Low P/E stocks indicate that the firm distributes a large proportion of its earnings as
cash dividends.
If accounts receivable are 15% of sales and sales double, the regression analysis says
that accounts receivable will become 30% of sales.
A decrease in the cost of an investment will increase its net present value.
The New Jersey lotto awarded a prize of $560,000 a year for the next 20 years starting
today. If the state sold $21,900,000 in lotto tickets, what proportion of the sales will the
state distribute if it earns 8% annually on invested funds?
Studies of investment returns suggest that investors can expect to earn at least 15
percent annually.
Increased operating leverage is associated with smaller amounts of fixed costs.
The numerical value of a stock’s beta tends to be stable over time.
Since commercial bank loans are cheaper than trade credit, few firms use trade credit.
The P/E ratio measures a stock’s price relative to the firm’s equity.
If a firm has an excellent credit rating, it may use commercial paper as a source of
long-term finance.
Trade credit is cheaper than commercial bank loans.
What is the simple annual cost of three-month $100,000 commercial paper that is sold
for $96,400? What is the true compounded rate of interest?
A beta of 2.0 indicates an asset’s return is more volatile than the market.
The purchasing of a new issue of stock is different than buying stock on the NYSE
because in the former funds flow to the firm while in the latter the funds flow to the
individual selling the shares.
Mutual funds pay federal income taxes on dividends they receive from their
investments.
A firm has the following accounts receivable:
If the firm’s terms are n30, construct an aging schedule showing the percent of accounts
that are one and two months overdue.
In general, banks prefer loans that stress liquidity and safety.
A person has an individual retirement account and can deposit $2,000 a year. What will
be the difference in the amount in the account if this investor earns 8% instead of 6%?
A prospectus gives estimates of a firm’s prospective earnings for five years.
The larger the margin requirement, the greater the proportion of a stock purchase the
investor may borrow.