C214 FINAL EXAM QUESTIONS WITH 100% CORRECT ANSWERS

Coupon Rate CORRECT ANSWER The interest rate that a company promises to pay on bonds Market Rate CORRECT ANSWER The interest rate on other comparable bonds Par Value CORRECT ANSWER The amount payable on maturity of the bond Market rate CORRECT ANSWER Same as YTM - Yield to Maturity Gordon Growth Model CORRECT ANSWER Assumes stable growth rates and does not incorporate risk CAPM Model CORRECT ANSWER Allows to determine expected return on stocks and incorporates risk How do public companies maximize shareholder value? CORRECT ANSWER by Maximizing Earnings Per Share How do private companies maximize shareholder value? CORRECT ANSWER By keeping control within the company Positive credit rating has what effect on capital? CORRECT ANSWER Lowers cost of capital What is cash flow from operating activities? CORRECT ANSWER It is cash flow generated for sale of products and services What is the formula for retained earnings? CORRECT ANSWER Ending retained earnings=Beginning retained earnings + Net Income = Dividends Is depreciation and salvage value on an asset precise or is it an estimate? CORRECT ANSWER It is an estimate What is an example of accounting difference CORRECT ANSWER Companies using different accounting methods What is an example of a timing difference? CORRECT ANSWER Companies using different fiscal years Do stock holders or bond holders have voting rights? CORRECT ANSWER Stock holders have voting rights