FIN 534 STRAYER Course Tutorial / tutorialrank

FIN 534 STRAYER Course Tutorial / tutorialrank

STRAYER FIN 534 Week 1 Chapter 2 Solution

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1.Which of the following statements is CORRECT?

a. Typically, a firm’s DPS should exceed its EPS.
b. Typically, a firm’s EBIT should exceed its EBITDA.
c. If a firm is more profitable than average (e.g., Google), we would normally expect to see its stock price exceed its book value per share.
d. If a firm is more profitable than most other firms, we would normally expect to see its book value per share exceed its stock price, especially after several years of high inflation.
e. The more depreciation a firm has in a given year, the higher its EPS, other things held constant.


2. Which of the following statements is CORRECT?

a. The statement of cash flows reflects cash flows from operations, but it does not reflect the effects of buying or selling fixed assets.
b. The statement of cash flows shows where the firm’s cash is located; indeed, it provides a listing of all banks and brokerage houses where cash is on deposit.
c. The statement of cash flows reflects cash flows from continuing operations, but it does not reflect the effects of changes in working capital.
d. The statement of cash flows reflects cash flows from operations and from borrowings, but it does not reflect cash obtained by selling new common stock.
e. The statement of cash flows shows how much the firm’s cash--the total of currency, bank deposits, and short-term liquid securities (or cash equivalents)--increased or decreased during a given year.


3. Which of the following statements is CORRECT?

a. Dividends paid reduce the net income that is reported on a company’s income statement.
b. If a company uses some of its bank deposits to buy short-term, highly liquid marketable securities, this will cause a decline in its current assets as shown on the balance sheet.
c. If a company issues new long-term bonds during the current...

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