a violation of the efficient market hypothesis?b. How might a cycle of increasing and decreasing risk premiums create an appearance that stock prices “overreact,” first falling excessively and then seeming to recover?You have been hired at the investment firm of Bowers & Noon. One of its clients doesn’t understand the value of diversification or why stocks with the biggest standard deviations don’t always have the highest expected returns. Your assignment is to address the client’s concerns by showing the client how to answer the following questions: What are two potential tests that can be conducted to verify the CAPM? What are the results of such tests? What is Roll’s critique of CAPM tests?You have been hired at the investment firm of Bowers & Noon. One of its clients doesn’t understand the value of diversification or why stocks with the biggest standard deviations don’t always have the highest expected returns. Your assignment is to address the client’s concerns by showing the client how to answer the following questions: Suppose a risk-free asset has an expected return of 5%. By definition, its standard deviation is zero, and its correlation with any other asset is also zero. Using only Asset A and the risk-free asset, plot the attainable portfolios.
- You have been hired at the investment firm of Bowers & Noon. One of its clients doesn’t understand the value of diversification or why stocks with the biggest standard deviations don’t always have the highest expected returns. Your assignment is to address the client’s concerns by showing the client how to answer the following questions: What is the Capital Asset Pricing Model (CAPM)? What are the assumptions that underlie the model? What is the Security Market Line (SML)?You have been hired at the investment firm of Bowers Noon. One of its clients doesnt understand the value of diversification or why stocks with the biggest standard deviations dont always have the highest expected returns. Your assignment is to address the clients concerns by showing the client how to answer the following questions: d. Construct a plausible graph that shows risk (as measured by portfolio standard deviation) on the x-axis and expected rate of return on the y-axis. Now add an illustrative feasible (or attainable) set of portfolios and show what portion of the feasible set is efficient. What makes a particular portfolio efficient? Dont worry about specific values when constructing the graphmerely illustrate how things look with reasonable data.You have been hired at the investment firm of Bowers Noon. One of its clients doesnt understand the value of diversification or why stocks with the biggest standard deviations dont always have the highest expected returns. Your assignment is to address the clients concerns by showing the client how to answer the following questions: e. Add a set of indifference curves to the graph created for part b. What do these curves represent? What is the optimal portfolio for this investor? Add a second set of indifference curves that leads to the selection of a different optimal portfolio. Why do the two investors choose different portfolios?
- All of the following statements about an efficient market are correct EXCEPT: a. All financial transactions have an NPV of equal to zero b. A skilled individual may have sustainable above market returns c. The investor is compensated properly for risk borne d. The investor does not receive abnormal returns consistentlyYour friend’s portfolio consistently plots above the Security Market Line. As a result, your friend claims to know how to earn abnormal returns. Thus, your friend tries to convince you that the market is not efficient. How should you respond? A) You should totally agree; this is direct evidence against market efficiency B) Tell your friend that this should be expected due to the Momentum effect C) Tell your friend that it is hard to measure risk (Joint Hypothesis Problem); maybe the market is efficient, or maybe risk is being measured improperlyWSP Inc. is involved in a wide range of unrelated projects. The company will pursue any project that it thinks will create value for its stockholders. Consequently, the risk level of the company’s projects tends to vary a great deal from project to project. If WSP Inc. does not risk-adjust its discount rate for specific projects properly, which of the following is likely to occur over time? Check all that apply. The firm will increase in value. The firm’s overall risk level will increase. The firm could potentially reject projects that provide a higher rate of return than the company should require. When a project involves an entirely new product line, the firm may be able to obtain betas from to calculate a weighted average cost of capital (WACC) for its new product line. Consider the case of another company. Chrome Printing is evaluating two mutually exclusive projects. They both require a $1 million investment today and have expected NPVs of…
