An increase in accounts payable is a cash outflow.
If accounts receivable are 20% of sales and the level of sales doubles, the percent of
sales says that accounts receivable will be 40% of sales.
Because interest is a tax-deductible expense, the effective cost of debt is less than the
stated rate of interest.
A firm will prefer to issue preferred stock rather than debt because the dividend is
tax-deductible.
Pre-emptive rights mean that current stockholders have the right to maintain their
proportionate ownership before new shares may be sold to the general public.
Bonds only sell for a discount when the firm is having financial difficulty.
The value of a convertible bond as a debt instrument sets a floor (i.e., minimum price)
on the bond.
One index of systematic risk is a stock’s beta coefficient.
An index fund seeks to duplicate an index of the market such as the S&P 500 stock
index.
What serves for money in France may not be money in another country.
Increases in income taxes reduce a firm’s operating income.
A change in the trade discount from 2% to 3% encourages the use of trade credit.
The larger an investment’s standard deviation, the smaller is the element of risk.
A firm may retire bonds by purchasing the debt in the secondary markets.