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vredina [299]
3 years ago
13

Bad managerial judgments or unforeseen negative events that happen to a firm are defined as "company-specific," or "unsystematic

," events, and their effects on investment risk cannot in theory be diversified away. T/F
Business
1 answer:
inysia [295]3 years ago
8 0

Answer:

The correct answer is True.

Explanation:

Non-systematic risk, also known as "diversifiable risk", encompasses the set of factors of a company or industry, and that affect only the profitability of its stock or bond. For this reason they cannot be diversified.

In other words, the non-systematic risk arises from the uncertainty surrounding a company due to the development of its business, either due to the company's own circumstances or those of the sector to which it belongs. Examples of these events can be bad business results, the signing of a large contract, worse than expected sales data, a new product of the competition, discovery of fraud within the company, a bad management of its managers, etc.

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The cash operating cycle for a merchandiser begins with cash purchases of merchandise and ends with _____.
netineya [11]

The cash operating cycle for a merchandiser begins with cash purchases of merchandise and ends with receipt of cash.

<h3><u>What is a merchandise?</u></h3>
  • Any form of items, including those used for personal or professional purposes, as well as goods sold to the general public (retail) or other enterprises, are referred to as merchandise (wholesale).
  • 'Freebies', or promotional things like the bespoke drink bottles in this example that are given away or not charged for, can also be referred to as merchandise.
  • Calendars, magnets, wall art, stationery, greeting cards, textiles, badges, and a wide variety of other goods may be included in this category.
  • A T-shirt with a slogan or logo that a political party distributes to voters during an election campaign or a calendar with a logo that a supplier offers its clients at the end of each year are two examples of freebie products.

Buying merchandise can be done with cash or on credit. The accounts involved in the transaction are the purchases account and the cash account if goods are paid for in cash. It debits the purchases account and credits the cash account.

Know more about Merchandise with the help of the given link:

brainly.com/question/15546663

#SPJ4

8 0
1 year ago
If a gain of $225,000 is incurred in selling (for cash) a building having a book value of $900,000, the total amount reported in
Valentin [98]

Answer:

$1,125,000

Explanation:

Given;

Gain from asset disposal = $225,000

Book value of asset disposed = $900,000

Therefore,

Amount of cash received from the sale = $900,000 + $225,000

                                                                  = $1,125,000

This represents an inflow of cash and will be represented by a positive value in the statement of cash flows. The total amount reported in the cash flows from investing activities section of the statement of cash flows is $1,125,000

8 0
3 years ago
The Signal Company has operating income (EBIT) before depreciation expense of $1,500,000. The company’s depreciation expense is
ANEK [815]

Answer:

A. Net income is $825,000; and Net cash flow is $1,225,000.

B. Net income is $750,000; and Net cash flow is $1,150,000.

C. Parts A net cash flow will equal part B net cash flow by deducting $75,000 difference, or Parts B net cash flow will equal part A net cash flow by addiing $75,000 difference.

Explanation:

The following are given:

Operating income (EBIT) before depreciation expense = $1,500,000

Depreciation expense = $400,000

Tax rate = 25%

We therefore proceed as follows:

A. If the company is 100% equity financed (zero debt), calculate its net income and net cash flow.

<u>Calculation of net income</u>

Income after depreciation but before tax = Operating income (EBIT) before depreciation expense - Depreciation expense = $1,500,000 - $400,000 = $1,100,000

Tax expense = Income after depreciation but before tax * Tax rate = $1,100,000 * 25% = $275,000

Net income = Income after depreciation but before tax - Tax expenses = $1,100,000 - $275,000 = $825,000

<u>Calculation of net cash flow</u>

Net cash flow = Net income + Depreciation expense = $825,000 - $400,000 = $1,225,000

B. If the company (instead) has $100,000 in annual interest expense, recalculate the net income and net cash flow.

<u>Calculation of net income</u>

Income after depreciation and interest expenses but before tax = Operating income (EBIT) before depreciation expense - Depreciation expense - Interest expense = $1,500,000 - $400,000 - $100,000 = $1,000,000

Tax expense = Income after depreciation and interest expense but before tax * Tax rate = $1,000,000 * 25% = $250,000

Net income = Income after depreciation and interest expense but before tax - Tax expenses = $1,000,000 - $250,000 = $750,000

<u>Calculation of net cash flow</u>

Net cash flow = Net income + Depreciation expenses = $750,000 + $400,000 = $1,150,000

C. Explain the difference in your answers to parts A & B – specifically, reconcile the change in net cash flow that occurred.

Difference in net income = Part A net income - Part B net income = $825,000 - $750,000 = $75,000

Difference in net cash flow = Part A net cash flow - Part B net cash flow = $1,225,000 - $1,150,000 = $75,000

Each of Part A net income and net cash flow is $75,000 greater than part B because part A is an 100% equity financed with the need to pay annual interest expense on debt of $100,000 like in Part B before calculating the Tax expense and the net income.

The $75,000 diffence is as a result of additional tax that Part A has to paid on $100,000. That is,

Additional tax expense in part A = Interest expense not paid in Part A * Tax rate = $100,000 * 25% = $25,000

Diffrenrence = Intererest expense not paid in part A - Additional tax expense = $100,000 - $25,000 = $75,000

For example, if there is no annual interest of $100,000 to be paid in part B, we can then reconcile by just addinf back the difference as follows:

Part B new net cash flow = Part B initial cash flow + Difference in net cash flow = $1,150,000 + $75,000 =  $1,225,000 = Part A net cash flow

Also, if annual interest expense has to be paid in part A as a result of being now financed by debt, we will just deduct the difference as follows:

Part A new net cash flow = Part A initial cash flow - Difference in net cash flow = $1,225,000 -  $75,000 =  $1,150,000 = Part B initial net cash flow.

5 0
3 years ago
Securities Exchange Act Rule 10b-5 liability attaches to anyone who trades in securities for personal profit using confidential
Wittaler [7]

Answer:

True

Explanation:

The Security Exchange Act Rule 10b-5 says that the insider dealing is not allowed because it waives off the trust of the shareholders placed on the corporations. This means if their agents are not trustworthy then nobody is going to invest in the companies which means the corporations that are fulfilling needs of more than 50% of the world would have no existence in future because their is no one who is going to lend them money. So the act says that this insider dealing which enables the employees or directors of the company to gain undue advantage due to their access to management information is not allowed and is unethical stance of the agents.

7 0
3 years ago
On January 1, 2021, Essence Communications issued $800,000 of its 10-year, 8% bonds for $700,302. The bonds were priced to yield
aev [14]

Answer:

A)

before decrease in rates: 706,483

   after rate decrease:            751,360

B)

interest expense 35,015.12

discount on BP 3,015.12

cash 32,000

--bonds first interest payment--

C)

interest expense 35,165.87

discount on BP       3,165.87

cash              32,000

--second interest payment--

D)

unrealized loss 44,877

  discount on bonds payable  44,877

--to adjust bonds valuation--

Explanation:

First, we solve for the present value of the bond to get the proceeds from the issuance.

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 32,000

time 20

rate 0.05

32000 \times \frac{1-(1+0.05)^{-20} }{0.05} = PV\\

PV $398,790.7310

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity   800,000.00

time   20.00

rate  0.05

\frac{800000}{(1 + 0.05)^{20} } = PV  

PV   301,511.59

PV c $398,790.7310

PV m  $301,511.5863

Total $700,302.3173

Now, we do the table for the first year:

# / Principal/      paid /    interest /       Amort/End. P

1 700,302 32000 35015.12 3015.12 703,317

2 703,317 32000 35165.87 3165.87 706,483

Now, we have to redo the calculations for the bonds market value considering a decrease in the market rate to 9%

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 32,000

time 18

rate 0.045

32000 \times \frac{1-(1+0.045)^{-18} }{0.045} = PV\\

PV $389,119.7377

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity   800,000.00

time   18.00

rate  0.045

\frac{800000}{(1 + 0.045)^{18} } = PV  

PV   362,240.30

PV c $389,119.7377

PV m  $362,240.2951

Total $751,360.0328

We adjust for: 751,360 - 706,483 = 44,877

This will be an unrealized loss as the liability increases but, will be realized on the redemption of the bonds or at the end of the bonds' life.

3 0
3 years ago
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