...TRUE/FALSE ____1. A corporation is obligated to make periodic interest payments on a bond and also to repay the bond's principal amount at the maturity date of the bond. ____2. If a corporation liquidates, stockholders have a prior claim over bondholders to corporate assets. ____3. Bonds are quoted in the bond market at a percentage of face value, while stocks are quoted in the stock market in terms of dollars and cents. ____4. A $1,000 face value bond selling at 104 would cost $1,000.40 in the bond market. ____5. The stated rate of interest is the rate prevailing in the bond market at the time the bonds are issued. ____6. If the stated rate of interest is 10% and the market rate of interest is 8%, the bonds will most likely sell at a premium. ____7. The journal entry to record the issuance of $100,000 face value bonds at 102 involves a debit to the Premium on Bonds Payable account for $2,000. ____8. The amortization of a bond premium reduces interest expense on the income statement. ____9. The amortization of $1,000 of bond premium would be recorded by debiting the Premium on Bonds Payable account and crediting the Interest Expense account for $1,000. ___10. The amortization of $1,500 of bond discount would be recorded by debiting the Discount on Bonds Payable account and crediting the Interest Expense account for $1,500. ___11. When bonds are sold between interest dates, the investors must pay the issuing corporation any interest...
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...Stocks Stocks are a form of ownership; they represent interest in a company's development. Typically, investors are given no guarantees about returns of the beginning venture. Truth be told, the productivity of the venture depends completely after rising stock cost, which, at the most key level, relates specifically to the execution and development (expanding benefits) of the company. Advantages of Investing in Stocks Stocks offer gainful returns back with constrained losses. When you put resources into stocks, you have the capability of profiting than you would with different types of investments, for example, fixed rate bonds and certificate of deposits, on the grounds that stocks participates specifically in the development of the economy and as time goes on have truly beat whatever other type of investment. However, any potential losses are constrained to the measure of your starting venture, not at all like different manifestations of investment that are utilized, for example, land where you could owe more than your original up front installment. In this respect, shareholders have constrained risk for the activities of the organization's administration in light of the fact that shareholders are detached investors that just participates in the capital gains and profits of the organization. Stocks additionally offer a lot of liquidity on the grounds that they can be sold at their market value and changed over to money whenever on the stock trade. Ultimately, stocks...
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...WHAT YOU NEED TO KNOW DETERMINANTS IN INVESTING: Americans in the work field are faced with a lot of challenges when it comes to saving for retirement. You don’t want to be too cautious (relying on just treasury bills that have barely kept up with inflation the last 70 years being an extreme example.) You don’t want to put too much weight into your stocks making your portfolio too risky and possibly jeopardizing your earnings and prolonging your retirement date. Your ability and willingness to take risk directly relates to your expected returns. A lot of factors go into your ability to generate returns through mutual funds, stocks and bonds. [pic] Google images Your age also plays a role in how you will invest for your retirement. The older you are and the closer you are to retirement, your tolerance for risk in your portfolio will go down. When you are close to retirement, the last thing you can afford is losing your savings. If you are younger and are many years away from retirement you will be more inclined to put more weight into stocks because if the market takes a downturn you have more time to recover your losses. Whether you are employed or not determines your willingness to take risk in terms of your ability to replace financial losses that may occur with your active income. Also an often overlooked factor that comes with investing for retirement is your psychological ability to tolerate the stress of a serious downturn in the...
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...Joe Mansueto is the founder of Morningstar, Inc. The company operates as a independent investment research firm (Ferrell, Hirt, & Ferrell, 2009). Since opening their operations in 1984, Mansueto has found that ordinary people are intimidated when it comes to investing. There are a multitude of stocks and bonds that people can invest funds into. However, the literature is often complex and a various array of investing options can leave a novice investor confused. In the past investing decisions were made by employers (Chambers, 2004). The decision to place retirement choices in employees hands has left many individuals faced with making life altering decisions alone. They have little to no experience with interpreting financial data associated...
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...The Statement of Cash Flows Purpose of a statement of cash flows: To provide information about the cash inflows and outflows of an entity during a period. To summarize the operating, investing, and financing activities of the business. The cash flow statement helps users to assess a company’s liquidity, financial flexibility, operating capabilities, and risk. The statement of cash flows is useful because it provides answers to the following important questions: Where did cash come from? What was cash used for? What was the change in the cash balance? Specifically, the information in a statement of cash flows, if used with information in the other financial statements, helps external users to assess: 1. A company’s ability to generate positive future net cash flows, 2. A company’s ability to meet its obligations and pay dividends, 3. A company’s need for external financing, 4. The reasons for differences between a company’s net income and associated cash receipts and payments, and 5. Both the cash and noncash aspects of a company’s financing and investing transactions. What can we learn from SCF that is not already available in the other financial statements? It provides answers to important questions like: Where did cash come from? What was cash used for? What was the change...
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...1. Define investing and speculating. The main difference between speculating and investing is the amount of risk undertaken in the trade. Typically, high-risk trades that are almost akin to gambling fall under the umbrella of speculation, whereas lower-risk investments based on fundamentals and analysis fall into the category of investing. Investors seek to generate a satisfactory return on their capital by taking on an average or below-average amount of risk. On the other hand, speculators are seeking to make abnormally high returns from bets that can go one way or the other. It should be noted that speculation is not exactly like gambling because speculators do try to make an educated decision on the direction of the trade, but the risk inherent in the trade tends to be significantly above average. As an example of a speculative trade, consider a volatile junior gold mining company that has an equal chance over the near term of skyrocketing from a new gold mine discovery or going bankrupt. With no news from the company, investors would tend to shy away from such a risky trade, but some speculators may believe that the junior gold mining company is going to strike gold and may buy its stock on a hunch. This would be speculation. As an example of investing, consider a large stable multinational company. The company may pay a consistent dividend that increases annually, and its business risk is low. An investor may choose to invest in this company over the long-term to make a...
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...Final Exam Comprehensive 1. A company should use process costing rather than job order costing if… a. Production is only partially completed during the accounting period. b. The product is produced in batches only as orders are received. c. The product is composed of mass-produced homogeneous units. d. The product goes through a single stage of production. 2. Measures of equivalent production are necessary in process costing because… a. Job order costing procedures cannot be applied. b. Unit costs are computed by departments or processes at fixed time intervals. c. Perpetual inventories are not employed in process plants. d. Production methods are more complex than in job order costing systems. 3. Which of the following is included in full product cost? a. All direct labor and direct material costs and all production and nonproduction costs. b. Only nonproduction costs. c. Only the costs of direct material. d. Only the costs of direct labor. 4. For a company offering services, which of the following is a value-adding activity? a. Billing the clients b. Preparing job order forms c. Ordering, receiving, and inspecting supplies d. Designing advertisements 5. Abraham Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 200 units and of Product B is 1,000 units. There are three activity cost pools, with total costs and activity as follows: Activity Cost Pool ...
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...Complete Name: Unit 4 Student Name: Coleman, Angela Nichole ********************************************************************************************************** 1. FUNDAMENTALS & STOCKS ********************************************************************************************************** 2. Investing Fundamentals First Budget: Investing in Stocks: ********************************************************************************************************** 3. The Garners' take-home pay is over $4,500 a month. Yet, after all expenses are paid, there is only a $220 surplus each month. Based on the information presented in this case, what expenses, if any, seem out of line and could be reduced to increase the surplus...
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...assets for a given level of risk As a government pension plan, the fund has some understandable constraints, which are: Need to invest in mature and stable large companies Only a certain percentage of the fund could be invested in equities, meant to grow by +10% every year up to 40% The remainder (up to 60%) to be invested in bonds Their objective of achieving a certain rate of return is a necessary step to ensure the pension fund is able to meet its future pension liabilities. However, having unrealistic expectations can prove to be harmful where in their case a 1.5% discrepancy in expectations had led to a 120% increase in unfunded liability! The investment constraint of having a pension fund made up majority of bonds can prove to be problematic. While it is true that bonds provide a steady income in terms of coupon plus the opportunity for capital appreciation; the fact that bond prices are inversely proportional to interest rates prove to be a risk for pension funds. Indeed, that is the case for South Carolina pension fund where in April 1996 the fund has lost $400mln due to a rise in interest rates. Also their constraint of investing in mature and stable companies have the benefit of earning steady dividends and a lower level of risk (Claus and Thomas, 2001). But these companies have limited growth potential hence returns tend to be low and the state may find that they are not being able to earn the higher expected return to fund the sudden increase in pension...
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...In the United States, a society plagued by capitalism, investing has become a way of life. To most Americans it begins with opening a savings account and slowly allowing that money to grow through the compounded interest rate over the years. While it may not seem like a big step in generating more income, nonetheless, this is a positive movement in the market of investments. With the many types of investments available knowing which are reliable, or safe, or yield good returns, are just some of the questions on the investors mind. Within each asset class there are investments to suit different kinds of risk, duration, returns and liquidity. Bank savings account, as stated before, is the simplest kind of short-term investment. The returns on savings account are low when compared to other investments, but the returns are guaranteed by the supplier, in this case the bank. Banks offer security meaning if a bank was to go broke the federal government through the FDIC (Federal Deposit Insurance Corporation) insures your bank deposits of up to $100,000. Having guaranteed returns means an investment will not lose its value in the short term unlike other investments. The bank pays interest to you account for saving your money with them. Bank fixed term investment also known as certificate of deposit is when you deposit a sum amount of money for a set period usually three, six or twelve months. The money becomes locked away for the fixed term but, in return, you get a higher interest...
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...implication of Capital Market in the financial environment. 5. Develop appropriate values like frugality and care in making investment 6. Examine the role of government explain how some economic activities affect the capital market. 7. Evaluate the relevance of Capital Market in today’s business society. V. Course Outline No. of Hours A. Overview of Financial Market 13.5 1. Why Study Financial Markets? 2. Classifications and Functions of Financial Markets 3. What are Money Market and Capital Market? 4. Basics of Capital Market 5. The Primary and Secondary Market 6. Over-the-counter Market 7. Advantages of the Stock Market 8. Players in Stock Market B. Investing in Common Stocks 1. Stocks and Equities 2....
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...specific short term debt, common equity, and preferred equity, the capital structure is the firm’s various sources of funds use to finance its overall operations and growth. Debt comes in the form of bond issues or long-term notes payable, whereas equity is classified as common stock, preferred stock, or retained earnings. Short-term debt such as working capital requirements also is considered part to the capital structure (The Free Dictionary, 09).” “A mix or a company’s long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using difference sources of funds (Investopedia).” Basically Capital Structure is that the company should be able to manage the company with growth by using a combination of debt and equity for maintaining its financial status for survival. Debt is bond issues that are long-term notes payable, equity is common or preferred stock or retained earnings. Capital Structure is also known as debt-to-ratio equity ratio which will give a view of the company in terms or risk. Equity capital is moneys that are given and owned by shareholders. There are two types of equity capital: 1. Contributed Capital in which money invested is in exchange for company stock. 2. Retained earnings are the profits from past years that have been collected and used to strengthen the budget or fund growth of the company by acquisition or expansion. Equity capital is...
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...The Statement of Cash Flows Purpose of a statement of cash flows: To provide information about the cash inflows and outflows of an entity during a period. To summarize the operating, investing, and financing activities of the business. The cash flow statement helps users to assess a company’s liquidity, financial flexibility, operating capabilities, and risk. The statement of cash flows is useful because it provides answers to the following important questions: Where did cash come from? What was cash used for? What was the change in the cash balance? Specifically, the information in a statement of cash flows, if used with information in the other financial statements, helps external users to assess: 1. A company’s ability to generate positive future net cash flows, 2. A company’s ability to meet its obligations and pay dividends, 3. A company’s need for external financing, 4. The reasons for differences between a company’s net income and associated cash receipts and payments, and 5. Both the cash and noncash aspects of a company’s financing and investing transactions. What can we learn from SCF that is not already available in the other financial statements? It provides answers to important questions like: Where did cash come from? ...
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...The Statement of Cash Flows Purpose of a statement of cash flows: To provide information about the cash inflows and outflows of an entity during a period. To summarize the operating, investing, and financing activities of the business. The cash flow statement helps users to assess a company’s liquidity, financial flexibility, operating capabilities, and risk. The statement of cash flows is useful because it provides answers to the following important questions: Where did cash come from? What was cash used for? What was the change in the cash balance? Specifically, the information in a statement of cash flows, if used with information in the other financial statements, helps external users to assess: 1. A company’s ability to generate positive future net cash flows, 2. A company’s ability to meet its obligations and pay dividends, 3. A company’s need for external financing, 4. The reasons for differences between a company’s net income and associated cash receipts and payments, and 5. Both the cash and noncash aspects of a company’s financing and investing transactions. What can we learn from SCF that is not already available in the other financial statements? It provides answers to important questions like: Where did cash come from? What was cash used for? What was the change...
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...Investing in the Philippine Stock Market: Worth it! A Term Paper Presented to Ms. Auracel Laplana-Alejandro Humanities Division Ateneo de Davao University In Partial Fulfillment of the Requirements for the subject ENGL 23 – Writing Across the Disciplines Second Semester, SY 2014-2015 By Ronsard-Novem N. Timan Adlin Joey Almencion February 20, 2015 Investing in the Philippine Stock Market: Worth it! By: Ronsard-Novem N. Timan Adlin Joey Almencion Thesis Statement: This paper aims to discuss that although Investing in Stock Market is volatile, risky, and the maintenance is costly, it is a secondary of income, Highly Profitable and has a Long Term Benefits. Outline: 1.0 Introduction 2.0 Background 2.1 Stock 2.1.1 Types of Stocks 2.2 Stock Market 2.2.1 Purpose and Function of Stock Market 2.3 Philippine Stock Market 2.3.1 Brief History of the Philippine Stock Exchange 2.4 Income Bracket for Investment 2.5 Attitude of Filipinos on Investments 3.0 Advantages of Investing in Stock Market 3.1 Earn more Money 3.2 Long Term Growth Benefits 3.3 Highly Profitable 4.0 Disadvantages of Investing in Stock Market 4.2 Risky 4.3 Costly Maintenance 5.0 Refutation 6.0 Conclusion Investment can be considered as a Capital for each company to start their operations. Investment is not only limited to companies, but also for individuals. It is designed to be a source of income for those who have no interest in...
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