Why might stockholders be indifferent to whetheror not a firm reduces the volatility of its cash flows?

Q: How does the market react to unexpected dividend changes? What does this tell us about dividend…

A: Dividend: It refers to the surplus amount paid by the company to its shareholders. It is considered…

Q: Why do you think so much emphasis is placed on cash-flow-based stock evaluations, especially the…

A: Stock valuation can be done by two methods: dividends discount model free cashflow model Dividend…

Q: Should the goal of the firm be to maximize the price of its stock?

A: Every company has its own vision and mission statement. Having a vision paves way for achieving the…

Q: Why do you think so much emphasis is placed on cash-flow-based stock evaluations, especially the…

A: Free cash flow is referred to as the cash available for the firm after meeting its obligations. The…

Q: What does a negative value for unlevered free cash flow imply for the claimants of a firm

A: Unlevered free cash flow for a company is that free cash flow which is determined and computed…

Q: Are short-term profits always in the best interest of stockholders? Explain

A: Short term profits are generally earned for a period of less than one years it may be quarterly,…

Q: In a strong-form efficient market, accounting announcements: will impact stock price only if it…

A: Stock price can be defined as the monetary value of a stock at which the stock is traded in the…

Q: Why do we need to decrease the stock holdings and increase the cash orbond holdings? Explain with an…

A: One of the important decisions which is taken by the financial manager is to maintain the minimum…

Q: In what circumstances would you choose to use a dividend discount model rather than a free cash flow…

A: dividend discount models are used in companies to value the stock of rapidly growing companies but…

Q: Which of the following dividend policies would be least appropriate for a company with a large…

A: According to the rule, because you hav eposted multiple questions, we will answe rthe first question…

Q: A firm can increase its earnings growth yet not affect the value of its equity. True OR False ???

A: Equity value is the value of a company available to owners or shareholders.

Q: Why doesn’t a volatile stock price necessarily imply irrationalpricing?

A: Introduction: Volatile is nothing but a variation that is not constant. Volatile stocks are such…

Q: If a company lowers its cash dividend payment, does that always send a bad signal? If not, provide…

A: Every company receives their capital in the form of equity or debt. Equity is from the shareholders…

Q: Give two reasons stockholders might be indifferent between owning the stock of a firmwith volatile…

A: Stock refers to the financial securities which are issued by the organization to raise funds.…

Q: a future investment opportunities? or should maintain its liquidity to fund its investment rather…

A: Companies have cash from the operations of the company and they have options to use the cash one is…

Q: Would a typical common stock provide cash flows more like an annuity or more likean uneven cash flow…

A: Common stock is an instrument that is the property of a company. Common stock investors elect the…

Q: Would it be possible for a company to report negative free cash flow and still be highlyvalued by…

A: Yes. Negative free cash flow is not necessarily bad. Most rapidly growing companies have negative…

Q: Is this statement true or false? Give a reason for your answer. " Relevant or not, frequent changes…

A: Dividend policy is a policy that determines the division of earnings into dividend and retained…

Q: Explain "frce cash flows. Why do managers like to retain free cash flows instead of distributing it…

A: Free cash flows : As the name suggests, free cash flows relates to the fund that are leftover to a…

Q: Why do the clientele effect and the information contenthypotheses imply that investors prefer stable…

A: Clientele effect means the preference of different categories of investors to invest in specific…

Q: why is money market necessary but not sufficient for the liquidity of securities on the stock market

A: Money market (MM) is a place where short term (ST) securities are traded. Generally, governments or…

Q: Why might a company hold low-yielding marketable securitieswhen it could earn a much higher return…

A: Introduction: Marketable security is a general word encompassing transactions that a company can…

Q: Give two reasons why stockholders might be indifferent between owning the stock of a firm with…

A: Stock is a type of security in a company that denotes ownership. Every company can raise the capital…

Q: Since stock represents ownership in the company, equity investing is less risky than debt investing,…

A: Investment in equity Vs Investment in Debt Investment in equity helps in acquiring ownership in the…

Q: A firm’s value depends on its expected free cash flow and its cost of capital. Distributions made in…

A: The correct answer is the last option i.e. Dividend irrelevance theory

Q: Stock dividends are ________ costly to issue than cash dividends. What is the missing word?

A: Cash dividend is exposing company to double taxation. The cash dividend is taxable in the hands of…

Q: Would a typical common stock provide cash flows like an annuity or more like an uneven cash flow…

A: Common Stock is a security that represents ownership in a firm. Common stock holder can earn returns…

Q: Practice : a: The computation of return on average investment ignores one characteristic of the…

A: Capital budgeting refers to the technique of evaluating a project for investing in it. It has…

Q: Explain the theory behind the free cash flow valuation approach. Why are the free cash flows value…

A: The free cash flows valuation approach will be a theory for determining a company's intrinsic value,…

Q: Which of the following best describes what investors in shares seek compensation for? OA. The…

A: From the given Statements we have to find what the investors in shares seek compensation for: A)…

Q: How does the equity method discourage the manipulation of net income by investors?

A: Equity method is used for accounting for investments by one company in another company when the…

Q: Which of the following is NOT a reason for a high-dividend-payout policy? A.        convenient and…

A: High Dividend Policy: It refers to a company where the company declares more of the proportion as…

Q: What are the risk implications/shortcomings of financial institutions in increasing their financial…

A: Financial leverage is defined as the use of the debt for acquiring an additional assets. Usage of…

Q: What are the implications of excess liquidity for the stability of the financial sector?

A: Financial system is defined as the range of the stability, when it used to dissipate the financial…

Q: What are the conditions for stock market efficiency? Is it possible that market for individual…

A: Stock prices completely reflect available information in an effective capital market: Rationality,…

Q: Explain two reasons for the firm management to prefer stock repurch

A: Stock repurchases :-  It means purchasing its own shares by the company. It is…

Q: Are stock values more affected by short-term cash flows or bylong-term cash flows?

A: Cash flows refers to the net amount of cash transfers within the business entity either in the form…

Q: The free cash flow valuation model is based on the same principle as dividend valuation models; that…

A: Free cash flow can be used to determine the value of a share price. It uses the same principle of…

Q: Why Are Stock PricesSo Volatile?

A: The prices of stocks listed on stock exchanges are dynamic and change every minute. Volatility is…

Q: What does it mean when a company’s free cash flow is negative in one or more years? Do negative…

A: Cash flows are the measures of the cash inflows and cash outflows that the corporation earns and…

Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.