Which of the following scenarios does a donated capital arise? * Forgiveness of an existing loan from the government An equipment from a manufacturer Shares donated by a shareholder to the corporation Financial aid from the government Which of the following is true about share split? * It increases the total number of outstanding shares It increases the aggregate par value of shares It decreases the retained earnings of the corporation O All of the above.
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- The cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnoverYour corporation needs additional capital to fund an expansion. Discuss the advantages and disadvantages of raising capital through the issuance of stock. Would debt be a better option? Why or why not?Boehn Corporation accounts for its investment in the common stock of Sells Company under the equity method, since they exert significant influence. Boehn Corporation should ordinarily record a cash dividend received from Sells as a. a reduction of the carrying value of the investment. b. additional paid-in capital. c. an addition to the carrying value of the investment. d. dividend income.
- Which of the following statements is false? A. Mutual funds are pool investor funds to purchase financial instruments and thus reduce risks through diversification. B. Initial public offering (IPO) occurs when firm issues stock in the public market for the first time. C. The difference between current assets and non-current assets equals to working capital. D. Owner’s equity is the residual interest in assets that remains after subtracting an entity’s liabilities.When one uses the after-tax weighted average cost of capital (WACC) to value a levered firm, the interest tax shield is: Multiple Choice A) capitalized by the levered cost of equity. B) not accounted for by the use of the WACC. C) automatically considered because the after-tax cost of debt is included within the WACC formula. D) considered by deducting the interest payment from the cash flows.Interpretation No. 46R relates to the issue of whether an investing firm is the primary beneficiary in a variable-interest entity. When is an entity classified as a variable interest entity? Starting with free cash flows from operations, discuss how an analyst would measure free cash flows to common equity shareholders.
- LGM will purchase all of the net assets of DMF by transferring its shares in YYZ. Because of the consideration transferred to DMF, the ____________. Assets of LGM will decrease Liability of LGM will increase Paid-in capital of LGM will increase Retained earnings of LGM will increaseUnder the capital maintenance concept, which of the following items should be deducted from the increase or decrease in capital? a. Losses on hedging instruments in a cash flow hedge. b. Increase in revaluation surplus. c. Actuarial loss on remeasurement on defined benefit liability. d. Reacquisition of treasury shares.Indicate whether the following statements are true or false. If the statementis false, explain why.a. If a firm repurchases its stock in the open market, the shareholders whotender the stock are subject to capital gains taxes.
- Which of the following is correct a. In a leveraged recapitalization, a firm uses its excess cash to buyback shares b. In an LBO, a firm borrows and repurchases its shares thereby reducng the number of shares outstanding. c. In a leveraged recapitalization, a change of ownership occurs as the firm is sold d. In an LBO, debt is a major component of the financing and a change of control occurs. e. In an LBO, managers use excess cash to repurchase sharesWhen a corporation invests borrowed money in assets that generate profits greater than the after-tax cost of the debt, it increases the return on equity for common shareholders. creates financial leverage. has a mix of debt and equity in its capital structure. does all of these options. If the effective rate of interest is greater than the contract rate, the bonds will sell at par. a premium. a discount. any of these choices, depending on other circumstances.What is the acceptable level of a company's indebtedness according to the financial leverage indicator a. The level based on the willingness of banks to provide loans b. Until the debt financing resource are cheaper than equity shareholder fund c. Under condition that the employed debt financing resources are increasing profitability of equity shareholder fund d. The level based on the willingness of shareholders to provide registered capital