1) Investors in high marginal tax brackets usually prefer companies that reinvest most
of their earnings, thus creating more growth in earnings and stock prices and deferring
taxes into the future.
2) Book value per share and market value per share are usually the same dollar amount.
3) When inflation rises, bond prices fall.
4) For mergers occurring after 2001, goodwill must be amortized and written off over
40 years or less.
5) An operating lease is generally a long-term, non-cancelable obligation.
6) Distributions of 20-25% or greater of outstanding shares are generally to be treated
as stock splits.
7) “Futures contracts” can lock in prices, interest rates, and foreign currency exchange
rates, compelling both parties to complete a transaction in accordance with these terms
at a later date.
8) IPOs generally underperform compared to the general market in the immediate
aftermarket.
9) Stockholders’ equity is equal to liabilities plus assets.
10) The formation of a Subchapter S corporation is a way to circumvent the double
taxation of a small corporation.
11) The APR is generally lower than the rate stated by the bank.
12) Increasing financial leverage will always lead to higher EPS because it reduces the
number of shares outstanding.
13) The investment of excess short-term funds is usually diversified between short- and
long-term marketable securities.
14) Asset utilization ratios measure the net returns on various assets such as return on
total assets.
15) After a rights offering, the common stock price will sell at the subscription price.
16) The higher the yield to maturity on a bond, the closer to par the bond will trade.
17) The inflation premium is based on past and current inflation levels.